Major carriers in the long term care insurance market who have long prided themselves on stable rates have recently begun to increase the rates of their policies. Two years ago, John Hancock insurance company proposed to increase their rates at an average of about 40%, however; some policyholders will be experiencing an increase in rates up to 90%. Other insurance companies have followed suit including Genworth and MetLife. The premium increase was attributed to the notion that the anticipated health care claims would surpass the amount of money brought in to the companies by the original premium rates. The expected increase in claims is largely due to the aging of the baby boom generation and because Americans are living longer and therefore requiring further health care.
If you are someone who has been issued a higher premium rate, The Journal of Financial Planning says that you have five options:
1. Keep the policy as-is and just pay the new premium
2. Keep the current premium and reduce the policy’s daily benefit amount to the extent necessary to bring benefits in line with cost (for example, from $250/day down to $200/day)
3. Keep the current premium and reduce the policy’s benefit period to the extent necessary to bring benefits in line with cost (for example, from a five-year benefit period down to four years)
4. Keep the current premium and reduce the policy’s benefits inflation rate (if the policy included an inflation rider) to the extent necessary to bring benefits in line with cost (for example, from a 5 percent inflation rider down to a 3.5 percent inflation rider)
5. Cancel the policy.
Each of these five options has different implications so it is important to think it through and do a formal assessment before committing to any decision. Tully & Winkelman, P.C., is available to help you assess what option is best suited for your situation. If you have any further issues or concerns we encourage you to contact our office at 631-424-2800 to discuss how to best handle your plan.
The following article speaks about the pros and cons to each of the options:
Journal of Financial Planners: