Kevin McCormally: I am Kevin McCormally of Kiplinger's and I am here with Kim Lankford, the Insurance Editor of Kiplinger's Personal Finance Magazine, to talk about Long-Term Care Insurance. Kim, I know long-term care insurance policies are still evolving, what's the latest?
Kim Lankford: Well, interestingly, companies had realized that people had been put off by the cost. 55-year old would sometimes have to pay more than $4,000 a year for coverage if they got lifetime benefits. Companies realized that lot of people are paying for benefit, they didn't really need. So, what are the ways they could cut down on coverage, and cut down on the cost.
Kevin McCormally: Is that a good deal?
Kim Lankford: Well, it can be a good deal but it depends on how they cut down on coverage. John Hancock, for example, has a new type of policy that instead of offering 5% compound inflation, offers inflation type to the CPI. That was able to cut their cost significantly because the CPI has risen by less than 5% over the last several years.
Kevin McCormally: Any other ways that companies are cutting premiums?
Kim Lankford: Genworth, for example, just introduced a new policy that cut back on coverage for room and board at assisted living facilities and have lower premiums significantly and can be fine if you plan on getting caring in your home or in a nursing home, but if you do plan on getting care in assisted living facility, that can make a big difference in the coverage.
Kevin McCormally: Okay, so that's what the companies are doing, what can the consumer do? What are ways that consumers can cut the cost of this insurance?
Kim Lankford: There are. You can stick with the standard policy but make some decisions that can lower the cost yourself. For example, if you instead of doing it lifetime benefit period, just do three-year benefit period which is about all the coverage most people need, that's about the average amount of care.
Kevin McCormally: Any other discounts?
Kim Lankford: Yes, you can also increase the waiting period before benefits kick in. Usually 60-90 days is a good balance.
Kevin McCormally: And is there anything else we can do to save money?
Kim Lankford: If you are a married couple, consider a shared benefit policy. That way you have a pool of benefits that the two of you can both use. For example, instead of having two three-year benefit periods, you have a pool of six years.
Kevin McCormally: How does that work?
Kim Lankford: Well, if one spouse only needs one year of care, then the other spouse gets the rest of the five years. It's a great way to hedge your bet since you don't know who might need care for long time.
Kevin McCormally: Thanks, Kim.
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