So How Good An “Investment” is That Long Term Care Policy?

Remembering that we hope to live a long life and never really need the benefit of the coverage it is still a fantastic risk management tool. In recent years we have seen insurance companies either discontinue offering new applicants coverage or offer it at significantly higher rates. In a nutshell, the product appears to have been underpriced – and quite likely may still be.

Partly due to improved longevity, and partly due to low return on investments (principally bonds) that insurance companies expect, another Long Term Care insurer has announced another price adjustments to its long-term care product. These changes affect only new applicants and not existing policy holders. This has been a common trend among Long Term Care insurers and the below changes being made by one major insurer are quite typical of what we see from others.

For this insurer the following changes will take effect on September 25, 2012 in all but 15 states (expect the changes to be rolled out in the remaining 15 states in a matter of months):

• A 15-percent increase on all premium rates (new business only)
• Preferred health discount, applicable to single applicants, reduced from 15 percent to 10 percent (This discount is already 10 percent for couples, and that rate will not change.)
• Couples discount reduced:
  

   
• Both spouses approved: Discount will be 20 percent instead of 30 percent
• Married spouse not applying: Discount will be 10 percent instead of 15 percent

Additional changes— On September 25, the following changes will take effect in all states except New York:

• Sale of limited pay options (i.e., single-pay, 10-pay, and pay-to-65) suspended
• Sale of the lifetime (unlimited) benefit period suspended

The theme here is higher pricing by as much as 31% through premium increases and the reduction in discounts as well as more restrictive coverage and payment options. This price increase is on top of the higher cost that one might expect to pay by delaying to begin coverage for one or more years.

So, congratulate yourself for putting coverage in place for yourself, look more favorably upon your now relatively modest rate for that existing coverage, and advocate coverage to your friends and family – especially those with less than $3,000,000 in invested assets whom you may become the caregiver too if/when they need care.