Most Elder Law Attorneys 'Walking the Walk' on Long-Term Care Insurance
An ElderLawAnswers survey of elder law attorneys finds that most have long-term care insurance . . .Read more
Editor’s Note: Reprinted by permission of retirementrevised.
If you have long-term care insurance, brace for the possibility of a steep increase in premiums this year. Some of the largest long-term care (LTC) underwriters are asking state regulators for large increases on some policies this year.
The current ultra-low interest rate environment is a key reason for the rate hikes. Low rates have cut sharply into the investment earnings that insurance companies depend upon to fund benefit payouts. Investment returns fund up to 60 percent of the funds used to pay benefits, according to the American Association for Long Term Care Insurance (AALTCI).
Another factor is the rising longevity of policyholders, and their tendency to hang on to their policies. Insurers expect a certain percentage of customers to drop their policies before they ever draw benefits and that's not happening in the case of LTC policies.
Investment News magazine reported recently that rate hikes are being sought by Prudential Insurance Company of America, Met Life Inc. and John Hancock Life and Health Insurance Co. The increase requests -- which won't cover all of the companies' policies -- range from 18 percent to 25 percent.
Notably, Hancock plans to raise premiums by up to 25 percent on policies held by up to 140,000 federal employees under age 65, according to the trade publication. MetLife -- the only insurance company to respond to my inquiries -- said it initiated the rate hikes in 2008, and has received approval from 41 states, with most of the increases set at 18 percent. In most cases, no rate increases have been put through for policyholders who were age 70 or older at the time the policies were sold.
LTC coverage can help protect you and your family from the potentially ruinous cost of care. The Urban Institute estimates that 25 percent of people over 65 will need help for an extended period of time with some aspect of basic personal care -- bathing, eating, getting in or out of bed or dressing. The average annual rate for a home health aide is $27,000, and the average semi-private nursing home rates are $72,270 per year, according to the Metlife Mature Market Institute.
If you do have LTC coverage and find yourself facing a big rate hike, here are some key questions to ask as you consider how to respond.