Long Term Care Insurance Update

Before you place thousands of premium dollars and even greater benefit amounts at risk, the following is a must read…

Many long term care insurance carriers are raising their rates and may impact your coverage. The information below will help you better understand the current long term care insurance marketplace.

What happened?

Actuaries who initially designed long term care insurance pricing, underpriced the coverage, resulting in current rate increases for existing policyholders of non-guaranteed policies.

Why did it happen?

Two reasons. One, actuaries initially priced long term care insurance policies based on incorrect models. As our population aged, claims and expenses became greater than premiums and revenue. This unprofitable imbalance has required premium increases and/or benefit reductions for many existing policyholders.
Two, in this low interest rate environment, carriers have been unable to generate adequate returns on invested premium dollars in order to remain profitable. That gap between projected earnings and actual earnings is being closed through premium increases and/or benefit reductions.

What can you do?

Your existing carrier will give you options including (but not limited to):
  1. Paying the increased premium with no assurance that the carrier won’t require another premium increase in the future.
  2. Accept a “reduced benefit policy” by forfeiting selected policy benefits such as,
    • Reduce your “per day” pool of money from which the policy pays for your care.
    • Eliminate the “cost of living” rider that keeps your purchasing power consistent with inflation.
    • Request a “reduced paid up” policy that lowers and then freezes your benefits and eliminates your premiums.
  3. Have your policy carefully reviewed for the policy features and riders that can be amended or eliminated.

Are alternative policy options available?

Yes. A handful of carriers have re-designed long term care insurance policies to provide guarantees of the premiums and benefits, provide the contractual right to designate any unused benefits to a named beneficiary in the form of a death benefit and under certain circumstances, guarantees a partial or even full refund of your premium should you later decide to cancel your coverage. No more “use it or lose it” policies, no more surprise rate increases. Insist that your agent presents these options to you. To not consider a guaranteed policy is to accept expensive unknowns and unnecessary financial risks.

Can I switch from a non-guaranteed policy to a guaranteed policy?

Underwriting for insurability is required but can be completed on a no cost, no obligation basis. To explore these options, leave your checkbook at home.
Information and perspective provided by JNBA strategic partner Tamar Fink.