Why Long-Term Care Insurance Costs More for Women, and How You Can Reduce Your Costs

A major insurer recently announced a major price hike on long-term care policies for women, marking a major shift in how insurers are looking at gender when it comes to pricing insurance premiums.

For generations, women have statisticallyoutlived men. As a result, they’ve generally paid less than men for life insurance coverage under the premise that because they live longer, they will pay more overall for their policies than men. Women, according to insurance underwriters, also tend to present less risk then men in terms of their health. According to studies, women tend to seek medical care more frequently than men and are less at risk for chronic or terminal conditions.

It’s precisely because women live longer and seek treatment for their ailments, though, that long-term care insurance carriers are spending more on claims for women. Statistics show that more than 70 percent of the residents in nursing homes are women; that number climbs to 80 percent for assisted living centers. And for some insurers, almost two-thirds of all payments for long-term care go toward services provided to women. Considering that the average nursing home stay comes with a price tag of $75,000 or more per year, the costs add up quickly.

Since most people do not buy long term care insurance policies until they are within a few years of potentially requiring some form of assisted living, the amount paid out for claims often quickly eclipses the amount that carriers earn on the policies. As a result, insurers are looking to replace the shortfall by charging those who are more likely to make a claim on the policy more than those who may never use the coverage. That means that in some cases, women may have to pay as much as 40 percent more than men for comparable coverage. In addition, insurers are tightening underwriting guidelines, so that some people will pay more for coverage thanks to their age and health status, while others may not qualify for coverage at all.

Buy Early, Save Money

Long-term care insurance is an important piece of the retirement planning puzzle for some people. Because the costs of long-term care are so high, and in most cases, patients have to exhaust their own financial resources (including savings and real estate) before they qualify for government assistance, a long-term care insurance policy offers peace of mind that a serious illness won’t lead to financial devastation.

Rates for coverage are increasing, though, and some people may be reconsidering whether the policies are a good value.Here are a few things that individuals can do to keep their long-term care coverage costs manageable, helping to ensure that the policies remain a solid part of their retirement plan.

Buy early. Most people wait until they are at or near retirement age to purchase coverage. However, with advanced underwriting rules, which often require a thorough health examination and a battery of tests, seeking coverage in your 40s or 50s, while you are younger and relatively healthy might save you money in the long-term.

Shop around. Like most types of insurance coverage, the premium cost varies by carrier and level of coverage. Seek quotes from multiple carriers to find the best rate.

Adjust your policy.Long-term care coverage costs depend on several factors, such as the daily maximum, elimination period and length of coverage. A policy that kicks in after 180 days and pays $100 a day is going to cost less than one that pays $175 a day after 30 days. Evaluate your financial resources and what you plan to save for retirement to determine whether you can buy long-term care insurance that offers lower — but still adequate — levels of coverage.

Other Issues

While some carriers are looking toward a gender-based pricing structure, such an arrangement is currently illegal in Montana and Colorado, and other states are considering bans on gender-specific pricing, citing that the Affordable Care Act of 2012 prohibits such practices. Whether or not such bans take effect in the future, these new prices are expected to take effect in spring 2013 and will likely influence the cost for women applying for new policies as well as couples applying for policies together.  If you have not yet purchased your long-term care policy, now is the time to start exploring your options, to save money and ensure good coverage.

About the Author:Joe Houston is an insurance professional who has helped hundreds of people evaluate their insurance options and make the right coverage decisions.