I loved living in Africa. I still love the wilderness and the culture of live and let live. I will retire there for sure… my 150 year old seaside cottage is ready and waiting for me.

But in my youth, Africa came at a cost: I was far from my loved ones. A round-trip ticket to the United States costs a full month’s salary.

But sometimes I thought it was worth it…like when my dear grandmother entered long-term care late in life.

She was a lovely person; kind and gentle, but with an eye for saving a penny.

Fortunately for her, when she needed 24-hour care, a combination of sound financial planning and good timing (health care was much cheaper at the time and Medicare had good benefits) meant she was well taken care of.

Those days, however, are over… are you ready?

Long-Term Care: It Will Cost You

Consider these numbers:

• The average cost of a private room in a nursing home is $250 to $350 per day, or about $91,000 to $128,000 per year.
• Median cost of assisted living is $3,628 per month, over $43,500 per year.
• A home health aide for eight hours a day costs more than $40,000 per year.

Most people prepare for long-term care by figuring out how much of the cost they could handle with income and retirement savings, and then turn to insurance to cover any gaps.

But long-term care insurance premiums have skyrocketed in recent years.

People are living longer with chronic diseases like Alzheimer’s, just like Grandma. And insurers did not anticipate a prolonged period of low interest rates, which have hurt the returns on their investments that they depend on to pay future claims.

As a result, long-term care insurance premiums have skyrocketed.

In 2000, you could pay $880 per year for a $70 daily benefit, a 50-day waiting period, 5% compound inflation protection, and lifetime benefits. Today, a similar policy, but with a maximum benefit period of five years, would cost $2,944 per year.

Long-term care policyholders face a tough choice: pay the higher premiums, cutting into your retirement savings! – reduce coverage, or let the policy lapse and lose benefits.

Be smart instead

Fortunately, there are strategies you can adopt to deal with these rising insurance costs. Here are some of the easiest to implement:

• Buy a combined life and long-term care policy. These pay whether you need care or not, and the premiums are fixed. A 55-year-old man paying $10,000 a year for 10 years could get a monthly long-term care benefit of $5,500 for up to six years, growing 3% compounded per year. If he didn’t need long-term care, his estate would receive a $130,000 death benefit, or he could cash in on the policy and recover 80% of the premiums from him.
• Add a chronic care rider to a permanent life insurance policy when you buy it, which allows you to use up to 2% of the death benefit per month for long-term care, with a daily maximum of $360. This rider tends to add 10-12% to premiums

The average long-term care claim is less than three years. That gives you room to adjust your policy and save on premiums:

Cut inflation protection. Going down from 5% to 3% can significantly lower your premiums. The older you are now, the better this option will be. A 70-year-old, for example, may have accumulated a large enough daily benefit with an inflation hedge of 5% that reducing the rate to 3% or less will suffice in the future.

Reduce the term of coverage. If you have lifetime benefits, you can generally reduce coverage from three to five years, which covers the average claim period. But keep in mind that the reduced term may not be enough for what you need if you develop a chronic illness.

Look for a “paid” option. Regulators in some states require insurers to offer this option to policyholders who cancel their insurance. Instead of losing all the coverage you paid for, you would get a benefit based on the premiums you paid.

Of course, there are other ways to lower your healthcare costs, now and in the future, such as overseas healthcare and health savings accounts.

Don’t set it and forget it

Most people react quickly to changes in the investment environment. They seize opportunities and adjust their portfolios accordingly as asset values ​​change.

Unfortunately, the same is not always the case with insurance. There is a tendency to buy it and let it run. Don’t make that mistake.

If you don’t have long-term care insurance, consider getting it.

If you do, review your coverage and see if it makes more sense to reduce it and divert some of the savings to your retirement fund, where you could earn better returns.

After all, the future of healthcare in the US is more uncertain than ever…and that’s a worry you don’t need.