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5 Tips to Reduce the Cost of LTCi
December 6, 2014
Long-term care insurance (LTCi) is one of the most important policies to have. Even if 64 percent of adults believe that most people will need LTCi, only 8 percent of Americans have purchased this policy. One of the reasons why people don’t buy LTCi is the cost.
LTCi is expensive, but the good news is, you can make it fit in your budget. Here are ways on how you can make premiums affordable.
1. Buy early.
The ideal time to buy LTCi is during your 50s. At this time, your age and your health can help you get good rates.
Insurers have varying pricing systems, but generally, they charge lower for younger policyholders because a person’s chances of making a claim are very slim while he or she is still young and healthy.
If you’re in good shape when you purchase LTCi, you can be entitled to good health discounts, which amount to about 10 to 20 percent of premiums. Note that this price deduction is locked-in, meaning you won’t lose the discount even if you develop health conditions along the way.
2. Streamline your coverage.
There are LTCi features that you can modify in order to lower your premiums, and these are the daily benefit amount, benefit amount, elimination period, and inflation protection.
A policy that has a daily benefit amount of $200 will cost less than a policy that will pay for $250 per day. Though a high daily benefit amount offers a wider scope of coverage, you need to consider that this will add up to the cost of your policy. Make sure that you only sign up for the amount that you will most likely use.
Meanwhile, a definite benefit period can allow you to save as much as 16 to 53 percent. Though a policy that will last for the rest of your life seems to be a more comforting choice, you need to consider that lifetime policies come with a high cost. Factor in the average length that a person will need long-term care, along with your risks of developing conditions that will warrant care services, in order to determine the best benefit duration for you.
LTCi’s elimination period can last from 0 to 100 or more days. The rule of thumb is, the longer your elimination period, the lower your premiums will be. Eighty-three percent of policyholders have set their elimination period to ninety days and opted to pay for their initial level of their care.
Inflation protection allows your benefit to grow over time in order to be at pace with the changes in cost of care. The younger you are, the higher the need for this feature. In order to save, buy the right kind of inflation protection according to your age when you applied.
3. For couples, take advantage of the shared care rider.
The shared care rider allows couples to pool their benefits together so that when one of them needs longer care than their individual coverage, they can use the other’s benefits. Through this rider, couples save money by not needing to immediately re-apply for a new policy or pay out-of pocket when one of them exhausts his or her coverage.
4. Pay your premiums on an annual basis.
Insurance companies usually allow their policyholders to pay premiums on a monthly or yearly basis. Experts suggest that you pay these premiums annually. Though a bigger amount is needed upfront for annual payments, you don’t need to pay for the “convenience” in the form of interest and surcharges, which are extra costs that come with choosing to pay monthly.
5. Shop around.
Take your time when shopping around for LTCi because insurance companies have varying pricing systems. In fact, two insurance providers can charge differently for an identical policy. That’s why it pays to be meticulous so that you do not end up overpaying for a policy.
Long-term care insurance is an expensive product, but with these tips, you can fit this policy right into your budget.