By Rosanne Rogé, CSA, RFG, CFP®
Unlike traditional health insurance, Long Term Care insurance is designed to cover long-term services and support, including personal and custodial care in a variety of settings such as your home, a community organization or other facility. There are a range of care options and benefits to select from, and the cost of the policy is based on many factors – such as your age at the time of purchase, and the maximum amount that a policy will pay per day. It’s also important to note that Long Term Care insurance is not just for the elderly. Car accidents or temporary health issues allow you to access your Long Term Care policy, provided that you are under a doctor’s care.
Why Are Rates Increasing?
Lately many policy holders’ rates have increased and there is much confusion about why the rate has gone up. Simply put, everyone’s premium is increasing because the insurance companies can only raise premiums for a class of insured. Some other factors propelling the increase include:
Low Interest Rates. Due to the low interest rate environment, the reserves from the premiums were not earning a high enough rate of return to support the current claims being paid. The interest earned on the premiums paid is credited to the reserves to payout claims. As a result, low interest rates are causing the premiums to go up.
Increased Life Expectancy. The Long Term Care policy holders are staying on claim longer and are using more of their benefits. Increased life expectancy is forcing the companies to pay out more in benefits than they previously anticipated for those claims. Essentially, people are living longer so they’re using the policies longer.
The Gender Gap. Women specifically are living longer. Women are in a class on their own and currently make up 70% of the claims. That’s why separate female rates are sometimes twice that for men’s – and that will be the case going forward. The women coming in today will pay more for the policies because the pool is being drained quicker than the men’s pool.
What Can We Do?
Long Term Care carriers are having difficulty receiving rate adjustments from some of the state insurance departments, and New York is one of them. Carriers are offering a reduction in the inflation factor rider by offering a 3.5% inflation factor, versus the original 5% option. This can keep the premium closer to what you are currently paying.
More importantly, if your policy has been in force for a number of years, you have already received the benefits of the 5% rider and a reduction to 3.5% may actually be a cost effective consideration.
Although the cost of receiving in-home care continues to rise, it’s rising at a more moderate rate of growth vs. receiving care in an assisted living facility. There are huge costs associated with not planning. It affects the family dynamic, can deplete hard-earned retirement resources, and places an unnecessary burden on the next generation. Long Term Care insurance is so important that R.W. Rogé & Company, Inc. provides it for employees, and offers personalized estimates of the premium to clients. We encourage and help clients to purchase Long Term Care Insurance to protect them, their family, and their estate.
If you have any questions about the rising rates or about Long Term Care in general, please don’t hesitate to contact us at 631.218.0077 or e-mail us at info@rwroge.com.
