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Long term healthcare insurance is a great hedge against the high costs of
elderly care, but it's not for everyone. Even if it is a good
choice for you, be very careful of which policy you select.
Is it right for me?
The United Seniors Health Cooperative of USA says you should buy the insurance only
if you meet these guidelines:
- You have more than $75,000 in assets per person in the household.
- Your annual income is $30,000 or more per person in the household.
- You can afford the premiums without making a lifestyle change.
- You could still afford the premiums even if they increase by 20
percent to 30 percent in the future.
The last two provisions are particularly important. The fact is that
long term care insurance policies are abandoned at fairly high rates.
Insurance experts say this is due in part to people who upgrade their
policies. But others find that paying the premiums cuts into their
incomes, and lifestyles, more than they anticipated.
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The single biggest disadvantage of long term
healthcare policies is that they are expensive. A study on long term care insurance by the Health Insurance
Association of America shows that cost is still the main reason why
people don't buy the coverage. The amount you will pay for the
coverage varies according to where you live, how
healthy you are, and the benefits you select. Benefits can also vary.
Here are some of the more important variables:
- Your age. The younger you are, the lower your premiums. Of
course, the younger you are, the longer you pay, too. Experts say 50
to 55 is a good age to start considering buying long term care
insurance. The exception to that is if you work for an employer that
provides attractive benefits at a younger age.
- The deductible or elimination period. This is the amount of
time you are confined to a facility or you meet another specified
criteria for a certain number of days. During this time you pay for
benefits, or another policy pays for benefits. The longer the
period, the lower your premium.
- Benefits paid. The variables here are the daily benefit
amount and the length of the benefits period. The higher the amount
and the longer the period, the higher your premium.
- Inflation calculation. Some policies calculate inflation
using a simple interest rate, while others use an annual compounded
rate. The latter, while ultimately providing you with a higher daily
benefit, is more expensive.
The rates, of course, can vary significantly from one company to
another and according to where you live.
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