Make Long Term Care Insurance Part of Your Retirement Plans

By on November 12, 2013

Americans need to start planning for health care needs in retirement before it’s too late. With a growing population over age 65, more and more people are going to need long-term care to cover health care expenses well into their 80’s and 90’s.

Long Term Care Insurance (LTCI) can help protect you from some of these unpredictable costs. It can be used to pay for nursing home expenses, adult day care, and in-home help for seniors with chronic conditions or who need extra help recovering from an illness.

Although long term care insurance will help protect your retirement nest egg from growing health care costs, it is typically more expensive than the middle class can afford, unless you impoverish yourself to qualify for Medicaid. Consider your long term care options with your trusted insurance agent as you create a comprehensive retirement plan.

Start Planning For Long Term Care Insurance Early

Purchasing long term care insurance early can potentially save you money in the long run by reducing your premiums, locking in annual discounts and bolstering your benefits in the future. This is the reason why long term care planning should be done as you plan for retirement in your 40s.

Different companies have varying rates and pricing systems, but generally, premiums for younger policyholders are lower than those who acquire long term care insurance at an older age. When you’re young and healthy, the insurer considers you a low risk for making a claim from your insurance policy. Since it is unlikely you will activate the policy, they can provide you with coverage.

Save Money by Buying LTCI Early

For example, if a married couple purchased a long term care policy at age 40 each would pay $2,250 annually to receive a $200 per day benefit ($6,000 per month) for home care and nursing facilities. By age 80, each person will have paid close to $85,000 into their policy.

However, if at 50 they chose to buy a similar policy, the annual premium would be $3,500 each, and the net cost at age 80 would increase to about $98,000. Five years later, the annual premium would rise to $5,579 each, and the net cost at 80 would be close to $105,000. The closer you get to the age when you are likely to activate your policy, the more expensive it will be for you to afford the care you need.

Qualify as a Healthy Young Person

Another incentive to start investing in your long term care insurance early is the greater likelihood you will qualify. According to the American Association of Long Term Care Insurance, fewer than 1 in 10 of those younger than 50 is turned down for long-term care coverage, compared to nearly 25 percent of those 60 to 69 who are rejected and 45 percent of those ages 70 to 79.

The longer you wait, the harder it is to get the coverage you need since policies are tied to your health, gender and age. Family history is not taken into account, however, any chronic condition such as Parkinson’s or Alzheimer’s disease may disqualify you. Buying a long term care insurance policy before these conditions arise can save you money and protect you.

Long Term Care Insurance Linked to Life Insurance

If you are feeling financially strapped with mortgage, home, auto and life insurance payments, college tuition and other midlife expenses, you can purchase a linked benefit policy that can add a long term care policy to your life insurance. Speak with your insurance agent to see if this is an option for you.

Make Long Term Care Plans Budget Friendly

Reduce Coverage and Lower Benefit Amount

Long term care insurance is not a one-size-fits-all product. Streamline your coverage and benefits to make long term care insurance friendly to your budget. If you need to control costs, you may want to pass on a lifetime policy with a huge benefit amount.

  • Cut your premiums by purchasing a policy for a specific term: 3-5 or 10 years. The average length of time that a person will need care is 3 years, however if you have a family history of chronic illness, you may want to opt for a longer policy.
  • Reduce the policy benefit amount to reduce your premiums: Determine how much you can afford to pay out of pocket as well as the risk you are willing to take that your care won’t be financially catastrophic. You can reduce how much your policy will pay and resolve to pay the difference.

Remember that the best long term care policy is not always the one with the broadest coverage, rather, it is the one that covers your health requirements without jeopardizing your financial capability.

Lengthen the Elimination Period

Elimination period refers to the time in which you need to wait and shoulder your care expenses before your policy will start paying. The longer the elimination period, the lower your premium. You have the option to set your policy’s elimination period from zero days to over 100 days.

When you finally need long term care, your initial expenses are less likely to be costly and could be easily handled by your retirement income, savings and even social security.

This can mean considerable savings on your end that can amount to at least 20% of the annual cost of your policy. A longer elimination period offers you higher savings and you can reserve your policy for more severe care needs and expenses.

Protect LTC From Inflation

Do not forego inflation protection on your long term care insurance as it will keep your benefit at pace with the rising cost of care services. Overtime, an inflation rider grows your benefits so that when you need to activate your policy it does not fall short of your care expenses.

Beware that an inflation rider can be an expensive cost upfront, however a simple inflation rate can be more advantageous and cost-effective for you. Speak with your insurance agent to determine your needs and ask what your insurer’s rules are if you want to decrease the level of your inflation protection.

Save on LTCI by Purchasing a Joint Policy with Your Spouse

Those who are married can save considerably on long term care insurance if they purchase a joint policy. A shared policy allows spouses to share their individual benefits so they can tap into the other’s benefits if one of them has exhausted their policy.

There are different conditions that need to be met in order for you to qualify for a joint long term care policy. It all depends on the insurer, companies may require that both spouses purchase an identical coverage. Ask your insurance agent what their terms are regarding these situations.

Pay LTCI Premiums Annually Instead of Monthly

Companies usually offer different payment terms when it comes to settling your long term care insurance premiums. You can choose between an annual, semi-annual or monthly payment.

If you cannot hand over a large lump-sum amount to your insurer, you may initially opt to make monthly payments. However, if you want to lower your premium payment amount, consider paying annually. You can save up to 8% of your premiums by forgoing monthly interest and surcharges.

Long Term Care Insurance is a growing necessity for most Americans. Do your best to save money and still get the right amount of coverage to receive care and benefits in your old age. Speak with your insurance agent to develop a comprehensive and affordable policy which supports (instead of hurts) your retirement plans.

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About Terri A. Kamoto

Senior writer for FSN - Terri is a former financial analyst dedicated to making personal finances, budgeting, investment and insurance advice accessible, up to date and easy to understand. It is hard to find professional advice written in a language someone without a financial background can understand. Terri helps companies synthesize industry lingo and expertise into clear and informative content which builds smarter, financially successful individuals. You can find Terri on !

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