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How much should I pay for Long-Term Care Insurance?

How much should I pay for Long-Term Care Insurance?

Your care cost for the 2017 Long-Term Care Insurance price index

Long Term Care Insurance (LTCI) is different from the traditional health insurance because it is designed to cover your long-term care needs, support, and services when the inevitable impact of aging or acquired disability gets to you. It includes custodial and personal care whenever and wherever you plan to receive care, be it in your own home, nursing facility or a community organization.

Once you become a policyholder, the long-term insurance policy you chose will determine how much you can refund from the daily expenses paid for services and personnel who help you accomplish your everyday living activities like eating, dressing and bathing. Depending on your preferred insurance company, you can choose from various benefits and care options that will ensure your care whenever and wherever you need it.

The Cost of Long term Care

Before you can imagine how much you would pay for your long-term care coverage, you should first consider the expenses you have to pay for care without insurance.

The reality is the cost of long term care in US, whatever type of service they offer, can be expensive if you shoulder it alone. Depending on the level of care you want to receive and where you want it to be received, your expenses can go way beyond what you and your family can afford.

According to The Genworth Cost of Care Survey in 2016, the costs of long term care services in US vary from state to state. The averages are as follows;

- Semi-Private Room in a Nursing Home: $225 a day or $6,750 a month
- Private Room in a Nursing Home: $253 or 7590
- Assisted Living Facility: $3,628 per month
- Adult Day Care: $68 per day
- Home Health Aide Services: $20 per hour
- Home Maker Services: $20 per hour

If you plan to stay in a private nursing home, you should cash out $91,250 per year. This cost can even rise as high as $125,000 per year in some states. Assisted living communities may be a little cheaper than nursing homes at it charge only $3,628 per month for the rent and use of their facilities. However, if you need higher level of care, you’ll have to pay more.

As most Americans desire to age in place, home care may seem a cheaper solution to long term care. The problem is, it also adds up quickly. For 44 hours of everyday work done for you by a caregiver, it would easily cost you more than $45,000 a year.  

If you aren’t eligible for Medicare or Medicaid, personally paying these amounts of money for your care is too much. If you can afford insurance, getting one will help you a lot.

How Insurance Companies Calculate Long-Term Care Insurance

In calculating for your premiums, insurance companies usually base the costs of long-term care insurance on the following considerations:

- Your AGE when you bought the policy. The older you or your parents are, the higher the premium insurance companies’ offers are. More often, insurance companies deny people over 80 to avail long term care insurance. Or they charge a hefty amount for their premiums. Experts suggest the perfect age to get covered is in your 50’s, when you are still in good health and still have more time to build up your retirement assets.

- Your GENDER. If you’re a woman, expect your premium to be much higher than men. Because women tend to live longer, insurance company thinks its only right they pay more.

- Your HEALTH. If you have a chronic illness or a disability, insurance companies may either raise your premium or deny you coverage, depending on your health condition. Insurance companies often deny clients if they have AIDS or AIDS - related complex (ARC), Alzheimer’s disease, dementia, progressive neurological conditions, Parkinson’s disease, multiple sclerosis, multiple strokes or metastatic cancer.

- The COVERAGE or the services to be subjected to daily reimbursements. Insurance companies usually cover 100 percent of the common long term care services like Nursing home, assisted living facility or hospice facility, home care, adult day care, respite services, formal and informal caregiver services and hospice care at home.

- The DAILY BENEFIT AMOUNT (DBA) or the chosen amount the insurance company will pay per day. Insurance companies usually pay the maximum of the policy holder’s daily cost of care. For instance, if you chose a policy that will reimburse you $150 per day, you’ll have to pay the rest out of your own pocket if you exceeded beyond $150. If you choose a higher DBA, the policy becomes more expensive.

- The BENEFIT PERIOD or the chosen number of years or days the insurance company must pay your care.   The longer the years in your insurance package, the more expensive it is.  

- The INFLATION PROTECTION for your benefits. Insurance companies make sure that the benefits that policyholders receive may keep up with the yearly inflation rate. For many years, many policy holders set their compound inflation protection to the standard 5 percent. However, from the average rate inflation for the past five years, experts say policyholder s can do with a coverage less expensive, grows one to four percent per year and changes with the consumer price index.  

- The CERTIFICATION PERIOD or the definite amount of time that an insurance company takes to assess whether you are eligible for long term care and whether your income can handle the yearly premiums you chose.

- The ELIMINATION PERIOD or the period that must pass from the beginning of the disability (when you needed care) and the time you are eligible to reimburse benefits.

The Latest data on the cost of Long-term Care Insurance

According to the 2017 Long-Term Care Insurance Price Index released by the American Association for Long-Term Care Insurance or AALTI, new policy rates for a 60-year-old couple increased by six to nine percent compared to last year. Now, an average couple who just recently became seniors must each pay around $100 to $150 per month to get an LTCI protection.

The premium rates for 55 year old single males declined by 20 percent in some insurance companies. Some leading insurers can offer them about $90 to $150 monthly for their premiums. Women also pay more premiums compared to men because they are the largest long term care insurer in the country. Two out of every three dollars spent on insurance claims comes from women. Statistically speaking they live longer and take care of their bodies more efficiently than men. The longer they live, the more they get out of their insurance. For insurance companies, not increasing their premiums would be disastrous.

Check out the AALTI data on the average cost of long term care insurance in US:

How to Choose the Right Long-Term Care Insurance for You

AALTI believes when it comes to choosing a Long-Term Care policy that’s right for you, you should consider the "Good - Better - Best" Approach. An insurance coverage can be considered “GOOD” if it encompasses a “short-Term Care policy which can pay benefits” for a whole year and with benefits that grows 5 percent annually.

According to AALTI director, Jesse Slome, this short coverage is more than enough for many people who “ultimately need long-term care” in the later part of their lives. He also noted on recent long term insurance claims, almost half of it ends within a year.

Whereas a “BETTER” insurance policy that can cover care needed in early years, maybe expensive but is practical because it remains level as a policyholder ages. And the “BEST” LTC insurance policy that AALTI considers is a policy that covers all and  grows by 3 percent yearly.

Simple Reminders before buying long-term care insurance

Avoid buying cheap insurance. Just imagine how you would feel if in your desperate time of need, your insurance doesn’t cover the cost. Remember it is more difficult to raise your coverage in the later years than decrease it as you age.

Avoid buying extravagant insurance. Don’t buy more than what you may need. Keep savings and use it to pay for a part of your care expenses. The policy can fill in the rest. Don’t hesitate to call on your family (if you have any) to help supplement your needs.

Scrutinize each policy. Always remember your policy should be designed on your need and what you think you may need in the future. A “one-size-fits-all” policy doesn’t exist.

Get covered while you are younger. It’s offered cheaper than when you reach your senior age.

Do your Research about the service quality, efficiency and reliability of the insurance company you’re thinking of getting. Compare insurance prices before choosing one.

Talk with an insurance broker before finalizing your decision. There’s a big difference in cost when you talk to a broker instead of an insurance agent. Brokers compare prices and service quality of several insurance companies while agents only pitch one company.


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