What Is The Cost For Long Term Care Insurance?

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William Bridgers
Specialist, LTCi, DI, Annuities, Life, Designs In Life, LLC, Utah
The cost for a long-term care insurance policy from a reputable company is running about $5,000 - $7,000 per year ($450/mo - $630/mo) for a person 55-60 years old, assuming that the person is healthy and can qualify for "standard" rate class. A "preferred" rate class would reduce those numbers by about 15-20%. Discounts can reduce premium significantly, if applicable.Long-term care insurance policies used to cost a lot less. But, to be truthful, insurance companies really miscalculated how much it would cost to pay out the high claims of an average policyowner and how much premium it would take to stay in business and make a profit. Even today, with higher premiums for the same coverage design available 10 years ago, the margins on this type of insurance are very thin. Recent claims history studies have shown that 1) policyowners do not allow these policies to lapse - less than 1% do, 2) more policyowners than anticipated are going on claim, and 3) the cost of medical facilities and skilled home care is going up at a greater rate than most consumer price indices (CPI).The take-away from all of this is in spite of the high cost, even a small, affordable policy is better than not having any coverage at all. A person's chance of needing at least some long-term care before death is greater than most other risks that people have insurance for. (However, it would not be prudent to purchase any long-term care insurance policy if going forward one knows that they will not be able to afford the premiums during retirement. If one can't afford the insurance, it is imperative to have a family discussion about a plan for family caregiving that might be needed before one dies.)There are lots of ways to keep costs for long-term care insurance affordable. Design is everything. To reduce premium and still have value, consider a lower-cost inflation rider or none at all; increase the maximum daily benefit to a higher amount than needed now and shorten up the number of years the pool of money is projected to minimally last; buy extra-cost riders only if your situation absolutely calls for them. Finally, buy young. Some LTCi experts suggest buying as young as 40. Most recommend that one not wait past 60 because premiums really start to climb after that age. By age 50, you should be seriously considering it. (I bought mine at age 53 and bought it on my wife when she was 49, and while it has been difficult in lean years to pay the premiums, I am so glad that we have kept the coverage in force. Neither of us would qualify medically to purchase it now.)
Answered on June 28, 2013
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