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As we age, the likelihood of needing long-term care increases. But whether that care is a home health aide who helps for a few hours a day, an adult nursing home that provides supervision and day care or nursing home for round-the-clock assistance, this service can come with a hefty price tag if you have to pay out of pocket.
For example, by 2024, the average annual cost of a private room in a nursing home will exceed $100,000 nationwide. And, the cost of this type of treatment may be higher in some areas. Because of the high average price, the cost of long-term care like this can be a huge burden your retirement savingsespecially considering that Medicare usually does not cover long-term care costs. In turn, many parents are looking for solutions to make this type of care more affordable.
One potential solution is long term care insurance. This type of insurance coverage is designed to help cover costs associated with long-term care services. By paying premiums to your insurance company, you gain access to a pool of funds that you can then use to pay for your appropriate long-term care needs in the future. But premiums for long-term care insurance not cheap, especially if you buy in your 60s. So, it can pay to find ways to cut costs.
Find out what your long-term care insurance coverage might cost here.
5 ways to reduce the cost of long-term care insurance in your 60s
Before trying to cut the cost of your long-term care insurance, it is important to understand what factors drive the cost of this type of coverage. The cost of a long-term care insurance policy is generally based on items like age, health status and the level of coverage chosen.
In turn, buying a policy at a younger and healthier age will generally result in lower premiums. That’s why many experts recommend at least exploring long-term care insurance options in the late 50s or early 60s before premiums become too expensive.
But there is a way to help make long-term care insurance more affordable – even if you bought it in the 60s. Here are five potential strategies to cut costs:
Buy a policy earlier in your 60s
The cost of long-term care insurance is based on your age and your health status when you first bought the policy. By buying a policy earlier in your 60s, such as age 62 or 63, you may have a better chance of locking in a lower premium than wait until later in that decade. Every year that you delay buying long-term care insurance, your premiums will be more expensive as your age and risk profile increase.
Compare your top long-term care insurance options online today.
Choose a longer elimination period
Elimination period tied to long-term care insurance policies is the waiting period before long-term care insurance benefits begin to cover costs. Policies often have cancellation periods ranging from 0 days to 120 days or more. By choosing a longer elimination period, you may be able to lower your insurance premiums, as you are taking on more of the cost upfront of the policy before the insurance kicks in.
Choose a shorter benefit period
Long-term care insurance policies will cover the cost of care for a specified period, such as three years, five years or longer. The shorter the benefit period you choose, the lower the premium will usually be. While a long or unlimited benefit period provides the most comprehensive coverage, a three-year benefit period can make your policy more affordable — and depending on your needs, it may be enough for coverage.
Limit inflation protection
Many long-term care policies have inflation protection options which increases the benefit amount over time to keep up with the rising costs of long-term care. While this feature is quite valuable in today’s inflationary environment, it can also increase your premium. So, if you want to save money on the cost of your policy, you may want to opt for lower inflation protection or delete it altogether to lower your premiums in the short term.
Consider a policy with co-pay
As with health insurance policies, some long-term care insurance policies allow you to have a co-pay amount, where you pay a portion of the out-of-pocket costs and the insurance policy covers the rest. And, in general, the higher your co-pay percentage is set, the lower your insurance premium will be. For example, a policy with a 20% co-pay will be cheaper than one with no co-pay.
So, it may make sense to choose a long-term care insurance policy with co-pays to help you save money. Make sure you have enough money to pay out of pocket, you must use long-term care insurance.
Bottom line
Ultimately, proper planning is key when it comes to long-term care costs, as these costs can cut into your retirement savings if you have to pay out-of-pocket. By exploring options like long-term care insurance and finding ways to lower premiums, you can hopefully reduce the burden of these costs later. And, while some of these cost-saving measures may reduce long-term care insurance benefits down the road, they can make coverage more affordable when buying a policy in your 60s. However, before you make that move, it’s important to consider your potential retirement, health and long-term care budget to strike the right balance between the amount of coverage and the cost.
