A fine balance between insurance and investing is the main key to saving money when buying long term care insurance. First off, the premiums are not cheap and there’s a chance you’ll never even use your policy in the first place. But at the same time, there is that looming potential risk of $100,000 to $800,000+ if maybe you break a hip and develop Alzheimer’s which can wipe out your nest egg in a few years. This uncertainly leaves baby-boomers perplexed on what type of long term care planning to do and how much coverage to buy. This brings me back to the balance point I made in the beginning because the statistics say that 92% of all claims paid are for 3 years or less. This stat I feel is especially important in deciding how big of a long term care insurance plan to purchase. Unless the client is especially worried about Alzheimer’s, Parkinson’s—or more of the longer claim illnesses, we tend to recommend 3,4, or 5 years plans. That time period is the sweet spot for most people in finding that balance when buying long term care insurance.
Another key benefit to take a good look out is the amount of coverage per day or per month because this variable in the long term care insurance really drives the price the most. You want to take a look at three costs per month in your area and then take the average of the three.
- Daily Nursing Home cost
- 8 to 10 hours of Home Health Care per day times the daily rate
- Monthly Assisted Living cost divided by 30 days in a month
Once you have that number (most often around $150/day in most areas of the country) you have a good foundation to build upon. In summary, start cheap and simple when beginning the long term care insurance buying process. After you have a firm grasp on the rates then maybe tweak your benefits up a bit if you still feel you might need a bit more coverage.
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