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Jordan Goodman is the author of Everyone's Money Book, available at 888-201-6300. This is the third edition of the book. You can also visit his Web site at www.moneyanswers.com. He talks with us on Thursday mornings.
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February 27, 2003
"Beating the Soaring Cost of Long-Term Care Insurance"
 Listen
While Americans are living longer and longer all the time, many of them are
having a hard time paying for the care they need as they age. This is where
long-term care insurance comes in because it pays for the cost of caring
for you when you can’t perform the normal daily activities of living by
yourself. It pays for whatever you need when you need it, from home healthcare aides to nursing home expenses.
Long-term care insurance has become increasingly popular as baby boomers
are seeing their parents living longer and not being able to afford the care
they need. But now, the companies that sell long-term care insurance have
begun to realize that they have under-priced the policies, given how long
people are living and how much care is actually costing. Insurers also
guessed wrong on the lapse rate for policies. They assumed that 1 in 10
policyholders would drop their coverage every year, when in fact, it has been
1 in 100 because people realize how valuable this coverage is -- if you can get
it. Insurance companies have also been hurt by falling interest rates
because they are not earning what they expected when they invest the
premiums at lower and lower yields.
Over the next few weeks, almost all the major carriers are jacking up prices
from 30% to 50%, depending on the age of the applicant. For example,
UnumProvident, one of the major long-term care insurers, will be raising the
premium on March 1 for a healthy 60-year-old by $760, or 54%, and it is
raising the rate on a 65-year-old by $972, or 49%.
So, what can you do if you want or need long-term care coverage and are
about to be priced out of the market? Here are few steps to take:
- Call for a long-term care quote today, before the rates go up. In some
cases, if you get a quote now, you have up to 90 days to decide if you want
to go ahead with the policy. Go to an independent company with no allegiance
to a particular carrier to get the best price, like Long Term Care Quote (http://www.searchltc.com, or 800-587-3279).
- Reduce the coverage you are paying for to cut the premiums. You could
reduce the benefit period from 5 years to 3 years, or reduce the amount the
policy would pay per day.
- Lengthen your deductible. You can increase the number of months before the
policy starts paying, called the elimination period, from 3 months to 6
months, or a year.
- Reduce the inflation protection. The best policies have 5% compounded
inflation protection, but you can drop that altogether or go for a lower
rate of inflation protection.
If you’ve been thinking about getting a long-term care policy, now is the
time to get off the fence and at least see how much the premiums might be
and how much the price is about to go up. You don’t want to deplete all your
family’s assets paying for home healthcare aides or nursing homes -- if you
can avoid it now by buying a decent long-term care policy.
For More Financial Tips From Jordan Goodman
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