Update on Long Term Care Policy Issues
Premium increases on existing long term care insurance (LTCi) policies have been dramatic over the past few years. In general, these increases reflect higher claims against the policies than the carriers anticipated. The good news is that the higher claims reflect unexpectedly strong improvements in mortality rates. Also, fewer LTCi policy holders are cancelling their policies than insurance company actuaries predicted. Another factor is that insurers’ ability to pay claims has been hurt by the current low interest rate environment.
As insurers incorporate all of this data into current pricing models, policy holders should expect the increases to moderate, although uncertainty remains for this still rather new line of insurance. If you receive a rate increase letter, insurers may provide certain options for reducing your rate increase. Keep in mind that the options offered are likely to be those preferred by the insurance company and may not include all of the available options. Therefore, you will want to call your agent or carrier and ask for all of the available options if you are willing to alter your coverage in order to avoid or lessen a premium increase.
According to Kim Natovitz, of the Natovitz Group, an insurance broker specializing in long term care, you may want to avoid reducing your daily coverage as a cost cutting measure, due to the rising costs of long term care. If you currently have an unlimited or five year benefit period, you may wish to consider shortening it, as few people actually require care for that long. Also, if you have owned a policy with inflation protection for a number of years, you may have already realized much of the benefit of inflation protection on the daily coverage rate. Therefore, this is one area that you may consider reducing or eliminating to lower premium increases.
Please feel free to contact us with any questions on your LTCi premium increases.
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This report has been prepared by West Financial Services, Inc. from original sources and data we believe to be reliable. This report is for informational purposes only and should not be construed as investment, legal or tax advice. Analysis of past market conditions may not predict future market activity.