No one disputes that long-term care insurance can be costly - but this doesn't have the be the case.  Premiums are linked directly to company exposure to risk.  So purchasing a plan with lifetime coverage, for example, puts the company at potential risk for millions of dollars worth of claims.

Enter the Supplemental Policy 

An increasing trend in long-term care insurance, outlined today in an article by Kiplingers, is to insure the majority of the risk, but not necessary all of it.  In other words, you purchase long-term care insurance as a hedge against the "bump in the road" of long-term care costs down the road.

Years ago, it wasn't unheard of for the companies to sell many unlimited plans with lots of bells and whistles.  Lately, however, consumers are springing for 3-5 year plans, and we think this is prudent.  By sticking closer to the averages, one can insulate themselves and their loved ones from a large part of the cost of long-term care without breaking the bank.  

Ways to Limit Coverage

For clients looking for ways to limit coverage, we've put together a list of certain elements that can be left out of a long-term care policy that will drastically reduce premiums.  Caveat Emptor, for you are sometimes giving up key benefits.  However, the point of a supplemental long-term care insurance policy is NOT to insure all risks, but just to cover the major bases.

• By opting for 5% simple instead of 5% compound inflation, you limit the amount of money you'll recieve down the road, and the two plans diverge quickly as time goes on.  However, the cost of 5% compind inflation is not cheap, so consider looking at a 5% simple or even a "Guaranteed purchase option" plan where you have the option to buy more coverage at a higher cost later.
• Going with three or four years of coverage will save you significantly versus an unlimited plan.  Familiarize yourself with the statistics and you'll quickly see that a four year plan protects from the majority of the risk for the average person.
• Keep your daily benefit in line.  This is the surest way to save premiums.  By going with a smaller daily amount, you may not cover all of the costs in the future, but you will have quite a boost from the coverage you do have.