5 ways to make long-term care insurance more affordable

Do you know someone in your life who needs long term care? Maybe they are a family member, friend or acquaintance. There are many circumstances in which a health condition can result in someone being unable to take care of themselves for an extended period of time. They may need help with activities like bathing or dressing, or they may have a condition like Alzheimer’s and need supervision.

Caregivers may be fortunate to have a loved one providing unpaid care, but with the rise of caregiver burnout, professional help is often required. And since long-term care costs aren’t covered by Medicare or health insurance, it’s up to the family to find ways to pay for care, which can be expensive!

According to Genworth, the median cost of a home health care in 2021 was nearly $62,000 per year! That’s a 12.5% ​​increase from 2020. And according to a PwC study, the average person needing long-term care will spend $172,000 — imagine what that cost will be in the future with inflation.

Luckily there is a solution. When someone needs help with things like bathing or dressing, Long Term Care Insurance (LTCI) can make a notable difference in a family’s life. However, many people grossly overestimate the cost of LTCI. In reality, the average premium is about $2,500 per year. Sure, that’s no small amount, but compared to the cost of care…the insurance cover has significant value.

To get the most bang for your buck, here are five strategies that can help make LTCI more affordable:

1. Buy at a younger age.

In one example, a 50-year-old couple taking out long-term care insurance with a $200,000 benefit for each spouse growing 3% annually would pay a combined annual premium of $3,573. If they waited until age 60, their annual premium would be $4,606 instead. Not to mention that the 50 year old buyers would have a much higher benefit level by the age of 85 as their policy would have grown by 3% for 10 more years!

See also  What you need to know about the agreed value insurance | King Price Insurance

2. Buy a smaller policy and let the benefits of automatic inflation coverage grow over time.

Another strategy is to buy a more modest policy at a younger age and then allow automatic inflation coverage to increase its utility. For example, a healthy 50-year-old single male can purchase LTCI rated at $80 per day/3 years with 5% inflation coverage for about $150 per month. By age 86 (if he needs long-term care, for example), the benefit will have grown to $463 per day and a total benefit cap of more than $500,000. This is the power of compound inflation.

3. Plan a bonus that is a percentage of your income.

When saving for retirement, the most popular vehicles are tax-deferred plans like a 401(k). Most employees choose a percentage of their salary, e.g. B. 6% to contribute to a 401(k) plan. In the same way, someone might choose to spend a certain percentage of their income, say 2%, on long-term care insurance. For example, someone who makes $100,000 a year can look at how much coverage they get with a $2,000 annual premium. This can help you plan for the long term.

4. Use money from your health savings account to pay for premiums.

Did you know you can withdraw money from your health savings account to pay for LTCI premiums? Because employer and employee HSA contributions are pre-tax, you pay the same pre-tax dollars for LTCI premiums for coverage. And the benefits of long-term care insurance are also tax-free for the actual expenses!

5. 1035 Conversion of existing permanent life insurance policies to a combined life/LTCI plan.

As people age, the need for life insurance may decrease while the need for long-term care insurance increases. Many are unaware that they can buy existing permanent life insurance plans at cash value and purchase combined life insurance/LTCI plans at that cash value on a tax-deferred basis. This could either reduce or eliminate the need for additional premiums.

See also  Meet Eugenia Mello, Artist in Residence for Life Happens

Long-term care insurance offers enormous added value. With the right planning, people of all income levels can find a policy that suits their situation and budget. But delays can be problematic – talk to a finance expert about LTCI today.

Leave a Comment

Your email address will not be published. Required fields are marked *