A recent article in the Columbus Dispatch touches on the issue of Long Term Care Insurance rate increases and how they are affecting residents of Ohio. If you are one of the policyholders receiving a rate increase or you are thinking about buying a policy but are worried about a potential rate increase, there is some vital information that you should know.
Premiums Going Up
It’s true that carriers have been raising premium rates, in the last several years especially, but it isn’t without good reason. Long Term Care Insurance became available for purchase in the 1970s and since its inception, the insurance climate has dramatically changed.
When insurance companies first made their assumptions, they were based on mortality, morbidity, and interest rates at the same. Because all of those influencing factors have changed so much, premium rates have changed, too. If you are one of the 260,000 individuals in Ohio who have a Long Term Care Insurance policy, it helps to know why rates are being raised.
Why the Increase?
Not only are people living longer, they are also using their policies at much higher rates than the insurance companies expected. On top of that, fewer people are letting their policies lapse, because they recognize just how valuable they are. Yet another issue is that the interest rate has been forced so low that insurance companies aren’t getting good returns on investments and therefore have to raise premium rates in order to make up for all of these incorrect assumptions.
“This is a marketwide problem,” said Carrie Haughawout, assistant director for policy and product coordination at the Ohio Department of Insurance.
Many of the smaller, lesser-known carriers have left the market because they were unable to remain financially solvent amongst all of the changes. In 2013, 45 companies were actively marketing Long Term Care Insurance policies, down one-third from 2003. While this may seem like a bad thing, that’s not necessarily the case.
The companies that are left in the market are the solid, reliable, larger companies who are able to continue selling policies by adjusting for their previous assumptions. Some of these companies are actually losing money on older policies because the claims rates are so high and care has become so expensive. That’s how much benefit these policies provide to claimants.
What to Do
If you have been hit with a Long Term Care Insurance rate increase, don’t lose your cool just yet. You have a number of different options.
First, you should call your agent and speak with them about the choices you have. If you can afford to take the rate increase, we suggest you do it. As mentioned, these policies hold a tremendous amount of value, which is the reason companies are raising rates in the first place. Seriously think about whether or not you can absorb the extra premium rates and if you can, take that route.
Nearly all of the time, when you are notified of a rate increase, you have the option to reduce your coverage in order to continue paying the same amount. If you are unable to afford the full increase, this is your best option. It doesn’t make sense to throw away a policy that you have paid for before you may ever need care and chances are, you will regret doing so later down the road.
Don’t Start from Scratch
The chances of needing long term care are an estimated 7 in 10 for all Americans over the age of 65. Granted, not all of those people will need care for an extended period of time, but they will need care. Cancelling your policy puts you right back at square one, where you are financially vulnerable to the high cost of care, and even worse, out thousands of dollars from paying premiums. So before you let your policy lapse, think hard about whether or not you can afford to self-insure for long term care.
If you are in the same boat as most Americans, chances are you can’t without putting your hard earned savings at risk. Although 45 companies are left in the Ohio market, there are really only about 10 that are worth looking at. We help our clients navigate the top 5 or 6 companies to give them a good idea of different carriers, policies, and benefits, all while being able to compare prices and financial ratings.
To find out more about policies and get a free comparison, request a quote today.