- Last Updated on Friday, 21 June 2013 15:22
- Written by Darrick Wilkins
The cost of Long Term Care Insurance is not as expensive one may think. There are various options that can be used to customize a plan to fit your specific needs and budget. The cost of your LTC coverage will depend on a number of these variables including:
- 1. Your age when you apply
- 2. Your health history
- 3. The amount of coverage you choose
- 4. Preferred health discounts, married, or even partner discounts.
How to Cover the Cost?
Many people have found innovative ways to pay the long term care insurance premium, such ways are:
- Take a portion of the interest on a given asset such as a 100k mutual fund and you that portion to protect your whole portfolio.
- Some people may choose to use the dividend income to pay the Long Term Care Insurance premiums .
- There are also fixed and variable annuity products on the market where you could invest say 100k in the annuity vehicle and again use the interest to pay the LTC premium.
You Get What You Pay For
Long-term care insurance is one insurance product where you may not not necessarily want to get the lowest price; the level of quality in the company is equally important. While there are over 20 companies that sell long term care insurance, of those, only about ten are A+ rated and have paid over $100 million in claims. Out of the ten only about five are consistently competitive, including names like Genworth Financial, John Hancock, Mutual of Omaha, Mass Mutual, New York Life, and Transamerica.
Cost of Waiting to Buy Long Term Care Coverage
An Example of the Cost Of Waiting to buy Long Term Care Insurance: Many people assume that they will save money if they just wait to buy long-term care insurance. This is absolutely untrue because each year you wait there are several factors hurt you:
- You will have to purchase more insurance because the cost of care rises each year.
- You are a year older so your premium will increase and these companies come out with new rate structures every 12 to 18 months.
- Your health could change for the worse leaving you with a much higher cost or even uninsurable.
The following example uses a long-term care insurance policy that includes $4500 monthly benefit, four-year benefit period, 90-day elimination period, and inflation protection with a major carrier.
Bill, 50 years old, purchased insurance, the annual premium would be $2,410. If he paid this premium until he was 85 years old, he would have paid in a total of $84,350 in premiums. If he waited just five years to purchase the same policy the annual premium would be $3,252. The increased premium takes into account that Bill is now five years older and he has to purchase a higher daily benefit since the cost of care has increased. If he paid until he was 85 years old he would have paid in a total of $97,560.
By waiting five years cost Bill an extra $13,210 in premiums over his lifetime. Bill did not save him a single dime on his overall Long Term Care Insurance cost. Another thing to consider is he was also uninsured for five years. Can the companies increase my long term care insurance rates?
Yes, insurance companies can increase premiums if the increase is for an entire class of policyholders and they go through your state's insurance commissioner. This is why you want to go with a financially strong company because the financially stronger companies are less likely to raise rates down the road. When you are comparing Long Term Care Insurance cost between companies be sure to review their current financial ratings.
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