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Apr 30

How much does long-term care insurance cost? (rate calculator for sample plan)

How much does long-term care insurance cost?

I usually respond to this commonly asked question with “How much does a car cost?”

There are multiple options that vary the price, but the core options are explained under the “LTCI Benefits” category on this website in the excerpt from my book The ABC’s of Long-Term Care Insurance called “Your Customized Benefit Selection Process”:

  • daily or monthly benefit (you want monthly for home care)
  • waiting period before benefits start (one-time deductible)
  • inflation protection (BUY IT)
  • home health care benefit (to include or not to include or include at a lower level)
  • benefit period/benefit maximum (lifetime maximum for benefits)

When I started my wonderful career in the long-term care insurance industry in 1988, I saw how little anyone knew about the subject. To get the word out, I did an educational seminar all over my city of 250,000 people.  The only qualifications I put on the audience were:

  1. they were a broad mixture of ages since long-term care affects the entire family; and
  2. they have assets to protect so that the purchase of long-term care insurance would be financially suitable for them.

Having said that last one, though, I have had adult children buy long-term care insurance on their parents because they want their parents to be treated like a private-pay patient when the parents need long-term care.  This means many more choices that the Medicaid program offers. Conversely – and this will make you smile a little – I’ve had parents buy long-term care insurance on those “20-somethings” because they know if that young son or daughter had a head injury due to an accident or developed a serious chronic condition, they as parents would be responsible.  That usually happens in the workplace when employees are exposed to long-term care insurance.

My seminars were generic which means they didn’t mention a particular product or insurance company – just good basic information about why people even need long-term care insurance. The second half of the seminar explained how one goes about selecting the benefits on a policy to get the most value for the least amount of premium. In other words, I just explained what I had wanted to know when I got into the field of LTCI. And the big questions I had were “How much does this insurance cost?  Can I afford it?”

So I developed a solid plan that will pay two-thirds of the cost of care in most of the country and another one that will do the same in those high-cost areas like New York, New England and parts of California. Here’s the plan:

Most of the U.S. High-Cost Areas
Daily/Monthly Benefit $150/$4500 $250/$7500
Waiting Period (one-time) 90 days 90 days
Inflation Protection 5% compound 5% compound
Home Care Benefit 100% 100%
Benefit Period/Benefit Maximum 3 years 3 years

The Long-Term Care Partnership is really what makes this work. The #1 thing that non-buyers report will cause them to consider long-term care insurance is that the government will start paying when the long-term care insurance benefits run out. (Source: LifePlans LTCI Buyer-NonBuyer Surveys, 2011) That’s exactly what happens in the Partnership states if you meet the state’s criteria for being physically or cognitively impaired. Plus, you get to keep assets equal to the benefits paid out by your long-term care insurance policy in addition to what your state allows you to keep as a Medicaid patient (see “The Partnership for Long-Term Care” and “What Your State Lets You Keep” under Laws and Regulations on this site).

So to see what that premium averages for you, please enter these factors below:

Age (actual age and know that most companies allow a 30 day grace period to get an application in after your birthday) and marital or partner status:

  • single or married without a spouse or partner issued
  • married or with a partner and both of you expect to be covered

You will see the average monthly and annual premium for both plans. You can pay semi-annual or quarterly as well, but this is just to give you an idea. You will also see that monthly creates a load of about 9%, which is like paying an extra monthly payment. Monthly also has to be drafted from your checking account and some people are squeamish about that. A couple of carriers accept a credit or debit card but that’s not common. If you can pay one of the other modes with annual being the least expensive, you save money.

Health: You can also save money if you qualify for a preferred health discount which ranges from 5%-15%, depending on the carrier. Generally, you must have a reasonable height/weight ratio, be a non-smoker, and take no more than one medication. The medication part is tricky – it has to be for a condition that is well under control. For example, it could be to control high blood pressure or cholesterol and there should be no dosage or frequency changes in the last six months or a change to another medication. So enter these factors here and see the average premiums:

[sc name=”rateCalc”]

Expensive, you say?  Please don’t leave this page until you consider – are you ready???

The LTC Insurance Value Proposition: After you see the average premium for these plans, multiply the premium by 30 years, then compare the amount of premium to what the benefits will be in 30 years.

Most of the US Plan: $600 daily benefit x 3 x 365 = $657,000
High-Cost Areas:
$1000 daily benefit x 3 x 365 = $1,095,000

Note: It’s easy to do this with any plan that has the 5% compound inflation protection, because at 5% compound, the benefits double every 15 years. Here’s how it works:

  • $150 x 2 = $300 in 15 years; $300 x 2 = $600 in 30 years
  • $250 x 2 = $500 in 15 years; $500 x 2 = $1000 in 30 years

If you and your spouse/partner are issued a policy, the benefit amounts are double; i.e. $1,314,000 for both of you on the lower plan ($657,000 x 2) and $2,190,000 ($1,095,000 x 2) on the higher plan. If you take a benefit called “shared care”, you can have access to each other’s benefits while living and inherit unused benefits when a spouse/partner dies.

