Long-term care insurance is getting to be a more expensive retirement planning option, but if you shop around, you can find better deals, according the 2013 National Long-Term Care Insurance Price Index released last week by the American Association for Long-Term Care Insurance, a trade group.
The association crunched the numbers for similar policies for couples, both age 60 and approaching retirement in good health. It found that costs for essentially the same coverage varied by as much as 92 percent.
Don't reject an insurer by looking at the average costs that it advertises -- choose an agent who can show you various options, advises Executive Director Jesse Slome. "A lot of agents only represent one company, and they advocate for that company's product. A good agent works with four to six companies," he says.
Slome provides these pricing examples for a couple, both of whom are age 60. Calculations are based on a $150 daily benefit in 2013. Benefits will last for three years, and there will be a 90-day elimination period after the patient qualifies and before the benefit kicks in. The total benefit can be used to provide care at home. The immediate value of the policy is $162,000 per person and the cost here is for a couple and may reflect a couple's discount.
Slome divides the policies into three types:
Noninflation adjusted. This is the cheapest. The average cost for the policy described above is $1,816 per year, but available policies range from a low of $1,667 to a high of $2,167 -- that's a 30 percent difference. Slome argues that while this policy value of $162,000 per person won't rise over the years, it will provide significant help -- even 25 years hence -- for someone who can afford to pay a portion of their care from savings and income.
Noninflation adjusted but increases available. The policyholder is offered the opportunity -- without having to pass another physical exam -- to buy more insurance at dates and prices that are locked in at the outset. The average cost is $1,942, but available policies range from a low of $1,742 to a high of $2,431, a 40 percent difference. Slome says most policies stipulate you must accept the increases when they are offered or you lose the opportunity to buy more down the road.
Coverage with a 3 percent annual inflation adjustment. This is the gold standard of long-term care. Over 25 years, the value of the policy will grow from $162,000 to $329,000 for each half of the couple. The average price is $3,725 with available policies ranging from a low of $2,580 to a high of $4,959, a 92 percent difference.
Remember, these prices are not locked in forever. While insurers can't raise prices on an individual or a couple, they can raise prices for a group of insureds as long as the increase is approved by the state insurance commission where the couple lives. Don't buy this insurance if you're stretched to the limit to pay for it initially.