This blog post is designed to provide general information on the subjects covered. It is not, however, intended to provide specific estate planning, insurance, tax or legal advice. Please note that LTC Consumer and its representatives do not give financial planning, tax or legal advice. You are encouraged to consult with your tax advisor or attorney concerning your own situation.

Will today’s LTC Insurance Policies experience Rate Increases?

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If you purchase a long-term care insurance (LTCI) policy today, your odds of receiving a rate increase in the future are much less than in year’s past. The American Association for Long-Term Care Insurance (AALTCI) polled close to 80 long-term care (LTC) industry actuaries and found that 79.1% of them believed the likelihood of a future rate increase on presently priced policies was 10% or less. 12.5% of the actuaries believed there was a 20% chance for an increase, 4.2% said 30-40%, and 4.3% said 50% or more. AALTCI Director Jesse Slome said he believes the risk of a future rate increase is zero.

Older Policies and Rate Increases

Why have policies purchased in the past received such large rate increases? According to Mike Skiens, president of MasterCare America, Inc., there were three big factors: more claims, longer claims, and a lower interest rate environment. In the 90s and early 2000s LTCI industry actuaries did not foresee so many people holding onto their policies for such a long time or going on claim for as long as they did. They also did not expect interest rates to remain as low as they have for as long as they have. “Because of the low interest rate environment, the insurance companies’ return on investment on their products has been lower than expected,” Skiens said.

Probabilities and Average SIze of Rate Increases, by Year

Current Policies and Affordable Premiums

While many consumers are concerned about LTCI rate increases, others are simply curious if they can find a policy within their price range. With the cost of everything increasing year to year, there are a few things you can do to achieve your ideal LTCI policy cost. You can adjust your monthly benefit, elimination period, and benefit period. Work with a specialist who can run quotes and adjust rates through screen sharing technology where you can watch premiums change based on policy selections. They can also make sure you are receiving any discounts and applying with the best insurance company to fit your needs.

“79.1% of LTC industry actuaries believed the likelihood of a future rate increase on presently priced policies was 10% or less.”

Current Policies and Future Rate Increases

Why should you trust that a policy purchased today won’t have just as big of an increase? There’s simply more data to base projections on. When asked about rate increases, LTC Consumer Specialist William Wetmore tells his clients, “The premium is not projected to increase, and will not increase due to your age or health. If the insurance company has adverse results regarding the actuarial data they used to create these premiums, they can request your state insurance commission approve an increase. Your policy has been priced in a much more conservative environment so the chances of your rates increasing compared to past plan pricing is less likely.”

Your policy has been priced in a much more conservative environment so the chances of your rates increasing compared to past plan pricing is less likely.
Your policy has been priced in a much more conservative environment so the chances of your rates increasing compared to past plan pricing is less likely.

 

Nothing is for certain; however, the hope is that the industry learned from its past. The product has been around now for several decades and the amount of underwriting and claims data to base projections on is much larger. The best way to make sure you are purchasing a quality LTCI policy from an A-rated carrier is to work with an expert. Our team of specialists can answer all your questions and guide you to the best policy for you and your family.

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