There are seven main variables in long term care policies which all influence the premium:
- Age: The younger you are, the lower the premium. The age is the single largest element in determining the premium. This factor creates a substantial additional cost if one waits to purchase long term care protection.
- Daily benefit: The maximum amount a plan will pay for one day of care. This can vary from $50 to $500 per day. The cost of a nursing home in California in 2010 averages $230 per day, according to the California Partnership for Long Term Care. Clients may want to protect against all of this cost or only most of it.
- Benefit limit: This is the number of days or years that a plan will pay a benefit … not from now, but from the time the client gets sick. Benefit limits can vary from one year to lifetime coverage. The longer the benefit limit, the greater the protection but the higher the cost.
- Inflation protection: Because nursing care costs are rising, clients need a way for their daily benefits also to increase over time. Otherwise, the policy may not adequately protect your client many years from now if he/she gets sick. Policies normally contain riders offering automatic daily benefit increases of 5 percent each year, either at “simple” or “compounded” rates, plus other options.
- Elimination period: This can also be called a deductible, and is a period where clients pay out of their own pockets before a plan begins to pay. This period normally varies from 0 to 100 days, with the 100-day elimination period yielding the smallest premium.
- Tax benefits of policy: Some or all of the premiums may be tax deductible depending on your filing status. Typically, the benefits of a plan are income tax-free. For specific details contact us and your tax advisor.
- Partnership: Four major companies in partnership with the State of California have special, tax-qualified policies where in the State pays lifetime benefits in skilled nursing facilities under Medi-Cal after the insurance company benefits run out. The amount of insurance company benefits paid out is preserved in the estate of the client.