Can My Long-Term Care Insurance Premiums Go Up?
Most Long-Term Care Insurance policies are intended to have level premiums. Today's LTC Insurance is priced based on rate stability rules required in most states and based on the low-interest rate environment and other factors that older legacy policies didn't consider.
You may have read stories about Long-Term Care Insurance premiums going up. These stories refer to older 'legacy' policies sold before more state regulations were implemented.
Since these older plans also didn't consider several factors like the impact of low-interest rates and low lapse rates, they have had approved increases.
Don't confuse policies where the premium does go up each year by design. As you read articles about premiums increasing, be aware that there are plans that intentionally go up over time. The premium goes up as benefits increase or you elect to increase benefits.
However, most policies have premiums 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 choose some kind of inflation protection, the premium is intended to remain level even as the benefits increase. The cost of the inflation benefit is already factored into the premium.
Will My Insurance Rate Increase?
Many articles about Long-Term Care Insurance many misleading or incorrect information. Have older 'legacy' policies had premium increases over time? Yes. However, there is more to the story, and those purchasing Long-Term Care Insurance have more consumer protections in place.
These "legacy policies" were priced too low based on less conservative underwriting (compared to today), low lapse rates, low-interest rates, and other factors. All of these policies were sold before rate stability rules, which are now in place in most states.
The American College of Financial Services has prepared a video rebuttal to one of these misleading articles. The video can help you and your family decide what to do about LTC Insurance if you received a rate increase on one of those older plans or are now considering adding Long-Term Care Insurance to your overall retirement plan.
Intended to Remain Level
Most Long-Term Care Insurance policies are intended to have level premiums. In fact, when an insurance company files its product and pricing for approval in each state, it must certify that they expect the premium to remain level for the life of the product series.
'Intended' does not mean 'guaranteed' (other than hybrid Long-Term Care Insurance policies that have guaranteed premiums).
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.
Today's Long-Term Care Insurance considers factors older 'legacy' policies did not. Since today's policies consider low-interest rates, low lapse rates, claims, and underwriting experience, the risk of an increase in the future is diminished dramatically.
Today, underwriting is much more scientific and conservative than before
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 today's products.
Read this article: Future Long-Term Care Insurance Rate Increase Risk Near Zero | LTC News
Before an LTC Insurance policy can 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).
Insurance companies 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 that 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.
However, these hybrid plans are not partnership certified and are more expensive - although they include a death benefit. 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.
Each state's insurance department regulates insurance products and premiums. No individual agent, agency, or advisor can offer you special deals.
Matt McCann will match you, your health, and your family history to find the right options and save you money. He is licensed nationwide and is certified with the federal/state long-term care partnership program available in most states. Matt is also one of the few agents endorsed by the American Association for Long-Term Care Insurance.
His unique process allows you to speak with him on the phone as you view his computer screen on your device. Nothing is easier or safer.
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