How To Save Money On Your Long-term Care Insurance Premium

Long-term care insurance has a reputation for being expensive, especially for people who waited until they were in their 60’s or 70’s to investigate coverage. But there are ways to lower your premium amount without sacrificing significant benefits. The elimination period is the most practical way to save money on your premium. For example, an elimination period in the range of 100 days can save a significant amount of premium dollars over a lower elimination period.

Also known as the deductible, the elimination period is similar to deductibles with other types of insurance coverage, such as your automobile or homeowner’s insurance. However, instead of being defined as a dollar amount, the elimination period with LTC insurance is defined in days between the time you begin to need care and the time the policy begins to pay benefits. For example, if you need long-term care services, and you had purchased coverage with a 100-day elimination period, on the 101st day of your need for care, your elimination period would be satisfied and the policy would begin to pay the benefit amount.

The more days that you are willing to pay for your care out of pocket before your policy begins paying benefits, the lower your premium rate. You can choose a variety of elimination periods, ranging from a zero-day elimination period—which would pay benefits from the first day you needed long-term care services—to elimination periods as high as 730 days or longer. There are various methods for calculating how the elimination period is satisfied. Some insurance companies use a calendar day method, whereby your elimination period starts on the day you begin to need care and every day counts, even if you do not receive care every subsequent day thereafter. Other companies use a “days of service” method, whereby an elimination period day must be a day that care was actually received. But in the overall picture of LTC insurance policy design, the method used to satisfy the elimination period is a minor consideration.

In determining the elimination period most appropriate for your situation and how that translates into out-of-pocket dollars, consider two important points:

1. Your risk tolerance philosophy and whether or not you believe in co-insuring a small or large amount of your potential long-term care costs.
2. The average cost of care in your area. Use this figure to calculate your out-of-pocket dollar risk for various elimination periods by multiplying the elimination period by the average cost of care per day in your area.

True long-term care is needing assistance for a period beyond 100 days. Short-term care, care needed for less than 100 days, can normally be paid for without significant hardship to the person receiving the care or their family. In certain instances, a percentage of short-term care may be paid for by your health insurance or Medicare. For these reasons, always concentrate your premium dollars on true long-term care. This means choosing an elimination period of at least 100 days. Some people view LTC insurance as a highly catastrophic type of insurance, and choose elimination periods much higher than 100 days—sometimes up to 730 days or more. We caution however, that this strategy could cause unexpected problems: if a policy’s benefits cannot be accessed until several months or years after the need for care, a policyholder and their family may be tempted to delay quality caregiving that could have been received earlier.

By: Allen Hamm

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