Aging Options

Rate Hikes Create a Long Term Care Insurance Dilemma

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Is long term care (LTC) insurance right for you? And more to the point, if your premiums rise, how should you respond – by cancelling your policy, adjusting it, or continuing to pay?

Because we work with seniors in helping them prepare for retirement, we deal with long term care insurance questions all the time. Increasingly, the second question – how to handle hefty premium hikes – has been coming up more and more frequently in our consultations with our clients. That’s why this recent article on the CNBC website caught our attention. While we may not agree with every point for every client, it’s well worth reading if you’re wrestling with LTC-related questions.

The article is titled “Less is more: the dilemma over long term care insurance.”  The subtitle puts a finer point on the question: “As rate hikes increase, older Americans weigh dropping their policies.”  More and more LTC insurance policy-holders, especially those who have had their policies the longest, are having to decide whether to hold onto their existing coverage in the face of rising premiums, or whether to reduce their coverage to keep their policies affordable – or drop their policies altogether and face the unknown expenses of nursing home or in-home care on their own. One 70-year old lady featured in the CNBC article has had her policy 15 years, during which time her premiums have risen twice. The increase totals about 30 percent. She’s decided to hang onto the coverage.

CNBC reports that there are about 7 million long term care policies presently in force nationwide, but the number of carriers has shrunk dramatically as many companies abandoned the business.  There are about a dozen LTC insurance companies today compared with more than 100 just over two decades ago. Experts say LTC premiums have gone up as the companies’ claims experience has changed, with higher expenses and low interest rates largely to blame. Coverage was generally better in the 1990’s: one comparison of average policies from the CNBC analysis shows that the average premium in 1990 was $1,071 compared with nearly $2,800 today. The average waiting period before benefits kick in has risen from 20 days to 93 days and the length of coverage – how long the insurance will pay for a nursing home stay – has dropped from well over 5 years to less than 4. Only in one area has coverage improved in the past 25 years: almost all policies now cover in-home care as well as nursing home care, reflecting the preferences of most seniors to receive care at home if possible.

So is this expensive type of insurance a good investment? Here’s what CNBC suggests. For those with estates valued at $300,000 or less, it would be better to spend down your resources and plan to use the Medicaid program for your long term care. By contrast, those with over $2 million in assets can probably self-insure by simply paying for long term care out of pocket. The vast remainder, people with estates in that large middle ground between $300,000 and $2 million, are the ones who may benefit the most from a long term care policy, says CNBC.

The article lists some strategies and suggestions you may want to consider should you be faced with a rate hike, especially if you find the increase making your current policy unaffordable. These are helpful tips. But our strongest conclusion as we read the CNBC piece is that you need objective advice from someone who is not selling anything. Asking a long term care insurance salesperson whether coverage is right for you is hardly the way to get unbiased advice. Instead we invite you to contact us here at AgingOptions. We will review your assets and your retirement plans and help you decide whether you need coverage and, if so, how much. We are also experts in the ins and outs of Medicaid and another government program you may qualify for, VA benefits. Deciphering these extremely important but complex programs requires the kind of experience and knowledge we have accumulated in many years of legal practice.

In fact, we can be your planning resource for all aspects of retirement: health, housing, finances, medical coverage and family issues. We can work with you to blend all of these critical facets of retirement into one document we call a LifePlan. Your LifePlan will help you protect your assets in retirement and avoid becoming a burden to your loved ones. It also answers questions raised by the CNBC article about long term care insurance and its alternatives. For peace of mind and security in retirement there’s nothing like a LifePlan. Find out more by attending one of our free, no-obligation LifePlanning Seminars soon. For dates, locations, times and online registration click on the Upcoming Events tab, or contact our office during business hours.

Don’t try to go it alone when making important decisions about retirement. We will consider it a privilege to guide you. We hope to see you at a LifePlanning Seminar soon.

(originally reported at

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