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Insurance companies offer ways to cut long-term care premiums

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As we've discussed before, the cost of long-term care insurance is rising. As middle age and older Americans struggle to keep up with cost of living increases, that insurance is too often dropped or never obtained in the first place. It may seem like a luxury now, but not having long-term care insurance can mean financial ruin later on if your or your spouse becomes ill or disabled and requires home health or nursing home care.

Assuming that Medicaid will take care of you may be a big mistake. One expert says that between middle-class people who feel they can't afford long-term care insurance and wealthy people who assume they'll be able to afford to pay for long-term care, there will be "many more people eventually stressing the Medicaid system."

One way to keep your long-term care insurance coverage while reducing the cost of premiums is by extending your elimination period. That's the waiting period between when your long-term care begins and when your insurance kicks in. By doing that, policyholders can minimize their premiums by as much as 40 percent while still ensuring that if they need years of long-term care if the future, they'll have coverage at the end of the elimination period.

The calculation waiting periods vary by insurance company and individual policy, particularly if the care you need is intermittent. Therefore, it's important to know exactly how long you will be paying for your own care and to ensure that you have the funds to cover it. While it's not ideal to have to wait for possibly a year or more to receive coverage, it's better than having none at all.

One long-term care executive with Northwestern Mutual who is in his 40s says the extended elimination period is the strategy he has chosen for himself because it makes the most financial sense at a time when he has young children but wants to "cover a catastrophic risk." He says that those insured by his company can knock as much as a third off their premiums if they choose a year-long waiting period.

As with most insurance, long-term care coverage is a sometimes-difficult balancing act between making sure you have enough to cover your needs in the future and not overstressing your pocketbook now. Your legal, financial and insurance advisors can help you determine what is best for you and your family.

Source: The Chicago Tribune, "Elimination period part of long-term care to consider" Janet Kidd Stewart, May. 30, 2014

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