Long Term Care Insurance Rate Increases

Dollars and Sense for Long Term Care Insurance

Dollars and sense of long term care insurance

Don’t You Just Hate That?

I went to my favorite gas station the other day (you know the one….where you can actually get in and out around the traffic light AND it has enough pumps that you aren’t waiting AND it is well lit so you feel safe at night?).  Much to my horror the price of gas had gone up again.  My car’s tank used to cost me $30 to fill – after driving this car for nearly 8 years, it now costs nearly $50 to fill.  Yes.  I do drive my cars until the wheels fall off.

So I wasn’t all that happy.  But I have circled around this old sun many times now.  I can remember when gas was $0.30 a gallon and the tank would have cost $4.5 to fill.

Nothing – but nothing – stays the same price for 25 or 30 years.  From coffee to gas to electricity to insurance.  Each year inflation creeps its way into our buying power.  And I have to tell you, if you buy a long term care insurance policy it is very likely to have a rate raise over your 25 or 30 years of ownership.  I wish I could tell you otherwise – and frankly, we DID tell people that once upon a time in this industry.  But these days, when people buy a long term care insurance policy my standard warning is that they will probably see a rate hike at some point in the many years of ownership.

Just remember these things:

  • Long Term Care Insurance is still cheaper than paying the full cost of care out of your own pocket – even with a rate raise. The typical break even window for someone who buys in their 50s is 5 to 7 months of care.  If you are in care for more than 7 months, the policy is going to pay more for your care than you paid for the policy.
  • Buy smart – remember that the upper threshold on premiums should be either 7% of income or under 2% of net-worth of your investments. If you buy smart, you should be able to comfortably hold on to it even though the price goes up.
  • The price uptick has been approved by your insurance commissioner – this regulatory oversight means the carriers have to prove they need the rate uptick to keep paying claims as you age. Without the price increase, the carrier couldn’t pay claims.  So this isn’t a ploy to garner MORE profit margins – it is a necessary adjustment which is overseen by regulators to be sure they will be solvent down the road when you need them.

I hate it when the price of things creeps up on me – or jumps up.  But understanding why it is occurring softens the blow.  Mostly though, it is good to know that I bought smart when I bought my long term care insurance policy.  I hope you did too.


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