Dealing with the costs of long-term care insurance

As we grow older our bodies will inevitably lose youth's vigor and vitality. Sooner or later daily rituals we used to perform with ease will become a chore to the point that we may need someone to assist us.

This is where long-term care comes in by helping individuals who are having a hard time carrying out activities of daily living.

Statistics and the Importance of Long-Term Care

Here is an overview about long-term care in our country:

  • The chances that a person who is 65 and older will be unable to perform at least two ADLs (activities of daily living) is 68 percent.
  • As of 2012, 9 million American need LTC. By 2020, that number is expected to rise to 12 million.
  • 40 percent of those who belong in the older age brackets who require LTC live below federal poverty level.
  • 78 percent of senior citizens who need LTC get it from friends and family. Caregivers in the country who service individuals who are 50 years old and older number around 34 million.
  • The average age of Americans upon their admittance to a nursing care home is 79.
  • The chances of someone who has reached the age of 65 will be admitted to a nursing home is 40 percent.
  • The median yearly rate for nursing-home care in the country is $73,000.
  • During the period 2008 up to 2012, the yearly increase in median nursing-home rates is 4.5 percent.
  • In 2010, about 7 to 9 million individuals in the country were covered with LTC insurance.
  • The average age of an LTC buyer in 2010 was 59.

Source: Statistics compiled by Christine Benz of MorningStar

Average Cost of Care

A study undertaken in November 211 by the Long-Term Care Group, Incorporated in behalf of Northwestern Mutual showed the average cost of care across the country.

STATE Nursing Home - Daily Average Home Health Care - Hourly Average Assisted Living - Monthly Average
Alabama $198.00 $16.00 $3,258.00
Alaska $526.00 $24.00 $4,726.00
Arizona $296.00 $21.00 $3,181.00
Arkansas $153.00 $19.00 $3,115.00
California $246.00 $22.00 $3,405.00
Colorado $219.00 $23.00 $3,348.00
Connecticut $429.00 $26.00 $4,235.00
Delaware N/A N/A N/A
Florida $241.00 $17.00 $2,972.00
Georgia $195.00 $23.00 $2,444.00
Hawaii $384.00 $24.00 $5,457.00
Idaho $234.00 $19.00 $3,101.00
Illinois $208.00 $20.00 $4,400.00
Indiana $276.00 $20.00 $2,752.00
Iowa $194.00 $25.00 $3,917.00
Kansas $176.00 $20.00 $3,480.00
Kentucky $231.00 $18.00 $2,792.00
Louisiana $156.00 $14.00 $3,091.00
Maine $322.00 N/A $4,962.00
Maryland $291.00 $20.00 $5,722.00
Massachusetts $379.00 $24.00 $4,219.00
Michigan $248.00 $19.00 $3,784.00
Minnesota $234.00 $29.00 $3,898.00
Mississippi $182.00 N/A $2,238.00
Missouri $174.00 $17.00 $2,882.00
Montana $205.00 $24.00 $3,483.00
Nebraska $3,483.00 N/A $3,483.00
Nevada $238.00 $22.00 $2,529.00
New Hampshire $304.00 $30.00 $4,102.00
New Jersey $354.00 $20.00 $4,863.00
New Mexico $293.00 $20.00 $3,492.00
New York $384.00 $20.00 $3,845.00
North Carolina $222.00 $18.00 $3,496.00
North Dakota $173.00 $31.00 $2,975.00
Ohio $240.00 $20.00 $4,347.00
Oklahoma $249.00 $18.00 $2,615.00
Oregon $272.00 $21.00 $2,655.00
Pennsylvania $309.00 $21.00 $4,251.00
Rhode Island $270.00 $24.00 $5,398.00
South Carolina $195.00 $17.00 $3,234.00
South Dakota $191.00 $33.00 $3,074.00
Tennessee $210.00 $17.00 $3,752.00
Texas $182.00 $20.00 $3,043.00
Utah $191.00 $20.00 $2,270.00
Vermont $289.00 $23.00 $2,880.00
Virginia $256.00 $18.00 $2,812.00
Washington $266.00 $21.00 $3,827.00
West Virginia $236.00 $22.00 $2,923.00
Wisconsin $288.00 $26.00 $2,975.00
Wyoming $206.00 $31.00 $3,574.00

How are premiums on LTC policies determined?

Premiums are usually determined on the basis of the following:

  • Age - a young consumer will get lower rates compared to older ones.
  • Health - the healthier is the individual, the lower will be the rates offered to him or her.
  • Elimination Period - the longer is this period before the insurer starts paying out benefits, the lower is the premium amount.
  • Duration and Benefit Amount - higher amounts for benefits and longer durations for receiving them translate to higher premiums.
  • Other factors - this may include the area where one lives, additional benefits, etc.

Further Tips to Lower the Cost of LTC Insurance Policy

In another article, "Buying long-term care insurance - everything you need to know," we discuss some of the ways you can save on your LTC insurance purchase. Here are some more tips recommended by the American Association of Retired Persons or AARP:

  • Get a list of insurers who are state-approved to sell LTC policies in your state from your local insurance department. Check if there are complaints against these firms.
  • Research on the financial stability of the company and see if it has a good track record in providing LTC coverage. You can check with sites like Standard and Poor's, A.M. Best and Moody's.
  • Get quotations from at least three insurers. See their histories on how much and how often they raised their premium rates.
  • Ask for a written offer and study this thoroughly. Get the help of a financial adviser or a lawyer. Put your questions down in writing and have these responded to by the company's representative.
  • Do not allow anyone to pressure you into making a hasty decision.
  • Do not make cash payments, issue checks instead but be sure these are payable to the insurance company and not to any person.
  • Almost all states make it a requirement for insurers to allow you thirty days to review your policy even after you have signed it. You have the option of returning it if something changes your mind.
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