Why Switching Policies After a Long Term Care Insurance Rate Increase Isn’t a Smart Choice
Published On: January 15, 2014
Last Updated: September 2, 2023
If you are among the adult Americans who own a long term care policy, then chances are you have received notice of a long term care insurance rate increase sometime in the past few years. Like many others, you might be wondering if it’s even worth it to keep your same policy or if you should switch to a new carrier. A recent experience with a client provided a great example of just why you should stop and do your research before dropping your long term care insurance policy.
Comparing the Costs
Stephen and his wife live in New Jersey and after evaluating all of their options, decided to purchase a long term care insurance policy. After buying in 2001, they paid $3,800 in premiums every year. Their specific policy included a $150/day benefit, an unlimited benefit period, and 5% compound inflation protection.
Recently, the couple was hit with a 60% long term care insurance rate increase and were unsure what to do next. Understandably frustrated, they didn’t want to pay the new premiums but understood the importance of having long term care coverage. Stephen contacted us asking whether or not he could switch carriers and find a new plan for a better deal.
After running the numbers and re-calculating the best deal he could get for a similar plan, we found out what he would pay if he switched plans. Because his $150/day benefit is now worth $270/day, it would be in his best interest to find a comparable benefit plan. Because unlimited benefit period policies aren’t sold anymore, the maximum period he could get is 10 years. With 5% compound inflation protection, the cost of a similar policy for Stephen and his wife would now be $27,500 in premiums annually.
Should I Switch?
Because age and health have such an impact on policy rates, switching plans later down the road usually isn’t the best choice, because it’s highly unlikely you will be able to get the same benefits for a lower price. As you get older and your health declines, you pose a significantly higher risk to the insurance company, which is reflected in your rates.
Though it might be upsetting to get a long term care insurance rate increase notice in the mail, if you can afford to hold onto the policy and pay the new premiums, chances are it will be worth it. Another option is to reduce your benefits to avoid such a steep increase, which is a good choice for those who simply can’t afford the new rates. Switching policies, though, is not a smart decision.
Stephen’s situation also speaks to the importance of buying a long term care insurance plan early. Waiting to buy will only cost you more because plans just get more expensive with age. If you have been going back and forth about whether or not to buy, keep in mind that waiting will only raise the price that you pay for a policy.
If you are interested in learning more about long term care insurance, fill out this form and we will be in touch with you shortly to discuss your options. We will send you a no-cost comparison of the top carriers and policies for you to review at home on your own time. At LTC Tree, we work to provide you with the detailed information you need with no pressure to buy. Read more about the reasons people need long term care or fill out the form to get your personalized quote.
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