Last week, we learned a little about how Long Term Care Insurance (LTCI) can assist a family with the older generations when life becomes challenging and perhaps unsafe. Check it out here if you missed it. Today, we’re talking about the cost of LTCI and generally how it is figured.

All insurance rates are derived from a number of factors associated with risk and benefit. The company wants to make money and clients want to get paid when they need it. So what specific things influence LTCI?  According to Wikipedia, it is “determined by six main factors: the person’s age, the daily (or monthly) benefit, how long the benefits pay, the elimination period, inflation protection, and the health rating (preferred, standard, sub-standard). (Source) Let’s take a look at these:

  1. Age: As a person ages, the risk to the insurer is greater, so in general, the older a person is when he or she starts the monthly premiums increase.
  2. Benefit: Researching various options for what you or a family member might need as they age will help you get an idea of what you might need as a benefit. The higher the benefit, the higher the fees.
  3. Benefit Duration: Pay close attention to the length of time that the insurance will pay out. Look at family history to see what might be needed. The longer the policy pays, the more you’ll pay now.
  4. Elimination Period: Elimination Period is often misunderstood. In short it is best described as deductible or waiting period from the beginning of assistance until the day premiums start. Differences in the elimination periods will have different fee structures.
  5. Inflation Protection: As inflation happens, the value of your premiums will feel as if they are going down. Some policies charge the holder a certain amount, to soften the blog of regular inflations. For more information, check here.
  6. Health: Your current health will determine your risk as an insured individual which will affect your fees.

It sounds complicated but by breaking LTCI down into several components, it becomes clearer. But what about the bottom line of premiums? To help you estimate the costs, check out the Federal Long Term Care Insurance Program (FLTCIP). Click here for their Premium Calculator.