Insurance

How Much Does Long-Term Care Insurance Cost? | LTC News

Many Americans consider long-term care insurance at age 50. For those who buy at age 50, long-term care insurance costs between $1,000 and $2,000 per year, depending on the amount of benefits in the policy. But there are several factors that affect how much you pay for long-term care insurance.

Put in perspective, the average cost of uninsured long-term care can range from $20,000 per year for occasional home care to more than $100,000 for a nursing home stay.

Reading: How much does long term care insurance cost on average

The cost of long-term care will vary greatly depending on the type of care you need, and unfortunately that need isn’t something most people can predict. Long-term care insurance helps people save thousands of dollars in potential care expenses, provides access to quality care services, protects savings, and relieves stress for individuals and their families.

In this FAQ article, we’ll break down the factors that affect the cost of long-term care insurance and explore hypothetical price breakouts.

what determines the cost of long-term care insurance?

Many factors can affect the final cost of your long-term care insurance policy. the most striking variables are:

  • age

  • gender

  • marital status

  • health conditions

  • preferred coverage & benefits

  • location

  • other policy options & plugins

    We’ll break down each of these in the following sections.

    age of policy holder

    Age is an important factor in determining the cost of long-term care insurance premiums. In general, the younger you are when you buy a policy, the lower your premiums will be.

    The risk of needing long-term medical care increases with age. this makes older policyholders a higher risk to insurance companies; therefore, older people tend to have more expensive premium prices. younger policyholders initially pose less risk to insurance companies; therefore, they tend to pay lower premium prices.

    Here are some examples of how age affects the cost of long-term care insurance:

    1. On average, a 60-year-old married man pays $700 more a year than a 40-year-old married man with the same health and benefits.

    2. A 70-year-old married man would pay about $1,000 more a year than a 50-year-old married man with the same coverage.

      The last example assumes the 70-year-old qualifies for long-term care insurance, which can be challenging. It is important to note that many insurance companies refuse to insure new applicants over the age of 75. applicants older than this age generally pose too much risk to insurance companies.

      gender

      Another factor in calculating insurance premiums is the sex of the applicant. Studies have shown that women tend to live longer and file more claims than men. As a result, women can pay up to hundreds of dollars more in long-term care insurance premiums.

      For example, the average 55-year-old married man will pay approximately $1,092 to $1,704 each year, or $91 to $142 each month, for a plan that covers up to $146,000 in benefits, with 3 percent inflation compounded.

      Women tend to pay between $1,896 and $2,400 per year, between $158 and $200 per month, for the same policy.

      marital status

      Some people may be surprised to learn that marital status can affect coverage. Married couples, or those in partnership, are eligible for some discounts, so they tend to pay less for long-term care insurance than single people. Compared to single applicants, couples on average can save hundreds.

      These discounts are offered for two main reasons:

      1. Insurance companies charge two premiums at the same time.

      2. In a partnership, the other partner may help provide some care, alleviating the risk of quickly exhausting long-term care insurance benefits.

        health conditions

        Health can have a big impact on long-term care insurance costs. applicants with standard health will pay a standard premium. Preferred health claimants generally pay less than a standard rate for the same amount of benefits.

        preferred health means that the applicant does not have any major health problems according to the company’s specific underwriting standards. preferred health standards vary by company.

        Preferred health applicants are eligible for discounts that lower their rates. Some insurance companies offer up to a 15% discount or more to applicants with preferred health.

        However, if you don’t qualify for a preferred health discount or standard policy due to chronic or pre-existing conditions, you may have other options.

        fees below standard

        Some insurance companies offer below-standard rates for people who may not qualify for standard policies. substandard fares are more expensive than standard fares.

        In some cases, substandard rates can increase the cost of a premium by 25% to 50% or more. substandard premiums are more expensive due to a higher level of risk perceived by insurance companies.

        Statistically speaking, people with chronic illnesses are more likely to need long-term care. companies must address that significant risk by charging higher premiums.

        other pre-existing health conditions

        See also: Buying Life Insurance For Someone Else | John Hancock

        In addition to chronic health history, people with a history of smoking, excess weight, or a family health history should expect variations in their premiums.

        once your policy is issued, the premium rate can never change based on future changes in your health.

        your preferred long-term care insurance coverage & benefits

        Possibly the most important part of the cost of long-term care insurance is the amount and type of benefits you want to include in your plan.

        Today, most long-term care insurance policies are comprehensive, meaning most plans cover:

        • home care (skilled, semi-skilled, and homemaker services)

        • adult day care centers

        • assisted living facilities

        • memory care facilities

        • nursing homes

        • hospice

          Many long-term care insurance companies use a benefit period to calculate the amount of money in a policy. this benefit period is essentially the minimum amount of time policyholders are guaranteed benefits.

