Long-term care insurance is becoming much more expensive for women than it is for men in many states. Here's how you can reduce the cost.
There’s still a “pay gap” between the sexes – women make about 81 percent of what men do, according to the U.S. Bureau of Labor Statistics – and now you can expect to see a wide “spend gap” for insurance.
Specifically, long-term care insurance. These policies cover what your health insurance seldom does: your costs when you enter a nursing home or assisted living facility – or even if you can stay at home but need help with the basics there.
Some insurers are now charging women much more for new policies than they charge for men. It’s called “differential pricing,” and it’s been implemented by major insurer Genworth in 31 states. Most long-term care insurers are expected to follow suit.
“Under differential pricing, single women can expect to pay 25 percent to 40 percent more for a policy than a single man would for the same policy,” Reuters reported. The news service partnered with ValuePenguin, a data-mining company, to study the issue. One example of its findings:
A 60-year-old man or woman buying three years of $6,000-a-month coverage in Illinois — which doesn’t have gender-based pricing now — would pay $2,927 a year … . In Iowa, which has differential pricing, the man would pay $2,674, but the woman would pay $3,647.
The rationale for differential pricing is that women live longer than men and are more likely to use the coverage.
Here’s what women – and men, too – can do to save money with this notoriously complicated kind of insurance:
1. Decide if you even want it – or need it
More than 10 million Americans have long-term care policies, says the American Association of Long-Term Care Insurance. Who really needs this coverage?
As The New York Times put it eloquently:
Wealthy people can pay for their own care. And Medicaid covers long-term care for people with no assets, though they may not be able to get the care they want where they want it. Everyone else either has to save for the possibility that they’ll need care for years or buy insurance to cover the cost.
Long-term care insurance used to be more affordable. But many insurers underestimated how much providing the coverage would actually cost them. Some have gotten out of the business, and others are raising rates by 50 percent or more. Headlines like this one, from February, are becoming more common: “CalPERS plans 85% rate hike for long-term care insurance.”
That’s one reason why Forbes wrote in March, “If you are risk-averse, you will stay away from these policies.”
The Women’s Institute for Financial Education – WIFE for short – recommends:
If your net worth is between $75,000 and $3 million, long-term care insurance can help protect your estate. If your net worth is below $75,000, Medicaid (government assistance) will pay for your care as soon as your assets are depleted. If your net worth is over $3 million, it might be cheaper just to pay for the care yourself.
2. Lock in now
If you’re a woman and you’re determined to look into a policy, the experts advise you to do so right now – before more insurers adopt differential pricing. So where can you find an easy list of comparison prices? Nowhere.
“There is no single directory of state plans and prices to find out if you’re too late,” Reuters says. “If you are in the market for a plan, just start getting quotes. Right now it is a patchwork.”
3. Up the deductible, lower the benefits
Deductibles for long-term policies are very different from those for your car or health insurance. For starters, they’re called “waiting periods” or “elimination periods.” They work like this: You have to wait, say, 60 days for your benefits to begin.
“So if your policy covers $150 a day for in-home care, and you have a 60-day waiting period, you will typically owe the first $9,000 — 60 times $150 a day — before the policy kicks in,” explains The New York Times.
You can always raise the waiting period to 90 or 100 days and save on your premiums. You can also limit some of the benefits. “Instead of paying for permanent benefits, consider buying coverage for five years,” Reuters recommends. “That would cover most typical long-term care needs.”
4. Apply with your spouse
If you’re married or in a same-sex domestic partnership, you can apply together, Reuters says. “A plan like that would let you split the benefits any way you needed them but would cost less than two single plans.”
As you can see, this is complicated, and the best advice is to consult an insurance agent you trust and do your homework. For more details on this topic, consult “10 Tips to Find Long-Term Care Insurance.”