Nobody enjoys receiving a letter stating their premiums are going up. Unfortunately, it may not be a matter of “if” but “when”.
The more you understand about Long Term Care Insurance premium increases the better you can make educated decisions. Here’s what you need to know.
Can my long term care insurance (LTCI) premiums increase?
The short answer is yes, but not easily and only under certain conditions.
Long Term Care Insurance is designed, reviewed, and regulated to not need a premium increase once a policy is inforce. However, the law allows insurers to require premium increases if deemed necessary. These increases can only be based on a policy series (or product) and are for all policyholders in the series. Premium increases are reviewed by each state’s Department of Insurance (DOI) who have the authority to grant an increase including how much of the increase is allowed.
LTCI premiums cannot increase for the following reasons:
- Increase in age
- Health condition(s)
- Filing a claim
- Targeting certain individuals
How are premium increases determined?
Insurance companies go through a review process of analyzing current claims data, future claims assumptions, interest rates, future risks, and many other factors before requesting premium increases on a policy series. Premium increases cannot be based on gender, age, health, or demographics. They may only be approved based on policy series statistics.
Companies request premium increases for a variety of reasons. The most common reasons include:
- The increasing cost of long term care services
- An increase in claims (people using their LTCI policies)
- A low interest rate environment
- People staying on claim longer than expected
Insurance companies must get approval from each state’s Department of Insurance before a premium increase can go into effect. Carriers propose a percentage of increase and each state can approve it “As Is” or require modification.
Because of the involvement of state departments, the state where you purchase the policy determines the percent of increase for your policy and others in the same series.
What are my options?
If you’re faced with a premium increase, you typically have a couple options. In fact, you may not need to pay more to keep your policy.
- You can keep your current policy and pay the increase.
- Your carrier may offer an option to reduce your daily or monthly benefit, benefit duration, or inflation protection to keep your plan affordable.
Premium increases are necessary to stabilize the market. It may be tempting to cancel your policy or stop paying premiums when faced with an increase, but it’s typically more expensive to buy the same or similar plan today at an older age.
While it’s possible you may experience a premium increase, coverage will never be cheaper than it is right now. Speak with an LTCI Specialist to make sure you’re protected with LTCI for the future.