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Avoiding Long Term Care Insurance Financial Mistakes

Avoiding Long Term Care Insurance Financial Mistakes

Most people will try their best to lower the cost of insurance premiums

, only to realize that what should have been saved turned out as lavish expenditures. You might want to cut down your premiums at its lowest possible rate, but have you ever wondered the risks in doing this? Here are some of the most common blunders people do when trying to skimp their premiums:

Concentrating on Average Benefit Amounts The first thing you consider when buying long term care policy is the amount of the daily benefit. How big or small the benefit affects your premiums. What most people do is pattern the amount on the national average, unaware that there are discrepancies in the cost of the national and state care; thus, this could lead to buying hefty benefits and cutting the amount on the rest of the coverage.

The smartest way to determine the benefit amount is to conduct survey in the costs of facilities in your area. Remember that nursing home rates vary from state to state, so it's best to sum up everything before deciding on such expensive LTC. Once you' have gathered the price list, try to figure out if you can afford the costs by yourself alone --- if not, then long term care insurance should interfere.

Remember when calculating for the benefit, the inflation rate should barge in. For instance, your local nursing home increases up to 4.25 percent per year, you would need enough monthly benefits to suffice the coverage in 30 years, Yet there's a quick rule: Don't buy more than what you need.

Choosing longer waiting period Ask some policyholders on what they've done to cut down their premiums, and most of them will just shrug and say "Choose longer waiting period." The elimination period or simply "waiting period" is the period that you are required to shoulder your own care before the policy kicks in.

For example, a policy costs $2,430 per year pays for $200 daily benefit, a three-year benefit period and a 30-day waiting period. Getting 60-day waiting period will automatically drops the cost to $2,227; a 90-day period lowers it to $2,025; 180 days to $1, 8222, and 365 days to $1,620. The longer the waiting period is the longer the time you'll shoulder the expenses.

The deductions applied on the waiting period are only equivalent to today's dollars. The costs of nursing homes increase sharply, so imagine what would happen to you if you have extended waiting period. If the rates continue to rise by 5%, this will give you headache in managing your out-of-pocket expenses.

Some financial advisers say that the policyholders should consider 60 to 90 days waiting period to keep your expenses manageable.

Choosing the wrong type of inflation protection Inflation protection is crucial, but it can also bring the worst case scenario when not managed properly. Most policyholders choose inflation protection that increases the benefits to its highest amount in order to keep pace with the inflation.

However, the best inflation protection coverage automatically raises the benefit amount to juist 5 percent compounded annually. Don't be surprised because it this feature is typically expensive but it will keep your premiums remain the same.

Avoiding Long Term Care Insurance Financial Mistakes

By: christine
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