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HOW TO CHOOSE AN LTC PLAN

There are two critical components when considering how to choose an LTC plan:

  • How MUCH protection you need
  • How SOON you’ll need it

HOW MUCH PROTECTION DO I NEED?

When choosing how MUCH protection you need, consider the following:

  • If you need care, who will provide it?
  • For the person providing the care, are they going to be paid? By whom?
    • A recent study on family-member caregivers found that half lost close to 1/3 of their income due to the demands of providing care. On the other hand, 55% of care recipients had to leave their job because of a long term care event.
  • If you need care, where do you want to receive it?

National Annual Average Cost of Care:

  • Home Health Aide – $46,332
  • Assisted Living Facility – $43,539
  • Nursing Home: Private Room – $92,378

WHERE YOU RECEIVE CARE

Long term care insurance pays for home care, assisted living care, and nursing home care. While it is impossible to know which care setting will be needed 20-30 years from now, it is possible to plan ahead by knowing where you want to receive care. 

Since the majority of care is received in the home or at an assisted living facility, it is reasonable to focus on building a plan to cover many of these costs.

If an assisted living facility in your area costs $3,400 per month for room and board, you’ll want to select a benefit amount that covers the additional costs for assistance. Additional assistance typically includes help with at least two activities of daily living (ADL’s), which is the trigger for an LTC policy to pay benefits.

The general rule is to take the average room and board cost for an assisted living facility in your area and add 20-30% for the cost of assistance with ADL’s. In this example, you would need a monthly benefit amount of $4,080-$4,420.

Curious about the cost of care in your area? Visit our Cost of Care Map.

Benefit Pool

Your benefit pool is your daily or monthly benefit multiplied by your benefit duration (or years of coverage). Current purchasing data shows most people select a daily benefit of $100 to $199.

For example, if you choose an LTC plan with a $150 daily benefit and a 3 to 5 year benefit duration, you’ll have access to $162,000-$270,000 in benefits.

NOTE: When planning for your benefit period, think about your extended family. If chronic conditions are part of your family’s health history, a policy with a higher benefit pool may be a better choice. If your family history includes longevity and wellness, a smaller benefit pool may suffice.

Inflation Protection

The next important factor to consider is how your benefit will grow in the future. On average, people begin receiving care when they’re between ages 70 and 80. For many of you, this may be 25-30 years from now.

Consider how the cost of care will change over the next 25-30 years and select a policy that will grow (inflate) over time.

Most people choose a 3% compounding inflation, however, given the right circumstance some chose a 5% compounding inflation. Either option offers great coverage; it just depends on what you can afford. The price difference between a policy with 3% compound inflation and one with 5% compound inflation can range from 45-107%.

Inflation Option Graph:

This graph shows how your pool of money grows over time with inflation coverage.

long term healthcare coverage

Example: At age 50, you purchase a $100,000 pool of money with no inflation protection. This will still be worth $100,000 in 20-30 years. If you purchased this same policy with 5% simple or 3% compound inflation, your benefit pool would grow each year. With 3% compound inflation, your benefit pool grows to nearly $242,725 by age 90, or with 5% simple inflation, it grows to nearly $250,000 by age 90. Although it’s more expensive, 5% compound inflation provides the best coverage with your pool growing to nearly $432,195 during this same time period!

Also note, if you’re buying LTC insurance with your spouse or partner, consider adding Shared Care. Shared Care allows couples to combine their benefits and share coverage. If you and your spouse or partner each have a $200,000 policy, then together, you have $400,000 of benefits you both can access if one of you needs additional care.

HOW SOON DO YOU WANT YOUR BENEFITS PAYMENTS TO BEGIN?

Long term care policies have an elimination period (or waiting period). You get to choose how long you want to wait until your benefits begin.

The elimination period is similar to health insurance which requires a person to pay their deductible before claims are paid. The two most common elimination periods are 90 and 100 days.

Consider these important factors when making your decision:

  • Calendar Day Elimination Period – the waiting period begins the first day of certified need for assistance with ADLs or due to cognitive impairment.
  • Service Day Elimination Period – one day of licensed care satisfies one day of the waiting period. If you don’t need care seven days a week, this option could last longer than 90-100 days.

DISCOUNTS

Speak with a Long Term Care Specialist to find out if you qualify for premium discounts for long term care insurance. An LTC specialist will know how to get you the discounts you deserve.

You may be eligible to receive premium discounts based on:

  • Good health
  • Marital or domestic partner status (subject to carrier definitions)
  • Multiple family members applying with the same carrier
  • Your employer offering coverage at group rates
  • Being a member of an association
  • Valued Client (or multiple policy) discounts

POSSIBLE SAVINGS OPPORTUNITIES INCLUDE:

  • Up to 5% – Multiple Policy
  • Up to 10% – Preferred Health
  • Up to 10% – Buying before your next birthday
  • Up to 35% – Spouse/Domestic Partner

*Please Note: Discounts are not cumulative and vary by insurance company, state, individual age and health situation.

Need help choosing an LTC plan? We’ve got you covered. Get an instant quote today and speak with an LTC Specialist about the discounts available to you.