Can my Rates Go Up?
Throughout occasions and most commonly long ago, miscalculations by insurers have led to increased premiums for long-term care policy holders. Although not as common now, if you’ve purchased long-term care insurance a while ago, you have probably by now been hit with some sort of rate increase. The reason for this that most of these policies purchased long ago were severely underpriced due to mis projections on the insurers part. More policholders than expected held on to their policies and made claims, resulting in higher claims costs that insurers did not account for. Another factor were the low interest rates faced in 2018 which yielded lower profits for insurers investments. So you’re telling me my rates could go up at any point?
Yes and no, it’s important to note there are way to be to better understand and mitigate your risk for this. You should note that insurrers can NOT simply raise your rates just because they would like more money and they can not just do so whenever they would like. In order to raise your rates insurers must first get approval from state insurance regulators. The state insurance regulator can either deny the request altogether or also counter with a lower rate approval than requested by insurers. Regulators are there to help ensure that any and all rate increases are valid and also to ensure that insurers will be able to afford all future claims as necessary. Rate increases can be necessary to account for mis projections, insurers need to make sure they can afford to payout the actual number of claims made by policyholders.
What Should I do In The Event of a Rate Increase?
In the event that you are facing a rate increase do not panic. You will get a letter notifying of you an upcoming rate increase, effective date, and rate increase percentage. If you can afford the rate increase it is recommended you keep your policy in place as is. Many carriers will also extend you the option to lower your premium by reducing your coverage, if needed. If the rate increase is wreaking havoc on you budget here is what you may be able to do to help lower costs:
- Decrease inflation protection
Inflation protection accounts for the % your benefits will increase each year to help prevent against inflation costs.
- Decrease daily benefit amount
Daily benefit amount accounts for the maximum amount your insurer will pay for care each day
- Increase elimination period
Elimination period accounts for how many days you pay for care before your policy kicks in and starts payouts. Note the longer elimination period, the larger out of pocket cost for you outside of your policy
- Decrease the benefit period
Benefit period accounts for the number of years your policy will pay for you long-term care
The options available to you will vary dependent upon your individual policy and insurer. You should also note that dropping your current policy and shopping a new one is typically never a good idea. The reason is you are likely now much older meaning your new premium for said new policy will likely also be much higher. Consider weighing your options with your financial advisor to devise a strategy that will work best for you. Although there is no guarantee that your long-term care insurance policy rates will remain the same and untouched by rate increases, the risk of facing no coverage when you need it may be far more riskier and costly. You should also note that today’s policies are priced more accurately to help deter against this and you can even look at an insurers history for rate increases before electing one.
If you or someone you love is interested in Long Term Care or Long Term Care Insurance be sure to visit: LTC TREE for more information.