What To Do If Your Long Term Care Insurance Rate Increases
You were notified by your long-term care insurance company that your rate (your premium) is being increased. You are not happy.
That is completely understandable. But please keep reading because we will try to give you some insight and information regarding your options.
Most importantly, cancelling your insurance coverage could be a big mistake. But please keep reading.
This webpage has been written and posted by Jesse Slome, director of the American Association for Long-Term Care Insurance (AALTCI). AALTCI was founded by Slome in 1998 as a non profit educational organization. WE DO NOT GET FUNDING FROM INSURANCE COMPANIES and I (Jesse Slome) understand how sensitive this topic is. Trust me, I am frugal to the core and understand how one feels when having to pay more for anything. My primary mission is to provide accurate, relevant information to help you make the right decision for yourself and your family.
Why do long term care insurance rates increase?
First, understand that you have not been singled out. An insurer CAN NOT do that. They must request a rate increase for what is called a 'class' of insureds. Then, they must request the rate increase generally from your State Department of Insurance.
But you want to know WHY your rate is being increased. The insurance company CAN NOT simply raise rates. They must demonstrate a resaon for the need. Typically, it has to do with the fact that they are seeing more people go on claim than expected, and that claims are costing more than expected. Why didn't they know better when they originally priced the policy? Long-term care insurance is a very difficult policy to price because you need to project what will happen 10, 15, 20 and even 25 years into the future. Not an easy task.
What to do when your long term care insurance rates are going up.
The insurance company will send you information. That's probably why you went online and found this webpage.
READ EVERYTHING THEY SEND YOU CAREFULLY - Start a file - Make a Note of any deadlines. Some insurers start with a note that let's you know of an impending rate increase. What you are really looking for is their letter that spells out your options. They will offer you options and you need to carefully consider them.
THE INSURANCE COMPANY WILL ALMOST ALWAYS GIVE YOU AN OPTION THAT INCLUDES NOT PAYING ANY MORE. That may be something you want to do. Or, after you evaluate your options, you may decide on something else.
Why NOT start looking for a new policy?
The short answer is "it's a waste of your time". If your long-term care insurance policy was purchased two (three) or more years ago YOU WILL NEVER FIND A LOWER COST even after you pay the rate increases.
I know you don't believe me ... so let me give you some 3 reasons and then some actual examples.
First, rates increase each year as you grow older. Say you purchased coverage at age 57 and now you are 67. You'll pay much more.
Second, some of the plan features are the ones MOST impacted. Older policies often had lifetime or unlimited benefits. Hard to even find them today.
Third, if you bought coverage with a 5 percent inflation growth option you DEFINITELY are getting a rate increase.
BUT I PROMISED TO SHOW YOU - SO HERE'S WHAT A 67 YEAR OLD WILL PAY NOW (September 2020)Age 67 Male - purchasing a $200 Facility Daily Benefit for just under 3 years ... with 5% Compound Inflation.
LOWEST COST: $5,400 a year
Age 67 Male - purchasing a monthly benefit of $6,000 with a year benefit period and 5% inflation groth
LOWEST COST: $6,905 a year
What do you mean 're-adjust' my coverage?
Investment experts tell us it's important to re-adjust our investments from time to time. That's because things change and we need to adjust to along with those changes.
The same is true with your long-term care insurance policy. Thinmgs have changed from when you bought the policy
Five 5 Percent Inflation Growth today may be more than you need or want to pay for. And the insurance company will likely give you options (often a 3% or 2.5%, etc). It's definitely something worth considering.
So basically, read the options sent to you by the insurance company. Look at your current financial situation and decide what's wprks for you TODAY.
YES, you may choose to reduce your benefits. But, they still have enormous value. If you go onto claim, and you tap the full benefits of your policy - you will almost assuredly get more benefits paid to you than what you paid into the policy.
"I'm going to complain to ...."
I get it. You are pissed (even after reading all of this). I'm not going to tell you not to complain, but I'm going to honestly say it won't do any good. You can write to your State Insurance Commissioner, but their department approved the increases. You can write to the media - but there's nothing that can be done.
I started this page explaining that the Association today gets ZERO DOLLARS from any of the long-term care insurers. I've been doing this since 1998 and here's what I can tell you.
EACH YEAR THE NATION'S LONG-TERM CARE INSURERS PAY OUT MORE CLAIM DOLLARS TO MORE PEOPLE than the year before. You can see the latest long-term care insurance claims data here.
I hope that helps give you a little peace of mind
Thanks for reading.
Jesse Slome
Director
American Association for Long-Term Care Insurance
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