The Cost of Long Term Care Insurance

Premiums will vary based on a number of factors. These include your age and health when you buy a policy and the level of coverage, benefits and options you select. A policy with a large daily benefit, a long maximum benefit period or a home health care benefit, will cost more.

Inflation protection and nonforfeiture benefits also can substantially increase premiums for long term care. Inflation protection can add as much as 40 percent to the premium for a long term care insurance policy while non-forfeiture benefits can double the premium. In fact, either of these options can substantially increase your premium depending on your age. The older you are when you buy long term care insurance, the higher your premiums will be since you are more likely to need long term care services. If you buy at a younger age, your premiums will be lower, but you will pay for a longer time.

The following example shows how much premiums can fluctuate based on your age and your coverage options:

1. The average annual premiums for basic long term care insurance ($100 daily benefit, four years of coverage, 20-day elimination period):
   1. $300 for a 40-year old;
   2. $409 for a 50-year old;
   3. $1,002 for a 65-year old;
   4. $4,166 for a 79-yeer old.
2. The basic coverage with an added 5 percent compound inflation benefit:
   1. $649 for a 40-year old;
   2. $881 for a 50-year old;
   3. $1,802 for a 65-year old;
   4. $5,895 for a 79-year old.
3. The basic coverage with an added non-forfeiture benefit option:
   1. $382 for a 40-year old;
   2. $506 for a 50-year old;
   3. $1,196 for a 65-year old;
   4. $5,067 for a 79-year old.
4. The basic coverage with BOTH a 5 percent compound inflation benefit AND a non-forfeiture benefit:
   1. $798 for a 40-year old;
   2. $1,087 for a 50-year old;
   3. $2,130 for a 65-year old;
   4. $7,000 for a 79-year old.

This information was taken from the Health Insurance Association of America (HIAA) survey: "Research Findings: Long Term Care Insurance in 1998-1999" February 2002. Table 5, page 26, "Average Annual Premiums for Leading Long Term Care Insurance Sellers in 1999." Though the numbers may have changed in the last few years, the survey does give you an idea of cost.

You also need to remember that long term care insurance policies may not cover the entire cost of your care. For example, your policy may pay $120 per day in a nursing home, but if the total cost is $150, you must pay the difference.

When you buy a long term care policy, consider what your income is and how much you can afford now and then calculate what your future income and living expenses are likely to be and how much premium you will be able to afford then.

You also need to consider whether you will be able to afford a future rate increase. Most long term care policies are, what the insurance industry calls, guaranteed renewable. This means the insurance company cannot increase your premium because of your specific health, age or claims experience, but it can increase your premium if it increases the premium of everyone in your policy class.