A growing number of clients who bought long term care insurance are receiving notices of significant rate increases – sometimes more than 70%. Unfortunately, insurance companies underestimated how fast medical expenses would rise and how many seniors would actually use their long term care insurance benefits. Clients who bought long term care insurance years ago are having to make some very difficult choices including possibly canceling their policies. Dropping coverage while sometimes necessary, is often the worst choice because a new policy (if you are still insurable) will likely cost much more than your current policy. If you should receive notice of a rate increase, here are some options to consider before canceling your coverage:
1. Keep the policy and pay the higher premium. If affordable, this is often the best option. If the reasons you purchased the policy in the first place are still applicable (i.e. you don’t want to be a burden to your children), then pay the higher premium.
2. Keep the policy and reduce the benefit period. If you can’t afford the higher premium to maintain your current coverage, lower the premium by reducing the benefit period. For example, if your current policy provides coverage for 5 years or more, you can reduce your premium by reducing the benefit period to 3 years (which is slightly more than the average long term care insurance claim).
3. Keep the policy and reduce the inflation rider. Many long term care insurance policies have an inflation protection rider whereby the coverage will increase by a set amount each year. If the policy has for example a 5% inflation rider, you can lower your premium by reducing the inflation rider to a lesser amount. This option is particularly appealing for clients who are age 70 or older and have had their policy for 10 years or more.
4. Keep the policy and reduce the daily benefit amount. If your long term care insurance policy provides coverage for up to $250.00 per day, or a similar amount, you can lower your premium by reducing your daily benefit to a lesser amount per day. Before choosing this option however, it is important to know the average daily nursing home cost in your area.
The long term care insurance industry is undergoing some drastic changes and many policyholders are facing some difficult decisions. To decide what is the best option for you, be sure to consult with an experienced elder law attorney today.