Long term care insurance is designed to assist in paying the costs associated with in-home, assisted living or nursing home services that can range from those provided at home, assisted living communities or nursing homes. Such costs can quickly add up and are usually not covered by Medicare; just three years of long term care could cost well over $100,000 which could quickly deplete retirement savings.
Long term insurance can be complex to understand, with various policies offering various benefits, costs and underwriting criteria. Therefore, it’s crucial that you consult a professional to help guide the process and guide your selection process towards making an appropriate choice suited to your needs.
Annual premiums depend on many factors, including age, gender and the policy type and carrier you select. As you get younger, your policy costs less while your chances of approval increase thanks to medically underwritten policies offered by many insurers. Annual increases generally reach between 2%-4% in your 50s before reaching 6-8 % by your 60s.
Your health history and current chronic conditions will also play a factor in the cost of long term care coverage. Some medical conditions, like muscular dystrophy or cystic fibrosis, may preclude you from purchasing traditional long term care insurance policies; smoking or being overweight could put you into higher rate classes that would increase premium costs accordingly.
Marital status also plays a factor in the cost of long term care policies, with married individuals typically paying lower rates than single applicants and couples purchasing joint plans often saving hundreds of dollars over purchasing policies individually.
Long term care insurance policies typically come equipped with additional features known as riders, which vary in terms of price and coverage; such as inflation protection or shared spousal benefits. All long term care insurers must offer at least 5% inflation riders as part of their policy offerings; you may wish to add extra riders based on your individual circumstances.
Many individuals are opting for products that combine long term care benefits with other financial benefits such as annuities or life insurance policies, which outsell traditional long term care insurance by about 4-to-1 and may allow you to leave any assets not used for long term care to their heirs.
If you are thinking of purchasing long term care insurance, the sooner the better. Most experts advise completing an application in your mid to late 50s as the costs associated with long term care insurance policies increase as we get older; purchasing early will help keep premiums manageable; for instance a single 55 year old man purchasing a $165,000 policy with 90 day elimination period and 3% compound inflation would pay an annual premium of $950.