How to Cut Cost and Save Money in the Long Term Care Insurance Game

By Clayborne Cotton

Most importantly - Choose the Best LTCi Broker.

Realistically, you cannot get all the answers you want until you sit down with a licensed long term care insurance specialist. Long term care insurance is complicated and there are features which can be easily misunderstood. Sooner or later, you'll want a personal guide to help you through the long term care insurance maze.

But beware: If an agent only works with ONE company, it's called "captive agent" status. This limits your choices. You want an LTCi broker who has the freedom to pick and choose from the best offerings available in the marketplace.

Your broker must also be experienced in handling paperwork at claims time. This is when experience counts (I have never had even one claim denied by an insurance company!).


 

1. Be as healthy as possible.

If you smoke, stop. If you are overweight, diet. If you have high blood pressure or Type 2 diabetes, change your diet, exercise, take nutritional supplements and/or herbs to correct or mitigate these imbalances. Do whatever it takes to make yourself low-risk, according to the insurer's underwriters. This can save you up to 15% to 20% on your premiums.

Your LTCi broker should be working directly with home office underwriters, so that you can be represented in the best possible light. Even so, do not lie about or omit health issues on your application under any circumstances! You will be found out, either during underwriting or - worse yet - at claims time.

2. When is the best time to take out my coverage?

The best time to purchase coverage is right now! Better yet, YESTERDAY... and last year would have been even better. Why? Your lifetime annual payment amount is locked in - frozen - at the age you are when you apply. Unless the company raises rates on everyone that has bought a particular policy, your rates will remain the same until you enter a care center or shortly thereafter, depending upon your policy wording. You save a bundle by getting a lower rate locked in at a younger age.

By waiting, you also run the risk of becoming uninsurable due to some unforeseen medical problem. I see it every day. As a matter of fact, it happened to me.

3. Get married ( just kidding! )

But seriously, if you are married you can save anywhere from 15% - 40%, depending upon the company. Some LTCi companies allow couples to get discounts if they are not married, but are co-habitating - even same sex partners. Choose a company that suits your lifestyle.

4. How much benefit amount per day should I buy?

Choosing a small pay-out per day is one of the standard ways to save some money now, but it may not be the best choice for you.

Long term care insurance coverage is bought in dollars-per-day payout amounts, in ten dollar increments. That means, if you are disabled, the company will reimburse you for the actual cost of care up to the benefit amount that you purchase. Any higher daily care charges must be born by you.

If the cost of care is currently $130/day, that doesn't mean that you must insure for the entire $130/day amount. Here's why...

You may have a dependable lifetime income from pension and/or investments. Right now you allocate that income stream to support your entire retirement lifestyle - new vehicles, travel, entertainment, etc. If you need care, you'll no longer be using your income to support the same level of lifestyle, so you can redirect it to help co-pay for needed care costs.

100 dollar bills with savings wrapped around them

Example:

$50,000 Annual cost of care
-20,000 = Your annual income
$30,000 Amount to insure for
$30,000 = approximately $80/day

If you're following the above example, you would only need to buy $80/day of Long Term Care coverage, not $130. That saves you money in long term care insurance premiums, but you'll spend more in the long run in actual long term care costs.

HOWEVER.....and this is a big however..... please remember two things:

a) Using pension and investments to pay for part of your daily long term care costs is not a good idea if you have a spouse/partner who will be depending upon that money for their needs. It's best to use this strategy only if you are single.

b) For the last few years, the long term care sector has been experiencing inflation at 6% per year. That's almost twice the rate of inflation as the CPI. This means that your $80 per day won't buy much in the years to come. Even if you add a maximum inflation rider of 5% compounded (which is recommended, but will substantially increase your premium), inflation will likely outgrow your daily benefits. So you must think ahead. Saving up to 15% or more in annual premium could cost you dearly in the future. 

5. How many benefit years are best for me?

The average stay in a skilled nursing facility is 2.8 years, provided you don't have dementia/Alzheimer's. Then the stays average about 8 years. Remember, that 2.8 figure doesn't include any previous care received in-home or in an assisted living facility.

Policies will cover either various years of care or Unlimited Lifetime of care. Obviously, Unlimited Lifetime benefits will cost you more, and less years of coverage will cost less. For instance, selecting coverage for up to five years can save you 16% to 27% in annual premiums.

Still, if you can afford it, you may want to choose a higher amount of years or even Unlimited Lifetime benefits. If you know that you can afford a higher priced policy and you know that you will have the money to continue paying for it, then more is always better when it comes to long term care insurance.

Please keep in mind, it looks like the LTCi industry might be pulling away from the Unlimited Lifetime benefit plans. Some companies that have charged low premiums in the past have found that they need to implement rate increases in order to keep up with the cost of care (sometimes up to 300 percent!) In the case of Unlimited Benefits, it may be wise to choose a company that charges a substantial premium amount in the beginning, so that you are unlikely to get hit with rate increases in the future.

6. Can I save money with deductibles?

Deductibles, called "elimination periods" come not in dollars, but in days. The company will lower your premium cost if you elect to foot your own bill for a period of time: say 30, 60, 180, or 365 days. Choosing a longer "elimination period" by increasing it from 30 to 90 days can save 10% to 20% in annual premium costs.

7. Is in-home care cheaper than facility care?

Not necessarily.

It depends upon how much care you need. 24-hour care can be prohibitively expensive. Staying in-home can be done, with enough planning and assistance, but you will want to prepare to meet these costs through your insurance. The general consensus is: If you are alone, and need more than five hours of care in your home each day, you should be located in a care center setting where your needs can be properly met. If you need assistance with transferring, toileting and eating, you definitely need to be where you can get 24 hour care.

It is usually desirable to remain at home as long as humanly possible, then relocate to an assisted living setting, and finally to a skilled nursing facility. In order to have these options, it's crucial that your policy pays your full daily amount no matter where you reside - any house, any facility, any state.

"Nursing home only" policies can save you a bundle on premium costs, but they are very limited. Yet if you are absolutely certain that you have loving, patient and willing family members who are also financially, emotionally and physically able to dedicate several hours a day to your care during the many years before you are eligible for nursing home benefits, then this may be something for you to consider.

8. Pay now and save.

Perhaps the simplest way to decrease you premium cost is to pay annually (with one yearly payment), rather than making monthly or quarterly payments. You can save up to 8% depending upon the company.