subject: Factors affecting Premiums in Long Term Care Insurance [print this page] Factors affecting Premiums in Long Term Care Insurance
In every long term care policy, there are corresponding premiums a policyholder needs to pay. Rates of these premiums vary a lot and there are determining factors that affect them including the following:
Age
Age is one of the most important factors that affect long term care premiums. Nowadays, the older you are when you buy a policy, the higher your premiums will be. This means that once you buy a policy the premiums do not automatically increase as you get older, it is likely that the company raises the rates due to the increasing costs of care over time.
Daily Benefit
Most of the time, benefits are defined by policies through the maximum daily benefit. A policyholder pays a higher rate for higher benefits. The daily benefit is the maximum amount an LTC policy pays for covered services in any given day. For example, a policy that pays $50 per day could pay the actual bill, up to the $50 limit, or pay a flat per diem of $90. To better understand how your daily benefits will be, carefully read the policy.
Inflation Protection
Protection against inflation is a rider a policyholder can add on to his long term care insurance. This unique feature adjusts the benefits over time to account for inflation. It can adjust benefits annually based on a simple or compound fixed rate or based on the consumer price index. It is crucial to have inflation protection so that you can keep up with the increasing costs of care.
Elimination Period
More commonly known as the deductible period, the elimination period is number of days you must pay your own nursing home or home care bills before insurance payment starts. If you chose a 100-day elimination period, this means you will pay for the first 100 days of your costs of care out-of-pocket. A policy with a 100-day elimination period is more convenient and affordable compared to a similar policy with a shorter period.
Benefit Period
The benefit period of a long term care policy tells a policyholder how long the policy will pay daily benefits. Benefit period can either be short or long, starting from a year to a lifetime or unlimited. It is not advisable to increase the benefit period because doing so also increases the policy's rate.
Guaranteed Purchase Option
Only a few policies possess this feature. A policy with a GPO means that instead of automatically adding benefits, your benefits increase at set intervals.
Non-forfeiture
If you stop paying premiums for one reason or another, non-forfeiture help you still get some benefits. Your new level of benefits will be equal to the premiums you paid.
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