Affordable Options to Pay for Long Term Care Costs
ONE OPTION: Figure Out How Much You Can Afford To Pay On Your Own And Then Buy Long Term Care Insurance To Fill The Gaps
Financial advisers know that long term care costs can be one of the biggest threats to a retirement plan. If you don’t deal with the long term care risk, it can decimate your retirement plan. So when an investment adviser draws up an investment plan, they typically ask their clients what they plan to do if they need long term care. A common best practice is to factor in about $250,000, per person, into the financial plan for potential long term care costs — the current average daily cost of care multiplied by the average claim of about three years. Even if you can afford to pay that amount out of pocket, you probably don’t want to, and may find it hard to stomach the thought of spending that much of your retirement savings on long term care expenses. It’s also likely that you don’t want to pay high premiums for a long term care policy.
Instead of buying a fully loaded policy that covers all of the potential expenses, figure out how much you can comfortably pay out of your income and savings and then buy a long term care policy to fill in the gaps. This will allow you to minimize the premiums, but your policy will still protect hundreds of thousands of dollars of savings.
Here’s an example of how this approach would work for someone in Austin, TX. According to the Genworth Financial Cost of Care Survey, the cost of a private room in a nursing home in Austin, TX is $230 per day. A person could buy a policy that provides a daily benefit of $100, which increases by 3% per year compounded and the insured can then plan on paying the difference from savings and income. This approach would save about half on the cost of long term care insurance premiums.
Here’s some other ideas for saving on Long Term Care Insurance premiums:
- Purchase Early as premiums are based on age and you never save money by waiting.
- Good Health Discounts can save you a sizable amount on premiums. If you have significant health conditions you may not be able to obtain coverage at any price.
- Spousal Discounts can be as much as 40%.
- Tax Deductions are available for individuals and even larger deductions are available for certain corporations.
- Annual Premium Payments can save 8% per year depending on the carrier.
- Choose The Right Carrier as premiums can vary significantly between companies. An important reason to work with an agent that not only specializes in long term care insurance, but also one that represents multiple companies and can show you side by side benefit and premium comparisons.