Ask Terry Questions LTC Insurance Premium Increase

LTC Insurance Premium Increase

By Terry Savage on March 03, 2014 | Financial Planning / Retirement


Like lots of people, my wife and I received notices of extraordinary Long Term Care premium increases from John Hancock — 35.63%, for my wife and , 33.2% for myself.

I found your 2012 column on possible remedies, and I still have a question: If I reduce daily benefits, coverage periods, or inflation adjustments, what’s to stop the insurer from another 35% rate hike a year or two from now, and another shortly after that?

The company says any new rate hike would have to be approved by state regulators. Those regulators already approved an extraordinary increase.

Our only sensible option is the non-forfeiture benefit that turns premiums paid so far into a interest-free savings account we may or may not qualify to use.

Maybe it’s time to address the issue again and acknowledge that Long Term Care Insurance is not a good deal for most people.

Terry Says:  The first thing I want to say is:  ME, TOO!   I just received a notice of a 90 percent premium increase on my CNA LTC policy, which I have had for at least 15 years.  (Thank goodness I also bought a 10-pay policy from another company, and it is now fully paid up.)  Still, I am not cancelling the CNA policy — because heaven forbid I need to use it, I want to make them pay!!)  I know not everyone can be so cavalier about paying higher premiums.  But I still say that it’s worth it to keep the coverage in place, perhaps cutting the increases by going to a shorter period of coverage (such as from 5 years to 3) or by going from compound inflation protection to simple inflation protection.

I did write about this topic a year ago, when so many companies started getting huge premium increases.  They were able to convince state regulators (and I had extensive discussions with the Illinois regulators) that if they didn’t get a premium increase they would not be able to pay out on their promises!  Yes, they planned poorly. And yes, most LTC policies were sold on the assumption that premiums would stay flat.  Who knew they had been so wrong in their calculations!

I also spoke to the insurers. They don’t want to go through this again. So they are “saying” that this should do it as far as rate increases in the foreseeable future.  Who knows.  But one thing I think is for sure, and that is the cost of care is going to keep rising.  Without LTC insurance, and when most of your assets have been spent (money you could have left to your children) you will be put into a state-funded Medicaid nursing home.  And I know for SURE that is not where I want to spend my last days!

For those who are reading this and are concerned about the possibility of premium increases, I suggest looking into the combo policies that combine life and LTC insurance.  If you need care, your money invested in the life policy is leveraged up to pay for a lot more care than you’d get if you just kept it in savings. And if you don’t need care, your heirs will get an inheritance!

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