Eight Ways To Save On Long Term Care Insurance Premiums
You may have heard that Long Term Care insurance is expensive. Well it is. A typical LTC premium is going to be $1,000 to $3,000 per year. Paying a controlled amount annually is better than risking an unpredictable and potentially devasting cost in the future. But still, there are ways to keep those LTC premiums affordable.
Buy Your LTC Insurance Policy Early
Premiums are based on age. For those of you who purchase inflation protection (and this should be all of you) the cumulative costs of the premiums is going to be lower the earlier you buy. You do not "save" premiums by waiting. Because Long Term Care Insurance premiums rise substantially with age, the earlier you buy LTC insurance the lower your cumulative insurance premiums will be.
You never save money by waiting, but you do lose benefits. The chart below shows an example of a policy that pays $200 per day for 4 years and includes compound inflation protection.
|Premiums paid until age 85||$46,710||$48,275||$51,600||$55,575||$58,900|
|Value of Benefits at age 85||$1,201,912||$941,729||$737,869||$578,140||$452,988|
The above example assumes that the individual applying for coverage has the same health history at age 75 as at age 55. In reality, most people's health declines with age which adversely affects premiums and even the ability to obtain insurance. Additionally, every year that you wait is a year you remain uninsured. If you have assets to protect and can afford the premium without changing your lifestyle, now is the best age to buy Long Term Care Insurance.
Good Health Discounts
Your health history can also affect premiums by as much as 150%. So if you are in good health, it can pay to purchase early to lock in advantageous rates. Yes, we know we said this earlier but its bears repeating don't you think? On the other hand, if you have a serious medical condition, you may be unable to find coverage at any price.
Married people can get discounts of 10 to 35% annually. For many couples these discounts will also apply to committed couples that are cohabiting. These discounts can even apply to brother & sisters.
LTC insurance premiums on tax-qualified policies are considered medical expenses under current IRS guidelines. If your total medical expenses exceed 7.5% of your adjusted gross income, you can write off the excess as an itemized deduction on Schedule A.
Even Better Tax Deductions
If you're a sole proprietor, partner or LLC owner, you can deduct all of the premiums for a qualified long-term-care policy whether or not you itemize.
If you work for a company that offers Long Term Care insurance, you may be able to get lower priced group coverage. Although be aware that many of these group policies have significantly reduced benefits or non-standard qualification criteria. Better yet, if you are an executive or owner of a business it is possible to provide Long Term Care insurance as to a subset of employees. These "executive carve-out" policies are exactly the same as standard individual policies but with 10-15% premium discounts and often with significantly lower underwriting requirements.
Plan Design - Smaller Policy
By opting to co-insure part of the cost of care you can significantly reduce your premiums. For instance, lowering your daily benefit by 20% will provide you with a 20% lower premium. Opting for a 4 year policy rather than 6 year can reduce costs 15-30% annually.
Plan Design - Longer Elimination Period
The elimination period is essentially a deductible for Long Term Care insurance. It is the amount of time that you pay out of pocket (or from an alternative source like Medicare or your health insurance) before the policy starts to pay. Increasing your elimination period from 0 to 90 days can save you 10 to 15% annually.
Annual Premium Payments
You can save 8% a year just by sending your payment in one lump sum on your anniversary date. Don't worry, this is an anniversary you won't forget as the carrier will kindly send you a premium notice. An insurance agent can help you find a policy that's both affordable and represents the best value for someone of your age and situation.