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By Brian O’Connell Aug. 15, 2013
Purchasing the right long-term care policy at the right price—it’s a difficult task, and a place to provide value to clients.

Insurance consumers are paying way too much for long-term care insurance.
Data from the American Association for Long-Term Care Insurance says that huge price differentials by big insurance companies can nearly double what Americans are charged for long-term care insurance, which can cost hundreds of dollars a year.

“We now see large price differences between leading insurers resulting from pricing approaches, discounts offered and health classifications,” says Jesse Slome, director of the association. “People can easily pay 40% to 90% more than they need to, and many people forgo getting this important coverage simply because they fail to understand how to take advantage of discounts still available.”

A big part of the problem is the complex formula insurance companies use to price out long- term care costs. It’s a process so confusing that Slome advises consulting with a trusted insurance professional to weed out the bad options. Going it alone is a big mistake, he says.

“Each long-term care insurance company sets their price based on 20 to 25 different pricing factors,” Slome says. “The single smartest move a consumer can make today is working with an insurance professional who understands the many pricing differences and legitimate ways to reduce what you pay for this important protection.”

Women in particular are vulnerable to higher LTC costs. Slome says single female insurance consumers are often charged 55% more than single men, which is why they should stay away from companies that distinguish insurance buyers by sex.
“Not every insurer has started charging sex-distinct rates,” Slome says. “Selecting a policy from an insurer still offering unisex rates is just one obvious way to save.”

Another vexing issue is that consumers have to meet certain standards, and that can affect prices.
“All [insurance] applicants must meet health qualifications, which vary,” Slome says. “Recently some insurers increased the number of health classifications, and the spread between ‘preferred’ and ‘standard’ classifications can amount to as much as 50% to 60%. Knowing which insurer will grant you preferred health status is overlooked by most.” The best advice for LTC consumers?

Slome advises saving some of your retirement income specifically for long-term care insurance and doing some due diligence in choosing where to get it.

“You’ll save considerably if you are willing to allocate some of your retirement savings and Social Security income to pay part of any long-term care costs,” he says. “That said, you can read every online article, but because provisions and pricing varies by state, understanding how to get the best coverage for the best price is a daunting task.”

Slome says to aim for long-term care specialists that can prove they’ve helped at least 100 consumers get a good deal on long-term care insurance. “There are agents who have insured 250 to 500 individuals or more over many years,” Slome adds.

“A good broker specialist will be appointed to compare policies from at least four or five long-term care insurance companies. ‘Appointed’ means they can actually sell the particular policy, because it’s rare one that will favor coverage from a company they cannot sell to you.”

Brian O’Connell is a special contributor to The Street.
For more in-depth analysis and commentary, please check out RealMoney.com, TheStreet.com’s subscription site.

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