Planning matters

What Can You Do When Your Long-Term Care Insurance Rates Go Up?

If you receive a letter from your Long-Term Care insurance company notifying you that rates are going up, don’t panic! You don’t necessarily have to pay the higher premiums.

Why do premiums go up even if you’ve never filed a claim? The industry made incorrect assumptions when it set premiums for policies issued 10 or more years ago. Low interest rates have made it difficult for companies to earn a reasonable return on premiums invested and low lapse rates mean policy holders are not dropping their coverage. As a result, many carriers have had to increase premiums to cover losses or exit the Long Term Care market altogether.

Planning ahead for price hikes is a good way to estimate how much you can afford to pay for a policy, even if rates don’t end up rising 20%-30% every 5 years or so.

Premiums have never been guaranteed not to increase, but newer issued policies have a better pricing structure and shouldn’t experience such dramatic increases as older policies have.

So what are your options if you receive notification of an increase in your premium? Your carrier will give you specific choices which are generally the same across the industry.

  • Reduce the number of years of coverage (benefit period)
  • Reduce the monthly or daily benefit amount
  • Extend the waiting period before the benefit starts
  • Reduce the inflation protection rate (most expensive feature on a policy)

Before you decide what to do, calculate how much you’ve accumulated in benefits so far and how any changes will affect your future benefits, as well as how much care you could pay for out of your own pocket.

It’s rarely a good idea to drop your policy and search for a replacement. Rates on new policies are 30% to 50% more than older policies. If you shop around for new coverage, you will likely discover higher premiums because you’re older and underwriting standards have become much tougher.

If you receive a premium increase notification letter on your policy and need help understanding your options, give Johnson Bixby’s Long-Term Care Specialist, Jeri Boston, a call. She’ll give you guidance on the next best steps to take.

Written By Jeri Boston