Planning for Long-Term Care: Is Your Insurance Premium Too High?
Imagine being 68 years old and having a long-term care insurance policy in place to cover the high costs of extended care. You’re paying $600 per month in premiums, thinking it’s a worthwhile investment. But are you paying too much?
Long-term care insurance helps cover the costs of extended or residential treatment, such as in-home care or assisted living. It’s essential for retirement planning, as the costs of care can be staggering – over $100,000 per year for a nursing home stay.
The median cost of a private room in a nursing home is expected to reach $13,267 per month by 2034. Without insurance, you may be forced to spend down your assets to qualify for Medicaid, selling off family homes and liquidating retirement portfolios.
A long-term care insurance policy can help prevent this financial strain. Premiums are based on factors like age, gender, coverage amount, duration, and inflation protection. The younger you are when you buy the policy, the lower your premiums will likely be.
Women pay more than men due to their longer life expectancy, and coverage growth protects your policy from inflation. A 2% rate of inflation means prices will double every 30-35 years, so it’s essential to consider this when purchasing a policy.
So, is $600 per month too much for a 68-year-old single person to pay? According to the American Association for Long-Term Care Insurance, you should probably pay between $100 and $400 per month for your insurance.
Average premiums for a policy with $165,000 in coverage and 2% inflation protection are:
* $137.50 per month for a male purchasing at age 55
* $227 per month for a female purchasing at age 55
* $217 per month for a male purchasing at age 65
* $352.50 per month for a female purchasing at age 65
A financial advisor can help you determine how much coverage you need and how much you can afford. Don’t wait too long to purchase a policy, as premiums tend to increase with age. Consider working with a financial advisor to plan for your long-term care needs.
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