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What To Look For When Purchasing A Long Term Care Insurance Policy

Amount Of The Premium

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According to the NAIC (National Association of Insurance Commissioners), you should spend no more than 7% of your income on premiums.;

When considering whether you can afford the premium, look beyond what you can afford this year and look into the future as well. If you can't afford to continue to pay premiums once you've started, the coverage will be lost - as will all the money you paid to that date. Financial advisors indicate you should not purchase a policy unless you can afford an increase in premium of 10 or 20%.

You can reduce the amount of the premium by each of the following:

  • Buy a policy with a shorter benefit period. It is likely that you can reduce the annual cost of Long Term Care Insurance by 30 - 40% by limiting your benefit period to three years instead of lifetime coverage. One study found that with a three year benefit period, only 8% of claimants exhausted their coverage.
  • Reduce the amount of the daily benefit.
  • Reduce what is covered.
  • Increase the elimination period - the period of time from the onset of the need until the policy starts paying. NOTE: It is generally better to reduce the benefit period than to extend the elimination period or cutting the daily benefit amount. Each of those alternatives would increase your out-of-pocket costs significantly from day one if you have a claim.
  • All of the above.

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