Where are LTC Rates Headed?
Strategies for hedging the risk of Long Term Care premium increases.
A few things in life are certain: death, taxes, and possibly inflation. Everything seems to increase in price as time goes on. Long Term Care Insurance is a little bit different. While the companies reserve the rights to increase premiums in the future, not all have. And some carriers, in fact, project future dividends that can actually offset premiums. So while there are rate increases in some carriers’ pasts, others actually have reduced premiums for their policyholders.
Rates with some carriers have risen. Others have fallen.
The reality is, Long Term Care Insurance has been around since 1974, and the companies are always improving their actuarial tables to reflect claims experiences. This is a good thing for you as a buyer because they are able to predict the risk with more accuracy and, in theory, keep premiums more stable.
Buy From Companies With Experience
Buying Long Term Care Insurance from a company just beginning to sell the product may not be a good idea. Until a carrier has seen actual claims data, they may have trouble assessing the risk properly. After all, actuarial types with the government can’t even keep Social Security solvent. Just as, in the 60′s, the government screened Medicare/Social Security wrong, new insurers may not screen buyers properly and take on too much risk. Buy from a company that has been selling Long Term Care lines for at least 15 years, if possible.
For example, Genworth is the oldest Long Term Care Insurance company; and since 1974, in that 37 year period, has had to increase premiums twice, only modestly. Several of the “newbie” AAA rated carriers tout no rate increases, yet have not been selling policies long enough to see peak claims and hence need increases. Genworth’s first rate increase was nearly 33 years after they sold their first policy.
Buy From Financially Sound Companies
Most all insurers reserve the right to increase premiums, and even A+ rated carriers can raise rates, so the link between financial stability and rate increases is not as strong as it once was believed to be. There are some things to be aware of though.
Even the big companies can and will raise rates, but typically the companies who have experience and solid financial ratings will raise rates less dramatically than the smaller carriers with worse financial rankings.
View a comprehensive list of rate increases at the Texas Department of Insurance. We find this resource to be quite accurate and relatively up to date for many carriers.
Click here for Rate Increase Histories. (TX) California version of similar list. (CA)
At LTCtree we work with all the major “blue chip” Long Term Care Insurance companies, and have an understanding of the rate increases history of all the carriers and will lay that info out for you to judge for yourself which company you’d like to instill your trust in.
Strategies to Eliminate Rate Increase Risk
There are several popular ways to completely remove any risk of future rate increases. Several companies, including Transamerica, sell a “one pay” single-premium Long Term Care policy where you make one (substantial) payment and enjoy lifetime coverage with no chance of a rate increase. Alternatively, buy a 10-year pay plan and combine that with a 10-year rate guarantee. Transamerica is the only carrier that offers the combination of 10-pay and 10-year rate guarantee, and it’s not available in all states.
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