What do policies cost?
The cost of long-term care insurance varies widely, depending on the options you choose. For example, inflation adjustments can add between 40 and more than 100 percent to your premium. However, this option can keep benefits in line with the current cost of care.
The actual premium you will pay depends on many factors, including your age, the level of benefits, and the length of time you are willing to wait until benefits begin.
Age
In 2001, a policy offering a $150 per day long-term care benefit for four years, with a 90-day deductible, cost a 50-year-old about $510 per year. For someone who was 65 years old, the same policy cost about $1,263, and for a 79-year-old, the cost was $5,265. The same policy with an inflation feature may cost $1,009 at age 50, $2,273 at age 65, and $7,588 at age 79.
Premiums generally remain the same each year (unless they are increased for an entire class of policyholders at once). That means that the younger you are when you first buy a policy, the lower your annual premium will be.
Benefits
The amount of your premium also depends on the amount of the daily benefit and how long you wish that benefit to be paid. For example, a policy that pays $100 a day for up to five years of long-term care costs more than a policy that pays $50 a day for three years.
Elimination or deductible periods
Elimination or deductible periods are the number of days you must be in residence at a nursing home or the number of home care visits you must receive before policy benefits begin. For instance, with a 20-day elimination period your policy will begin paying benefits on the twenty-first day. Most policies offer a choice of deductible ranging from zero to 180 days. The longer the elimination or deductible period, the lower the premium.
However, longer elimination periods also mean higher out-of-pocket costs. For instance, if have a policy with a 100-day waiting period and you go to a nursing home for a year, you must pay for 100 days of care. If your stay costs $150 a day, your total cost would be $15,000. With a 30-day elimination period, your cost would be only $4,500.
When you're considering a long-term care policy, you should determine, not just how much you can pay for premiums but also how long you could pay for your own care. Bear in mind that while 45 percent of nursing home stays last three months or less, more than one-third last one year or longer. The more costly longer stay may be the devastating financial blow that you may want to insure against.
Will my premiums increase as I get older?
In general, premiums will stay the same each year. If they do increase, it will be for the whole class of policyholders, not because you as an individual have aged or your health has deteriorated.