3 Factors that Affect the Cost of LTCi

April 4, 2014


For those who want to address the potential for long term care expenses on your life, many are probably considering the use of long term care insurance (LTCi) as an umbrella for assets and savings.

However, before purchasing a policy, one key factor you need to determine is its price. However, remember that premiums are not the same since policies are typically customized to an individual’s need.

To help you shop around for the best policy, we will discuss the factors that affect the cost of LTCi.

Age and Health

Age and health are the first factors that insurance providers look into when you are applying for a policy. Typically, the younger you apply, the lower your premiums will be. That’s why insurance experts advise that you buy this type of insurance plan before your retirement, ideally during your 50s.

Your health also plays an important role in applying for LTCi. Buying while you’re still healthy reduces your premiums. In fact, being health-qualified can entitle you to a 10% discount. On the other hand, if you have pre-existing conditions, your premiums will likely be higher or worse, your application will be declined.

Main Features of the Policy

Benefit period, maximum benefit amount, inflation protection, and elimination period are the key features on the coverage that you need to look into for any policy.

How long your policy will last and the total amount it will pay off are the primary basis of your premiums. The bigger their values, the higher you will have to pay for this policy.

Meanwhile, if you are looking into cutting costs, pay more attention to the inflation protection and elimination period options. Instead of going for a high maximum benefit amount, it is more ideal to shield your policy against inflation. Doing so will ensure that your policy can keep up with the increases in the cost of care as years pass. If your plan is shielded, your maximum benefit amount will double in about a decade or two.

A longer elimination period means a lower premium. The waiting period is the time when you will have to pay for the care expenses you have incurred before your benefits start paying off. It is advisable to stretch this period because it is likely that your initial expenses will still be within your budget. It’s like saving your benefits for the real deal which is the advanced and more expensive care services.

Payment Options

Long term care insurance can be paid one time with a lump-sum amount or periodically. Going for a single-premium payment means a considerable amount that you have to pay up front. However, this can be beneficial to you since it can avoid premium hikes over time because your plan is already paid in full.

The more convenient way of paying for this policy is through a limited premium payment. In this way, you will be paying for your premium periodically—may it be annually, semi-annually or monthly. However, going for this option can be more expensive in the long run as your policy can go higher even in the middle of the payment period.

Being knowledgeable on the factors that determine the cost of LTCi is the key to saving on premiums. It allows you to create a balance between them and that can result to great reductions on premiums without compromising the quality of care that you will receive.

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