About Long-Term Care Insurance Premiums
(2 of 6)
About Long-Term Care Insurance Premiums
There is probably no other type of insurance that has more variables directly affecting the price of a policy than long-term care (LTC) insurance. The good news is that it’s easy to understand how and why these variables work. As with all insurance, the more likely it is that the insurance company will have to pay benefits, and the more generous those benefits are, the higher will be the premiums.
Age matters most
The age of the policy applicant is the biggest single factor in determining the premium quote he or she will be offered. But LTC insurance is not cheap at any age.
Understand why premium increases might happen
Although LTC policies are designed so the premium remains constant every year, several companies have had to increase the premiums on some policies because the original rates relied upon predictions that proved to be inaccurate. Large and unexpected premium increases on entire groups of policies (primarily older ones) have been imposed on occasion. The chance of this happening with the insurance products sold today is greatly reduced due to the fact that insurance companies now have more experience than they did ten to twenty years ago.
Things To Know
- Although individual policyholders cannot be singled out for increases, insurers can get permission from state regulators for rate hikes on an entire group of policies if the increase can be justified.
- Virtually all LTC policies now are "guaranteed renewable."
Still, most policies have no price guarantee. Although individual policyholders cannot be singled out for increases, insurers can get permission from state regulators for rate hikes on an entire group of policies (all those sold in 1993, for example) if the increase can be justified to improve the financial soundness of the company.
Virtually all LTC policies now are "guaranteed renewable." As long as the insured pays the premium on time, the insurance company must maintain the policy in force without any change in coverage unless the insured agrees. As noted above, however, that premium can be increased across-the-board under limited circumstances.
About "limited pay" plans
For those who would prefer not to have an annual premium indefinitely, there are "limited pay" plans offered by some companies. The policyholder is given the option of paying a lifetime premium in ten or twenty annual installments. Some policies guarantee no premium increase during this period. With or without a guarantee, a limited pay arrangement is attractive to people who want to satisfy the LTC premium obligation within a known time frame—during their high-earning years just before retirement, for example.