Many families consider purchasing long-term care insurance in advance to help pay for expensive long-term care in the future. Here are three important factors to keep in mind when buying long-term care insurance.
Your Daily Benefit Requirement
Many people look at the national averages for long-term care costs and neglect to factor in regional differences. Don’t make this mistake. Be sure to find out the care costs where you live now or where you want to reside in the future.
The issue here is two-fold: The age at which you apply for the policy initially, and the waiting period you choose for the policy to take effect before you begin receiving benefits. Typically, the younger you are when you apply, the cheaper your policy. Of course, the benefits of the lower premium must be factored in against the amount of time a younger person will likely continue to pay premiums without requiring long-term care. It is important to note that if you wait too long, or until you have developed medical problems, you may not be able to qualify for a policy at all. As for the waiting period, the longer it is the less expensive the policy. But a longer waiting period means you’ll need to pay the bills yourself before you receive any benefits. Given the cost of long-term care, most people should consider a 60-day or 90-day waiting period, which keeps premiums manageable but limits out-of-pocket costs.
It is essential to have some kind of inflation adjustment in your long-term care policy. A policy with a $200 daily benefit will barely make a dent in the bills if care costs $500 per day when you finally need it. The best inflation-protection coverage automatically increases your benefit amount by 5 percent compounded annually, keeping pace with the rising cost of care. Such policies are pricey, often doubling the cost of coverage, but your premiums should remain the same even as the benefit amount increases.
Long-term care insurance isn’t right for everyone. Before purchasing a policy, talk to us first. We can determine whether it is a good idea in your particular situation, and if so, incorporate it into your overall plan.
Please contact us today to schedule a time to discuss your estate planning needs.