How Much Does A Long Term Care Insurance Policy Cost?

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William Bridgers
Specialist, LTCi, DI, Annuities, Life, Designs In Life, LLC, Utah
We've entered into a new phase of the development for covering the risk of having to pay for long-term care costs and therefore, a new phase of designing coverage. The consumer doesn't have to pay a fortune for at least some coverage, but expectations over how much risk one can afford to transfer to an insurance company may require some reality therapy.A base plan for a couple can cost around $3,000 - $5,000 per year depending on age. The design is simple: a fixed pool of money with as much access to it (maximum daily or monthly benefit) that one can afford. There is no accommodation for inflation and no riders, except perhaps the "monthly home care" rider which if not part of the contract should be added. It doesn't cost much as a rider. The pool should be around $300,000, if possible.A value plan for a couple can cost between $5,000 and $7,000 per year. The design includes the lowest cost inflation rider, monthly home care rider (if not included in the base plan) and maybe survivor waiver of premium. The pool of money to pay care costs and daily/monthly access to it should be as much as can reasonably afforded.A premium plan (which we used to illustrate routinely five years ago) for a couple can run from $9,000 - $14,000/yr. depending on which combination of bells and whistles you want and can afford. This design would include one of the automatic annual 5% compounded or simple benefit increase riders. Available riders could include shared-care, spousal waiver of premium, 0-day elimination for home care, non-forfeiture rider, and/or return of premium. Other riders, depending on the carrier, may be available. NOTE: This design is most likely to experience in force premium increases over time due to the uncapped benefit increase rider.For a single person, drop the above range of numbers down $1,000 for the base plan, $2,000 for the value plan, and $3,000-$4,000 for the premium plan.These are all VERY ROUND numbers. The point is that columns and articles in the press recently have only looked at the old way of thinking about long-term care. It's pointless to dredge up old statements by insurance companies which at the time reflected their ignorance of a) how many people would actually use their policies, b) how many would keep them in force if premiums rose - the lapse ratio is 1-2%, about the lowest in the insurance industry - adjusting their benefits to stay in the game, and c) how few people would buy long-term care insurance - the percentage of Americans owning their own coverage is about 7-8% and holding.The probability of needing to pay for some or all of the costs of extended professional care at home or in a facility is still relatively high as we live longer, but not necessarily better. No LTC insurance policy can promise to pay all care costs, but is anyone going to be turn away a payment from an insurance company that covers half of those costs?Some coverage is better than none.
Answered on July 9, 2013
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