          Benefit periods are typically two, three, or five years. in most cases benefits last longer as most people will not use the maximum amount available each day/month when they first need care services. you will have access to your benefits until there is no money left in your policy.

          There are still some companies that offer unlimited benefits for life. this means that you could never exhaust your benefits. these unlimited plans are priced higher. Generally, the longer the benefit period, the higher your cost.

          location

          Long-term care costs can vary from state to state. Long-term care insurance companies are required by law to file their products and prices with each state’s insurance department.

          Each state insurance department has different guidelines for approving insurance rates. that’s why the same policy may be more expensive in one state than another.

          Costs of care are also higher in some areas. however, this does not have a direct impact on insurance premium prices.

          other long-term care insurance options

          Most insurance companies also offer different types of policies and add-ons for those looking for features other than traditional long-term care insurance policies. These can range from simple add-ons to bundled life insurance policies. add-ons and alternative policy types add additional cost to the premium.

          a couple of options include:

          • insurance clauses & plugins

          • hybrid policies

            insurance clauses & plugins

            An insurance rider is an add-on to a traditional long-term care insurance policy that provides additional benefits for an additional cost. All LTC insurance companies offer riders for an additional cost, although some may cost more than others.

            The most common add-on is an inflation rider, which must be offered by federal law under section 7702(b). Inflation riders increase your benefits each year to address the ever-increasing cost of long-term care services.

            With inflation riders, policyholders can select a guaranteed percentage increase for benefits to increase each year. Some insurance companies will increase the premium as your benefits increase or offer options to purchase additional benefits.

            Other common clauses include:

            • shared spousal benefits

            • cash benefits

            • restoration benefits

              Each insurance company may offer slightly different options. For more information on insurance provisions, it is best to consult with a long-term care insurance specialist.

              hybrid policies

              A hybrid policy combines long-term care insurance with a life insurance or annuity policy. These hybrid or linked benefit policies will pay a death benefit to a beneficiary.

              Hybrid policies are completely different from traditional long-term care insurance policies and will not be eligible for partnership programs. however, hybrid policies are not the same as traditional life insurance policies.

              Premium prices depend on your age, gender, inflation options, death benefits, and long-term care benefits. These policies are more expensive than traditional policies since they group two types of insurance. however, hybrid policies can never increase during the term of your policy.

              Hybrid policies can be paid for with a single premium, which can range from $60,000 to $200,000 or more. policyholders can also spread the costs by paying the premiums annually for 5, 10 or 20 years or during their lifetime.

              To find a hybrid policy that best suits your needs, it’s best to meet with a long-term care insurance specialist.

              Related: Long Term Care Planning Resources: LTC Specialists vs. Financial Advisors

              tax deductions

              See also: How Auto Insurance Works When You File a Claim

              Did you know your long-term care insurance premium may be tax deductible? The federal government and some states offer tax incentives to encourage people to purchase coverage. Plus, the benefits of a long-term care insurance policy are always tax-free.

              Tax deductions on long-term care insurance policies can reduce your annual tax liability by hundreds to thousands of dollars.

              However, not everyone qualifies for a tax deduction. Only tax-qualified long-term care insurance policies that meet federal guidelines are eligible.

              If that seemed confusing to you, don’t worry. There is a long-term care insurance tax guide to help you fully understand tax deductions and tax-qualified policies for long-term care insurance.

              If your policy is tax deductible, then great news for you! here are the tax deduction limits for 2022:

              The IRS also has more information regarding tax deductions for tax-qualified long-term care insurance policies.

              the cost of long-term care insurance?

              Long-term care insurance costs vary from person to person. it’s nearly impossible to give someone a definitive amount they’ll pay for care without knowing her specific situation. there are too many variables that affect the cost.

              That said, we can visualize long-term care insurance coverage with a few examples. there are two examples below, one with no inflation rider and one with a 3% compound inflation rider.

              Compounded inflation riders increase the benefits within a policy by a set amount each year to help offset inflation. in the examples below, the benefit amount would increase by 3% each year.

              We will also provide examples of additional age ranges at the end of this article. we’ll include links at the end of this section that will allow you to jump to specific examples you’d like to see.

              example 2a: annual premium without inflation at age 50

              example 2b: annual premium with compound inflation of 3% at age 50

              Please note: The premiums in the tables above are recorded and approved by each state’s insurance department. in most cases, the premiums will follow those stipulated above. however, some variations may occur based on carrier, age, subscription, location, health, and specific situation.

              Long term care insurance is a highly regulated industry. This means that no insurance agent, agency or advisor can offer special deals or raise premiums on their own. the only way an insurance company can offer a deal or increase a premium is through approval from the state insurance department.

              examples of ltc insurance cost for other age ranges

              Looking for the cost of premiums for other age ranges? click the links below to advance to the example tables at the end of this article. we also include the 50-year examples below for easy comparison.

              examples for 45 years:

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