3 Ways to Lower Your Long-Term-Care Insurance Premiums

Can't afford higher premiums for long-term care insurance? Consider various options to trim your benefit instead.

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If you can afford a premium increase, paying it is often your best option. If you don't want to or can't pay the higher premiums, insurers usually give you ways to reduce them.

1. Cut inflation protection. Cutting back from 5% protection to about 3% can reduce your premiums significantly and is often a good choice, depending on your age and how much the coverage has increased. See how much your policy has grown; if you bought a policy with a $150 daily benefit 10 years ago, the daily benefit would now be about $244. Compare that with the current cost of care in your area and the portion of the costs you're able to cover. The older you are now, the better this option will be. Someone in his or her seventies, for example, may have already built up a big enough daily benefit at 5% inflation protection so that reducing the rate to 3% or lower will be enough in the future. But make sure you’ve locked in the inflation adjustment you've already earned.

2. Reduce the coverage term. Reducing the coverage term is an easy way to reduce premiums. If you have lifetime benefits, you can usually reduce coverage to three or five years, which would encompass the average claim period. But you are giving up some coverage you've been paying for over many years, and the reduced term may fall short of what you need if you develop Alzheimer's or another chronic disease.

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3. Take the paid-up option. Regulators in some states require insurers to offer this option to policyholders who drop their insurance. Instead of losing all the coverage you paid for, you’d get a benefit equal to the premiums paid to that point (the calculation varies by state).

Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.