Why Long-Term Care Insurance Policyholders Face Rate Increases

Jesse Slome, long term care insurance expert

Jesse Slome, long term care insurance expert

A percentage of individuals who purchased long-term care insurance policies have or are facing increases in the premiums they pay for this important coverage.  Reasons for the rate increases were shared by the director of the American Association for Long-Term Care Insurance.

“No one likes to pay more a fact that’s understandable whether we are talking about a dozen eggs or an insurance policy,” shares Jesse Slome, director of the American Association for Long-Term Care Insurance.  Slome was sharing reasons for rate increases with leading insurance professionals who market traditional long-term care insurance policies.

“Interest rates or investment return is vitally important,” Slome explained.  “Years ago when interest rates were higher, an insurance company easily assumed a five percent interest rate when it priced a policy for a 55 year old.  If the actual interest rate was closer to say one percent, and assuming every other actuarial assumption was correct, they would need a 50 percent or greater premium increase to pay out future claims.”

Actual claims have also been higher than anticipated, Slome notes citing testimony by Dr. Marc Cohen to the U.S. Subcommittee on Government Operations of the Committee on Oversight and Government Reform.

“The good news for consumers is that insurers are paying out more money to people needing long-term care,” Slome reports.  “But that puts pressure on insurers to increase costs to make sure they can sufficiently pay future claims.”  Between 2010 and 2014, the actual to expected incurred ration has increased from 111 percent to 124 percent.

Slome shared two important pieces of information with agents who are addressing rate increases with their clients.

“First, most consumers perceive it’s a take it or leave it situation, when they have options available to avoid the rate increase,” Slome shared.  “Most people will take this as an opportunity to re-assess their needs, their overall retirement assets and their long-term care insurance policy coverage.  Some will end up keeping reducing their coverage and end up paying less money that they are currently paying.”

The national long-term care insurance expert also noted someone who bought a typical LTC insurance policy at age 60 and becomes disabled 20 years later, will recoup all of their policy premiums in roughly five months of paid care,.  “If they faced a 50 percent rate increase after 10 years, they would still recoup the cost  within seven or eight months of receiving qualifying paid care,” Slome added.

Established in 1998, the American Association for Long-Term Care Insurance creates heightened consumer awareness for the importance of long-term care planning and supports professionals who market the range of long-term care insurance solutions.  For more information or to request long-term care insurance costs from experienced agents go to www.aaltci.org.

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