The Price of Long Term Care Insurance

When buying long term care insurance, it pays to compare different policies offered by different companies. The first step toward doing this is to understand what is included in the long term care insurance price.

Be sure to always compare rates and use the FREE tool above to start your search!

Daily Benefit

Long term care insurance pays for care in a nursing home, assisted living facility or, sometimes, in your home. When you hire help in your home or enter a long term care facility, you will be charged by the day. A long term care policy will pay a certain amount per day, up to the daily cost of your care.

When you purchase a long term care insurance policy, you select the amount of money the policy will pay each day. This is called the daily benefit. The higher the daily benefit, the higher the premium for the policy.

When considering how much of a daily benefit your policy should cover, consider the cost of the long term care in your area. In 2010, the average cost of a semi-private room in a nursing home in the United States was $205 per day, according to the U.S. Department of Health and Human Services.

A private room cost an average of $229 per day. For a one-bedroom unit in an assisted living facility, the average cost per day was $108. The average cost for a home health aide was $21 per hour, and for homemaker services, $19 per hour. An adult day care center cost $67 per day.

When considering an appropriate daily benefit for your long term care insurance policy, take into account the costs in your area, which may be higher or lower than the average.

Benefit Period

The next consideration when choosing a long term care insurance policy is the benefit period. This is the amount of time for which benefits will be paid. Most insurance companies offer a two-, three-, or five-year benefit period, or a lifetime benefit.

The U.S. Department of Health and Human Services says that women who need long term care need it for an average of 3.7 years. Men need it for an average of 2.2 years. 20 percent of today’s 65-year-olds will need long term care for longer then five years.

Many policies use the benefit period to calculate the total amount of coverage your will have, and then let you use that coverage for home care, assisted living or nursing home care.

For example, if you have a long term care insurance policy with a daily benefit of $250 for five years, that’s a total benefit of $456,250. If you need nursing home care at $250 per day, the benefit will last five years. However, if you need assisted living care at $125 per day, the benefit will last ten years.

If you are in an assisted living facility for two years, and then move to a nursing home, the policy will pay for the assisted living facility for two years and then the nursing home for four years.

Elimination Period

The elimination period for a long term care insurance policy is like the deductible on your car insurance. It’s the number of day you will have to pay for out of pocket before the insurance kicks in. The shorter the elimination period, the higher the premium.

It's important to note that Medicare will typically pay for a 90-day stay in a nursing home, provided that you have been admitted to the nursing home following a hospital stay of at least three days.

For this reason, many people choose the 100-day elimination period, which helps to keep the premium cost down.

Types of Service

Long term care insurance policies cover several different kinds of care. When you are comparing policies, make sure that each policy covers the same kinds of care.

Home care services are provided in your home by individuals. They may be nurses, home health aides or therapists who come to your home to provide assistance with daily tasks, including medical assistance.

In most cases, a long term care insurance policy will not pay for a friend or family member to provide assistance or care unless they are licensed or trained to do so.

Community services include adult day care centers and home care agencies as well as transportation services that take you to doctor’s appointments. These services are often covered under a long term care insurance policy.

An assisted living facility provides some support services such as assistance with medications, meals and housekeeping services. In these facilities, you would typically live in your own apartment but have assistance available to you if you need it.

A nursing home offers skilled nursing care and 24-hour supervision. These facilities are the most expensive of the different care offerings as they provide the most comprehensive medical care.

Activities of Daily Living

In order to qualify for the long term care insurance benefit provided under your policy for assisted living or nursing home care, you must require assistance with two or more of the six activities of daily living, or ADLs. These are:

• Bathing, either in a bathtub or shower
• Dressing yourself
• Using the bathroom
• Transferring yourself from the bed to a chair or vice versa
• Eating
• Continence, including changing adult diapers if you wear them.

You may also qualify for coverage for nursing home care or assisted living if you have a significant cognitive issue like Alzheimer’s or dementia.

Home health care or home support may be covered if you need assistance with other tasks, sometimes called instrumental activities of daily living, or IADLs. These include:

• Taking medication
• Managing money
• Meal preparation and clean up
• Grocery shopping
• Pet care
• Housework
• Using communication devices such as a telephone
• Responding to emergency alarms

Riders

Many policies offer optional features called riders. These can add significantly to the cost of your long term care insurance policy, but they can also add significant protection.

Carefully consider which riders make sense for your particular situation.

Here are some common riders.

• Elimination Period Waiver – This rider waives the elimination period so that your policy begins paying benefits from the first day that you require long term care.
• Shared Care Rider – If both you and your spouse are getting long term care insurance, you may be able to save some money with a shared care rider. This lets you use your spouse’s coverage if yours is exhausted and they haven’t used theirs. For example, if you go into a nursing home and use up your three-year benefit, but your spouse is still at home, your spouse’s coverage will pay for your continued care.
• Survivorship Benefit – If you and your spouse have both had policies for ten years without a claim, and your spouse dies, your premium is waived. Your policy is considered paid up and your benefits continue for your lifetime with no further premiums.
• Inflation Protection – The cost of nursing care is rising rapidly, and this rider increases your benefit each year to keep pace. You can choose a simple increase of 5% per year, or a compound increase of 3%, 4% or 5% per year. If you are purchasing your policy when you are age 60 or younger, inflation protection is a very important benefit to consider.
• Return of Premium Benefit – Many people shy away from long term care insurance because they don’t think they’ll need it. In that case, you can opt for a return of premium rider, which pays back your premium to your heirs if you die without using your coverage. Pay close attention to this rider, however, since it is very expensive, and the cost of the rider itself is not refunded, just the policy premium.
• Nonforfeiture Rider – If your policy lapses because you are unable to pay the premium, you will receive a paid up policy equal to the amount of premiums you have paid under this rider. For example, if you have paid $10,000 per year for five years and then your policy lapses, you get $50,000 worth of coverage.

The purchase of long term care insurance is an important one, so compare policies carefully. The least expensive policy may not be the best protection for you and your family, and the priciest may have more features than you need.

Understand your options, discuss them with your family members, and compare similar policies to find the best choice for you. Be sure to use the FREE comparison tool below to start your search today!