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:
- they were a broad mixture of ages since long-term care affects the entire family; and
- 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|
|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:
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.