Elimination Periods and Long-Term Care Insurance Cost

Most people are deterred from buying long-term care insurance due to the high cost of the premiums—and the hope that they'll never need it. Choosing a longer elimination period is one way to reduce premiums.

What Is an Elimination Period?

When you purchase a long-term care insurance policy, most of them have a waiting period before your coverage will begin. This is known as the elimination period, which generally lasts from 30 to 90 days. The longer you make this waiting period, the cheaper your premiums may be.

The premium level is based on a number of factors, including:

• Your age
• Your health
• The daily benefit you choose — such as $200 or $300 a day
• The length of coverage you choose — such as two years or five years
• Whether you purchase an inflation rider, so that the daily benefit increases each year by a set percentage
• The elimination period — the amount of time before the long-term care insurance policy begins to pay out

The Elimination Period of Long-Term Care Insurance

If you choose a longer elimination period — for example, 90 days — you can reduce the premiums a bit. After all, Medicare may cover some or all of the first 100 days of skilled nursing care following a hospitalization, and anyone who can afford long-term care insurance in the first place should be able to cover the first three months of care without a huge problem. To the extent this choice lowers the annual premiums, more people may be comfortable purchasing the insurance.

You can take this a step further by looking at policies with a one-year elimination period and thinking of the policy as catastrophic long-term care insurance. Most people who can afford long-term care insurance can afford to pay for a year of care. It is care needs that go on for years that can damage the ability of a spouse to remain financially independent or deplete an inheritance earmarked for children and grandchildren. The average stay in a long-term care facility is three years.

This strategy makes sense for older individuals who may save up to 20 percent on their premiums, but if you choose to purchase your insurance at a much younger age, the premium savings may be relatively small.

Other Ways to Save on Long-Term Care Insurance Premiums

There are many considerations to save on long-term care insurance costs. How you choose to reduce costs may depend on your current or anticipated health situation:

• Reduce your benefit period. It can be very expensive to opt for lifetime coverage
• Adjust your daily benefit amount based on potential long-term care needs and the availability of other financial resources
• Find an insurance provider to bundle your insurance products along with your long-term care policy
• Seek out discounts based on gender, marital status, profession, and memberships to organizations
• Get quotes from multiple insurance companies

If a couple is buying two policies, the premium and the savings from extending the elimination period will increase. But it may not double, because insurance companies often offer discounts for couples.

Many factors can increase or reduce the cost of long-term care insurance. One option is to choose a longer elimination period and plan to pay out of pocket, or self-insure, for care needs up to one year in duration.

Additional Resources

To get advice on long-term care planning and insurance, reach out to a qualified elder law attorney near you. Read more about long-term care insurance, or check out some additional articles:

• How to Reduce Long-Term Care Insurance Costs
• Deducting Long-Term Care Insurance Premiums
• When Should You Purchase LTCI?