Buying long term care insurance (LTCI) can present significant obstacles.
Consumers face a staggering number of private insurer LTCI products. Many policies were sold years ago, customized to meet individual applicant needs.
In addition, LTCI policy components are complex and involve many interrelated parts. These include varying daily maximums for nursing home care, different benefit payment waiting periods calculated according to insurance company policies, distinct coverage provisions and inflation-adjustment features.
An LTCI quote comparison can be a daunting, often-paralyzing experience. Consumers are confused about what they are receiving for their premium dollars, notably the value of individual LTCI policy components they are forced to choose.
U.S. Government Long Term Care Insurance Program
The Federal Long Term Care Insurance Program (FLTCIP) galvanized long term care insurance sales in 2003, which were up 4.2% in 2003.
The FLTCIP organizes the different long term care insurance components into easy-to-understand package plans. Consumers can review and choose from a limited number of policy choices.
The LTCI package approach also facilitates the following benchmark rates. Consumers can uses the government program benchmark rates by age to compare long term care insurance quotes from private insurance carriers.
Long Term Care Insurance Quote: Three-Year Benefit Payment
The following FLTCIP quotes are for a policy that pays after a 90-day benefit payment waiting period. Nursing home residence is subject to a $150 daily maximum, with an overall benefit payment period of three years. Both yearly and monthly premiums are shown.
- Age 40 … US$244.08 annual premium ($20.34 monthly)
- Age 50 … $418.92 ($34.91)
- Age 60 … $799.56 ($66.63)
- Age 70 … $1,710.72 ($142.56)
- Age 80 … $5,067.24 ($422.27).
Annual premium rates for an applicant age 80 are 20 times higher than at age 40.
Long Term Care Insurance Quote: Five-Year Benefit Payment
That same FLTCIP policy but with a five-year benefit payment period costs about 20% more than a three-year package plan, regardless of applicant age.
- Age 40 … $287.88 annual premium ($23.99 monthly)
- Age 50 … $498.60 ($41.55)
- Age 60 … $967.32 ($80.61)
- Age 70 … $2,070.00 ($172.50)
- Age 80 … $6,205.56 ($517.13)
Quotes for seniors ages 60 and over are from 4 to 25 times higher than at age 40. Note that premium rates vary by age, but not by gender.
Long Term Care Insurance Comparison with 5% Inflation Increase
LTCI policies often do not pay for many years, when the insured person becomes physically and mentally in need of help with assisted living or nursing home care expenses. To pay for increased nursing home charges, consumers often buy a cost-of-living component that adjusts maximum daily benefit payments annually.
Below are the long term care insurance quotes for a three-year LTCIP policy with an annual 5% inflation increase.
- Age 40 … $1,044.36 annual premium ($87.03 monthly)
- Age 50 … $1,497.96 ($124.83)
- Age 60 … $2,246.40 ($187.20)
- Age 70 … $2978.28 ($248.19)
- Age 80 … $7089.00 ($590.75)
The following rates are for a five-year benefit payment, also with the annual 5%-inflation adjustment.
- Age 40 … $1,285.80 annual premium ($107.15 monthly)
- Age 50 … $1,847.76 ($153.98)
- Age 60 … $2,771.64 ($230.97)
- Age 70 … $3,668.76 ($305.73)
- Age 80 … $8,813.04 ($734.42)
For both the three-year and five-year LTCI policies, the 5% inflation component boosts LTCIP premium quotes most dramatically at ages 40 and 50. This is because longer potential policy periods allow more time for maximum benefit amounts to compound.
Buying Long Term Care Insurance
Consumers should evaluate both the benefit coverage provided as well as the premium rates charged under the federal government’s long term care insurance program.
These can provide a meaningful basis for comparing against the best long term care insurance quotes for private insurance LTCI policies.
Prospective applicants should also consider how readable the long term care insurance documentation is, including insurance policy language.
Sources: This analysis provides independent calculations and insights based on source data from the Federal Long Term Care Insurance website
Daniel Workman - A senior business and finance writer who also does French translations, notably international trade and insurance materials.
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