As an advisor, I help people address the risk of having all their retirement savings drained paying for long-term care. And since the government has found that 70 percent of those over 65 will have a need for long-term care at some point, its an issue that touches most. This is the focus of my practice: I help people insure against that risk with long-term care insurance.
What I learned recently is that one of the insurance carriers is going to be raising its premiums for long-term care insurance by 40%. And while the number40%is in itself scary sounding, there is something even more troubling than that. Once people hear this piece of information, they may drop their coverage or those who dont have it may decide they dont want it.
I want to emphasize that this increase is just that, a piece of information. What really went on behind the scenes is that this insurer did an extensive study of its long-term care insurance claims and found that there had been a steep rise in claims in recent years and will be raising premiums to keep its promises to its policyholders in the future.
If this information takes policyholders by surprise, it shouldnt, and I would place some of the responsibility on their agent or advisor. Just like health insurance and homeowners insurance and car insurance, rates for long-term care insurance are subject to change. It is the agents or advisors duty to make that very, very clear to the policyholder before they sign their policy.
As to the next step for these long-term care insurance policyholders and those looking into getting this important coverage, my advice is to take a deep breath and look at the full picture. Rates are going up on older policies that were issued before comprehensive data had been gathered on this market and product. Premiums on these policies are low in comparison with what policy premiums actually are today. And for those faced with the rate increase of this particular company, it has offered an alternative to keep premiums the same, by adjusting the policys inflation feature moving forward.
My bottom line advice is to think long and hard before getting rid of your long-term care insurance coverage. In my book this isnt really an option. In fact, it would be a big mistake to fail to insure against a risk that could cause you and your family financial ruin. And for those of you considering it, I would keep this in mind. Would you rather make a small mistake and perhaps be faced with a premium increase 10 years down the road? Or, would you rather make a big mistake, and ignore the issueuse it as an excuse not to do anythingand let your family face the physical and emotional consequences of your lack of planning?
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