What’s the point? The point is that everything is expensive but you have to say “compared to what?”  If you compare the premium you pay in to the benefits available, all of a sudden the premium looks small. Plus, the premium stops when you start receiving benefits and some plans offer the option to pay a little more and have it stop on both of you if you are part of a couple.

Of course you have to qualify medically for a plan, and the younger you are, the greater the chance that you will qualify and the less a plan will cost for you.

18 comments

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  1. Michael

    Dear Phyllis,

    I was delighted to find your site–a terrific resource!

    I have a LTC with Continental Casualty through a group plan with my university employer. I bought a $200/day hospitalization plan with an inflation clause for a monthly premium of $150 at my then-age of 54. Five years later, the premium increased to $162. This year, CC has ended its group plan and is accepting no new customers. It has also sought and received approval from Texas Department of Insurance for a 98.5% increase beginning this coming September and spread over two years (with 70% increase the first year).

    If CC is taking no newcomers into this pool, won’t they have to fund any care costs out of premiums paid by current customers? If so, can I expect ever higher premium rates until it is no longer affordable. CC (through its operative CNA) is pushing existing customers to drop some of their coverage, but I am reluctant to do so because they seem bent on a strategy of getting rid of all of their customers to contain their costs.

    I am now 68, having paid LTC payments every year for 14 years (with inflation, daily cost limit is now $375; $675,000 lifetime max, 100% home care benefits, and 90-day waiting period). I have checked with New York Life and State Farm. A comparable policy at my current age would cost me $1,100-$1,200 a month. I feel that CC engaged in deceptive trade practices to get the original group contract and is now trying to absolve itself of any obligations. Is there nothing I can do to hold onto (or transfer) the LTC plan without going poor in the process?

    Michael

    1. Phyllis Shelton

      I’m glad you found me Michael. You were so smart to sign up for LTC insurance 14 years ago at age 54. I know a 98.5% rate increase seems exorbitant, but the perspective is that the insurance was way underpriced then and the insurance companies had yet to find that out. Since you enrolled, there have been two major claims studies released, each one showing claims longer than the last. People are living longer, especially in really nice assisted living facilities instead of the nursing home environment that people dread so much. Fewer people have lapsed their coverage than anyone thought would happen. I think it’s because the closer we get to facing an LTC need, the more we realize how valuable it is to pay only $350 a month instead of $11,406 a month as your policy would pay. It kinda reminds me of the guy who asked God to give him a different cross. God said “sure” and took him to The Room of Crosses. He carried his cross in and after looking around at all the much bigger crosses, he shouldered his cross and quickly backed out of the room. Another way to state this is to say after adding up what you have already paid in (5 years at $1800 + 9 years at $1944 + 1 year at $3305) plus another 15 years at $4248, you will have paid $93,521 by age 84. That’s if you haven’t had a claim, in which case your premium will be waived. If you didn’t take anymore inflation bumps, that would be $93,521 vs. your benefit pool of $675,000. A “country-club” assisted living facility in San Antonio at $5,500 a month today will likely be around $12,000 a month when you are 84, using 5% compound inflation. So as long as you aren’t one of the less than 15% of people who need nursing home care as a last resort, you should be fine with the $375 daily benefit and five year benefit period, unless Alzheimer’s runs deep in your family. Your concern of course is will the $350 a month rate hold? Replacing it with a Mutual of Omaha plan with a $10,000 monthly benefit ($328 a day), four years, and 2% compound inflation for 10 years would get you to the $12,000 a month at age 84 with a little smaller benefit pool, and it’s $481 a month. Another alternative could be purchasing a plan that combines LTC benefits with an annuity. The closest I can get is $8,000 a month at age 84 with a 6 year benefit period (almost $600K). You would reposition $146,000 that you have somewhere else, and a beneficiary would get the money if you didn’t need care. Benefits are still tax-free. If you have an old annuity with a lot of gain, this is a good way to get the gain out tax-free by rolling it into this product. Please feel free to reserve a time with me if you would like to know more.

  2. Marilyn Waldhalm

    My MetLife long term insurance plan has gone up 20% this year and the 5% inflation option only adds $1 to the daily benefit for a $140 daily nursing home benefit.

    My TransAmerica universal life policy is going up 28%. I have had this policy for 30 years. The options from TranAmerica in their letter include, buying another policy, surrender the policy or let it ride…..yikes?

    I am 67 and my husband 68 has a LTC policy that pays $100 daily benefit. Seeking guidance.

    1. Phyllis Shelton

      Hi Marilyn, I’m happy to talk with you and your husband and see if I can help. I will need the Schedule of Benefits page for all three policies so I can see what you have. You can fax those to me at 615-590-0307 or email them to phyllis@gotltci.com. Then please call our office between 8-5 CST Monday – Friday and ask Lawrence to put you on my calendar for a consultation. Our office # is 888-400-1118, x120 for Lawrence.

  3. Kim

    Are you familiar with Lincoln MoneyGuard II? I’m a female who will be turning 50 in April. It looks like the premium is $400 per month for 10 years ($48,000 total premium); then the LTC policy is paid up. If I die before ever making a LTC claim, my beneficiary gets a guaranteed $58,000 life insurance benefit. If I decide after making all of the premium payments that I made a mistake, I can get a return of $38,000 of the premium. In the first year, the LTC benefit is a maximum of $2,433 per month for 6 years. There is a 3% inflation rider. At age 80, the maximum LTC benefit is $6082 per month for 6 years. It doesn’t sound like the premium can increase. Does this sound right? What am I missing?

    1. Phyllis Shelton

      Depending on where you live, Kim, the cost of a really nice assisted living facility can be easily $20,000 a month in 30 years. That’s $5000 a month today inflated by 5% compound for 30 years. I’ve been strongly encouraging women to be sure they can afford a “country club” assisted living facility, as that amount of money will also pay for a lot of home care because home care is growing much slower. So the question is, will you be able to make up the difference when you are 80 between $6082 a month and $20,000 a month? If you can’t, then you need a higher monthly benefit. The 6 year benefit period is great but if you can’t make up the difference between the monthly benefit and the actual charge, you can wind up spending your savings paying the difference and have to apply for Medicaid long before you use up the whole six years. If you would like to do a consultation with me to discuss alternate ideas, please complete the short questionnaire at https://www.gotltci.com/contact-us/ and let me know. No obligation to buy anything of course.

  4. Ernie

    Phyllis, I am 60 and going thru the whole process of selecting LTC insurance with my financial advisor. We have had 2 or 3 meetings regarding enrolling in a traditional policy, also perhaps going the hybrid route with a life insurance plan with an upfront lump-sum or 10-pay with LTC riders using accelerated death benefits. Of course, all these options are expensive and appear to have different advantages / disadvantages, so I haven’t decided yet.

    One option my advisor wants me to explore is a dual option. It sounds like a traditional policy with a lower monthly benefit and therefore lower premium, in conjunction with a hybrid policy requiring a smaller lump sum that I could more easily afford. This strategy would still be weighted more toward the traditionally policy, with the hybrid policy being used only if necessary. An example would be a $4,000/month trad partnership policy with a $2,000/month hybrid policy. My guess is that the advantage here would be lower traditional policy premiums, and if I don’t ever need LTC or need it sparingly, then the death benefit to my beneficiary from the hybrid policy would help mitigate the premiums I had paid into the trad policy.

    We haven’t gone into the details of this, so I hope I am representing above what he says correctly. Do you have comments on such a dual approach to LTC?

    1. Phyllis Shelton

      I think this is an excellent suggestion from your advisor. I have done this for several people as well. You just want to be sure that between the two policies, you have enough to achieve your coverage goal at claim time. Here’s an excerpt from the article I posted on Dec. 16th to explain how I do it:

      Thankfully there are more options for combining long-term care insurance with life insurance or annuities. The caution here is to not fall for the “Give me $100,000 and I’ll give you $300,000 (or more) for long-term care.” Be sure to ask what the daily or monthly benefit will be 20 or 30 years from now, depending on your age today. I am using 5% compound to project the future cost of the really nice assisted living facilities, because the baby boomers are just starting to discover how nice they are. So a place that costs $5000 a month today at 5% compound will double twice in 30 years to $20,000 a month! The good news is that home care is growing much slower…maybe 2% a year,,,so a policy that fully funds a really nice assisted living facility in the future will buy a lot more home care than it would today.

      Hope this is helpful.

      1. Ernie

        Thank you very much for your feedback!

  5. bonnie temperly

    i need more info? Is the benefit period only 3 years?

    1. Phyllis Shelton

      There are many benefit periods available Bonnie. This is just showing a sample. If you would like to talk with me to look at all the options with no obligation, just go to http://www.gotltci.com/contact-us and complete the short questionnaire. We will get back with you shortly to set up a convenient time. Again, no obligation.

    2. Mateen

      This is way more helpful than annithyg else I’ve looked at.

  6. Dora

    ABCs of Long Term Care Insurance will not open on a Mac.

    1. Phyllis Shelton

      That is correct. Please email lawrence@ltcconsultants.com for a hard copy. Thank you! Phyllis Shelton

  7. Yamina

    I am single 60 years old and in good health ( I also do not take any medication). Will appreciate your advic on LTC I currently live in NYC.

    1. Phyllis Shelton

      Hello Yamina Yes I am very happy to help you. My staff will be in touch with you tomorrow to set up a no-obligation time for us to talk. Here’s a link to my little ABCs of Long-Term Care Insurance that you can review in the meantime.

  8. Skylar St. James

    Hello I was referred by Suze Orman I am 51 years old and single in great health. No medication. active and feel great. Need some help on if I need a LTCI and how much etc. Thanks!
    Cell 808-443-1838

    1. Phyllis Shelton

      Hi Skylar – so glad to hear from you! Congratulations on reaching out. Planning for long-term care is so very, very important, especially for a single person. You will hear from Lawrence on my staff shortly to set up a convenient time for a personal consultation with me.

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