Will My Insurance Rate Increase?
Many Consumers have read articles about Long-Term Care Insurance premium increases. While many of these articles have many misleading for incorrect information, the fact is older "legacy" products have had increases.
An article from the Wall Street Journal describes policyholders dealing with premium increases on these older product series. These "legacy policies" were priced too low based on less conservative underwriting, low lapse rates, low-interest rates, and other factors. All of these policies were sold before rate stability rues, which are now in place in most states.
The American College of Financial has prepared a video rebuttal to the article that can help you and your family decide what to do about LTC Insurance if you received a rate increase on one of those old plans, or are now considering adding Long-Term Care Insurance to your overall retirement plan. This video is worth watching:
Most Long-Term Care Insurance policies are intended to have level premiums. There are some policies where the premium does go up each year, by design, as benefits increase or you elect to purchase additional benefits. However, most policies have premiums that are intended to remain level based on your age at the time of application, your health, and the amount of coverage you selected.
Since most people will select some kind of inflation protection, the premium is intended to remain level while the benefits increase—the cost of the inflation benefit is already factored into the premium. As you read articles about premiums increasing, be aware that there are plans that intentionally go up over time.
Today, all plans are priced with a very low-interest rate environment in mind (interest rates have been low in the United States over the last decade). This was not always the case.
Some of these older products that have had rate increases were due to several factors:
- Interest rates
- Lapse rates (meaning, how many people drop their policies. In practice, very few do, but this was not factored into premium pricing on many older plans)
- Claims and underwriting experience
Today, underwriting is much more scientific and conservative than before. Premium costs now consider low-interest rates, low lapse rates, and actual claims experience as well.
The Society of Actuaries suggests the chance of a rate increase on a long-term care policy sold today is very, very low. Regardless of those facts, it is also not easy for insurance companies to raise rates on the products being sold today.
Today's Long-Term Care Insurance is designed to be rate stable. An insurance company must certify with your state's Department of Insurance that based on their pricing, underwriting, and actuarial data that they expect the premium to remain level.
Before a product is allowed to be sold, the insurance company has shown the state regulators that their sound actuarial data will hold up in the decades ahead. Essentially, they need to actuarially certify that the premiums make sense for the policies they are marketing to the public.
In the event an insurance company thinks they require a rate increase, they must go to the Department of Insurance in each state that they're looking for the increase, show a substantial need, based on actuarial data and have it impact a class of people in a product series (in other words they can't just pick on you).
They are NOT allowed to price profit in any potential future rate increase.
This is a good article discussing this: www.brokerworldmag.com/long-term-care-insurance
Any potential rate increase cannot charge more than what a new policy would cost a consumer at that time.
For the older legacy policies going through an approved rate increase, premiums for those policies are still significantly lower than what a new policy with the same benefits would cost today.
Most insurance companies will also provide those policyholders with options to decrease their benefits to keep the premium lower or level.
Single premium, or limited premium policies, are available which eliminate the possibility of a rate increase. These "hybrid" plans also provide death benefits as well. For some consumers, this could be something to consider. These plans are not; however, partnership certified. You should discuss the options with Matt McCann before making a decision.
Remember, few financial advisors or general insurance agents have expertise in Long-Term Care Insurance. Matt McCann will help answer your questions and find appropriate coverage at a very affordable premium.
This way, you can address the financial costs and burdens of aging so you can ease the burdens otherwise placed on your loved ones while safeguarding your savings.
Today's Long-Term Care Insurance is easy, affordable, and rate stable income and asset protection.