What Are the Best Long-Term Care Insurance Options?

Best Long Term Care Insurance Options
Kevin Wenke

Kevin Wenke

Owner at Decision Tree Financial. CFP. CLU

Long term care insurance options vary with different riders, or features, that give the policy greater benefits. Generally, more benefits will mean higher premiums.

The answer to this question, “What are the best long-term care insurance options for me?”  is that… well, “It depends…”

This question usually comes up when people are considering the value of the policy compared to their current cash-flow available.  Everyone would want the best coverage possible, until the premium is considered… The best long term care option will provide good benefits and fit into the budget.

The cost of an insurance policy can greatly vary depending on the company and the coverage you choose.  For example, one company may charge more for inflation protection vs. another company, or they may charge more for home care.  After analyzing coverage for hundreds of seniors, no single company that has the lowest cost in all cases.

Therefore, the first step is to decide on the coverage you want, then get quotes from several companies to find the best cost for the coverage you desire. There are five important factors in understanding coverage for long term care:

Best Long-Term Care Insurance Options

Inflation Protection: This protection will increase your insurance benefit over time in hopes of keeping pace with the actual cost of long-term care.  If you are under age 75, you may want to get inflation coverage because we hope it will be many years until you need to use the benefits. 

Over the years, the cost for services will increase and you’ll be glad you have the inflation-adjusted benefit.  The increases in benefit can come in simple or compound adjustments.  The compound inflation protection adds much more over a longer period of time and therefore comes with a higher price.

Benefit Period: The coverage period determines how many years the insurance company will pay you benefits once you need them.  In many cases, it is good to apply for at least four years of coverage.  Statistics indicate that a five-year policy has historically covered 90% of all long-term care cases. 

Of course, there is no guarantee that this pattern will continue into the future.  A longer, or lifetime benefit will put the insurance company on the hook for a longer period of time so this policy design would require more premium dollars as well.

Daily Benefit: This is how much the insurance company will pay for your care every day.  The amount of coverage needed depends upon your income and ability to cover these costs.

For example, if you determine that an additional $4,500 of monthly cash flow is needed to cover long-term care costs, then you might consider a policy with a $150/day benefit ($4,500 divided by 30 days).

You should consider your various sources of income and cash flow when making this determination (social security, pensions and retirement distributions, annuities, etc.).

Coverage for In Home and Outside the Home Care: You can select where you want to receive the benefits too. While many people like the idea of remaining in their own home and want insurance for in-home care, the more important insurance for others is for outside the home (nursing home or assisted living facility).

Shared-Care Option: Long-term care insurance can be purchased by two people who share the same benefit.  For example, if a policy provides up to $500,000 in benefit, it can be shared between the two policy owners.  One of the insured might use all of the benefit, half of the benefit, or even 12.67% of the benefit; then whatever is left is available for the other policy beneficiary. This can reduce the cost of coverage 15-30%.

Elimination Period: With your car insurance, the more you are willing to pay for a loss (the deductible) the lower your premium. An “elimination period” is like a “time deductible” and dictates how long an insured person will pay for their own care before the insurance kicks in. Most policies allow you to select periods ranging from zero days to 180 days with shorter elimination periods corresponding to higher premiums.

Long-term care insurance policy design is an important consideration when looking for the best value, but it is not the only thought.

Tax deductions, hybrid long-term care insurance, State Partnership Plans, and many other considerations should be assessed to make sure you are getting the maximum economic value of the policy…and your whole financial life.

These things and more are discussed in my eBook The Secret to Long-Term Care Planning.  You can click on the link to download this eBook for FREE.

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