The Longer A Person Pays Into The Insurance Pool, The More Time The Insurance Company Has To Earn Income From Those Premiums

Category: Finance, Insurance.

Just a year in nursing home can wipe out$ 77, 745 of savings, so it is no surprise that more and more Americans are buying long term care insurance.

The benefits are obvious, but what are the costs? Long term care insurance pays for nursing home care, but it can also cover assisted living care, a service that now costs$ 35, 628 a year. Does it make sense to have it? Four factors affect the cost of long term care insurance: the daily rate of the benefit, the duration of the benefit, the waiting period before the benefits take effect( also known as the elimination period) , and the age of the insured. When should you get it? Long term care insurance is a contract under which an insurer agrees to pay certain amount per day for long term care, an amount known as the daily rate.

To cover the current average cost of a nursing home, the insured would need$ 213 a day. The higher the daily rate, the higher the premiums will be. An assisted living care facility, costs about, by contrast$ 97 a day. The insured can also specify how long the coverage should last. Obviously the premiums would be different for the two amounts. According to a study by The Lewen Group, the average length of stay in a nursing home is 876 days, or 4 years. To keep premiums low, some people limit the time period.

More than 25% stay in a nursing home more than years, and 12% stay more than five years. Others are worried that a long stay would decimate their savings. If a person takes out a policy right before needing the care, the insurance company has no way to recoup the cost of benefits. The longer a person pays into the insurance pool, the more time the insurance company has to earn income from those premiums. As a result, the sooner a person takes out a policy, the less he or she will pay. A person fifteen years older, would pay about, at age 65$ 2200 a year in premiums. For example, a person who takes out a four- year, $150- a- day policy at age 50 will pay about$ 1000 a year in premiums.

A person 30 years older, would pay at, at age 80 least$ 7500 a year in premiums. This can be risky, however. One way to lower premiums is to decrease the daily rate. For example, lowering the daily rate from$ 150 to$ 100 would leave the insured responsible for all charges above$ 100 a day. For example, by increasing the elimination period for$ 150- a- day facility from 30 days to 90 days, the insured would be responsible for an additional$ 9000 in out- of- pocket expense. After just one year, a$ 50- a- day shortfall would total$ 18, 25A better way of reducing premiums is to keep the daily rate sufficient to cover costs but to increase the elimination period. However, the financial responsibility would be capped there.

It is better to sacrifice a set amount upfront than to expose assets to the open- ended cost of long term care. The goal of long term care insurance is not to maximize how much insurance pays, but to minimize the risk to the bulk of a person s assets.

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It Also Gives You Greater Flexibility And Discretion Over How You Use Your Health Care Benefits - Finance and Insurance Articles:

Benefits experts are stating that conventional coverage, such as health maintenance organizations( HMOs) and preferred provider organizations( PPOs) , are still the main types of health care plans. The HSA is a tax- favored savings account that s combined with a qualifying HDHP.