Although buying long-term care insurance might seem like an expensive proposition, choosing a lower deductible can offer considerable savings.
Choosing a long-term care insurance policy with a 90-day deductible can reduce annual costs by hundreds of dollars.
“You can significantly reduce the cost of long term care insurance when you select the right combination of benefits and option,” Jesse Slome, executive director of the American Association for Long-Term Care Insurance, said in a statement. “In fact the elimination period selection is one of the more important ways people can reduce their costs.”
The Elimination Period is industry jargon for a waiting period when a policyholder must bear the cost of qualifying claims themselves.
According to Slome, choosing a 90-day deductible period will reduce costs by more than 15 percent annually versus selecting a 30-day deductible.
A 55 year old in standard health could expect to pay roughly $2,220 per year for an immediate level of protection equal to $164,000 when they chose a 30-day deductible. The policies examined by AALTCI included a three percent annual compound inflation growth option. By extending the deductible to 90 days, the cost would be lowered to $1,882, a 15.225 percent reduction.
“Most people don’t wake up one morning and find they need round-the-clock care,” Slome said. “We often age into a need for care so that family members often provide unpaid care at the early stages thus a longer deductible period when one pays for their own care makes a lot of sense.”
The cost is higher for shorter elimination periods because insurers will not just pay out more claim dollars but also see more claims incurring during this time period.
“People who need long term care do sometimes recover from the condition and can go off claim,” Slome said. “Many people have a deductible for their homeowners, car and even health insurance. It makes sense to share some of the risk with the insurance company as a way of achieving significant savings. The same is true when it comes to long-term care insurance.”
