Long Term Care Insurance Benefit Increases
Just like the old compounding savings account, benefit increases become huge in later years.
The average cost for long term care nationally is $70,000 per year. Metro areas will be higher. The average cost for a year of care in New York City is $141,000.
When you apply for long term care insurance you must decide on how much of a Daily or Monthly Benefit you want and for how long (called a Multiplier). You base the Daily or Monthly amount on what the cost of care is where you live.
If you have some income you can consider a lower benefit amount than the cost of care and pay the difference out of your income to have a lower premium.
Reviewing your own current health, your health history, and your family health history might give you some clues as to how long you might need care. Heart disease and cancer may mean a short care period. Dementia or Alzheimer's may mean a long care period.
This chart shows how much your benefit increases over time. Like the old savings account model, a compound interest account will take off after about 10 years.
If you bought a policy with a $150 a day or $4650 a month benefit that's what the insurance company will pay you on day 1 of your policy. If you put in a claim 10 years after buying the policy they would pay $244 a day or $7574 a month, and so on.
Another 10-year milestone is the Survivorship benefit that some companies include as part of the policy. The Survivorship benefit provides that if both have a policy for 10 years and one spouse dies, the surviving spouse never pays another premium for their policy.
As you can see by the chart below if a 55-year old bought a $150 a day 4-year (1460) policy by the time they were 75 they would have $581,072 in long term care insurance money. If the premium was $2250 a year they would have paid over time $45,000. Two points: $45,000 would pay for about 7.5 months of care (today, not in 20 years) and where could they invest $2250 a year and have $581,000 in 20 years available for their long term care?
Personal Benefit Account
Increases 5% compound on policy anniversary
Two example plans, both 4-yr (1460 days).
A. Starting at $150 a day or $4650 a month -- $150x1460=$219,000
B. Starting at $190 a day or $5890 a month -- $190x1460=$277,400
|
Daily Benefit |
Monthly Benefit |
Annual Benefit |
Account Total |
|
|
Year 0 |
150 |
4,650 |
54,750 |
219,000 |
|
Year 5 |
191 |
5,934 |
69876 |
279,505 |
|
Year 10 |
244 |
7,574 |
89,181 |
356,727 |
|
Year 15 |
312 |
9,667 |
113,821 |
455,285 |
|
Year 20 |
398 |
12,337 |
145,268 |
581,072 |
|
Year 0 |
190 |
5,890 |
69,350 |
277,400 |
|
Year 5 |
242 |
7,517 |
88,510 |
354,040 |
|
Year 10 |
309 |
9,594 |
112,963 |
451,855 |
|
Year 15 |
395 |
12,244 |
144,173 |
576,694 |
|
Year 20 |
504 |
15,637 |
184,006 |
736,024 |
Also see
LTC CHARTS
Invest The Premiums Instead Chart
Self-Insure Chart
