LTC insurance premium "surprise"

[razztazz]

My fear is that as I grow older I will be literally priced out of the market about the time I am most likely to need the insurance.

That's probably how the things are priced in the first place.

 

[Sunset]

Update to this old thread.

Two years ago we were notified of our first premium increase:

Today we were notified our LTC insurance premiums were going up another 30%. That's a increase of 95% in rates during the 16 years we've had the insurance. The premium for each of us is now $1,138, a compound increase of 4.3% per year.

Edit: Note the policies have a 5% per year inflation rider, so the increase in benefits continues to exceed the increase in premiums - FWIW.

I have questions/concerns as to the inflation rider:

1. perhaps only kicks in once you start collecting on the policy ?
2. If applies each year of policy from the start would be good, but probably is limited to CPI and not automatic 5% (so last 2 years would total 1.5% inflation).

If it really was 5% per year, then if I bought a 200K policy ten years ago, wouldn't I consider it a 325K policy now ? (approximate number).

 

[REWahoo]

My fear is that as I grow older I will be literally priced out of the market about the time I am most likely to need the insurance.

That's probably how the things are priced in the first place.

I view LTC insurance much like term life insurance - and I think of the economic value in much the same way. I'm willing to pay the premiums now as a prolonged stay in a care facility and the resulting hit to our financial well-being would likely be more severe the younger we are. The older we get (and the shorter our remaining lifespans) the less we will need in our nest egg - thus we may be OK dropping the coverage in a few years and self-insuring.

 

[REWahoo]

I have questions/concerns as to the inflation rider:
If it really was 5% per year, then if I bought a 200K policy ten years ago, wouldn't I consider it a 325K policy now ? (approximate number).

^ This

The initial maximum policy benefit was $109,500 (May of 2000). The maximum benefit "...will be increased by 5% of the limit in effect on the previous anniversary date." The policy will now pay (effective May 2016) a maximum benefit of $239K.

That was the point I was making regarding the fact that while the premiums have increased by 95% over the past 16 years, the benefits have gone up 118%.

 

[mathjak107]

we need at least 120k a year in our area and that is today . 20 plus years from now who knows what it will be .

we took 300 dollars a day for 3 years with a 5% inflation adder each year .

i am 63 and wife 65 . we took it two years ago and pay 7900.00 a year for both of us but we have a ny partnership plan which has other great perks when the insurance runs out . we also get back up to 1600.00 from the state as a tax credit .

 

[ziggy29]

That was the point I was making regarding the fact that while the premiums have increased by 95% over the past 16 years, the benefits have gone up 118%.

Fair point, but you should have already paid for the inflation adjustments when you selected a policy with inflation protection which can cost several times more in premiums than one with no inflation rider. That cost should have already been "baked in" to what you were paying from the get-go.

So really you are paying 95% more.... but you probably paid at least twice as much per month as one with no inflation coverage so in some sense you are paying at least 290% more than one that had no inflation coverage at the original benefit amount 16 years ago.

 

[mathjak107]

all our state partnership plans require at least 5% inflation adjusting . you can't buy one with out it .

 

[ziggy29]

all our state partnership plans require at least 5% inflation adjusting . you can't buy one with out it .

OK, but that said, isn't it still true that when you purchase a plan with inflation adjustments, the projected cost of the inflation adjustments should have already been factored into the premium from Day One?

Until these products can be stabilized to stop creating massive increases on "locked in" rates, I can't get myself to consider one.

 

[REWahoo]

Until these products can be stabilized to stop creating massive increases on "locked in" rates, I can't get myself to consider one.

I can understand that - buying LTC insurance today is a real crapshoot.

One point of clarification. The rates for our policies were never advertised as "locked in" and we understood the rates would almost certainly increase over time. We had a 10 year guarantee of premium and didn't see our first increase until year 14.

We are going to keep the policies for now because even though our two rate increases have been jarring, the premiums are still on the low side. We have similar coverage to mathjak (3 year policies with 5% inflation) and our combined annual premiums are now $2,276 vs his $7,900. That seems to be a bargain by comparison.

 

[Chuckanut]

FWIW, according to today's WSJ Mass Mutual is asking for a premium increases on some of its LTC policies that average 77%.

I get the impression from the article that the increase is on about 2/3 of their policies and seems to be on older policies that were issued before the company realized that it had under priced the policies. Apparently, Mass Mutual has been better able to absorb the costs than some other companies, but now they don't see that continuing.

Note: the link below is behind a pay wall.

https://www.wsj.com/articles/massmu...tes-1526415144?mod=searchresults&page=1&pos=2

The potential increases would apply to about 54,000 of its 72,000 long-term-care policyholders, the company said. In total, the insurer is asking state regulators to approve increases averaging about 77% per customer, a company spokeswoman said.

MassMutual said the increases would apply to its “earlier policy series,” some of which have lifetime benefits that are no longer sold. Policyholders will have options for holding down an increase. Typically, insurers allow consumers to give up features such as inflation adjustments or otherwise reduce benefits.

Of course, the various states have to approve the increase.

 

[brewer12345]

The MassMutual action is not particularly surprising. LTC insurance should be renamed: BOHICA.

 

[ncbill]

Yeah, if you didn't buy (before 1995) one of those legendary can-never-increase-the-premium John Hancock LTC policies there isn't much that makes sense out there.

 

[Taxman59]

DH and I bought LTC policies in 2003 from MetLife. $100 per day, 5% compound annual increase in benefit, no cap on benefits. I paid $5k per year for 8 years, then 7.5k for 2 years. After 10 years, NO MORE premiums! After the last premium was due, I was notified that the next premium would increase 45%. I laughed since the contracted premium was $0 so I would pay the 45% increase on $0!
These 10 pay policies are no longer issued, the 5% compound growth is now 3% on new policies and there is a lifetime cap on benefits for new policies, so I got in just under the wire!

 

[Mark24609]

Yeah my wife has LTD insurance. I wonder if it’s worth it since they can increase premiums at their whim

 

[jimandthom]

Yeah, if you didn't buy (before 1995) one of those legendary can-never-increase-the-premium John Hancock LTC policies there isn't much that makes sense out there.

This is the type of policy that DH has as did his parents. Purchased around 1990.

Difference is Mutual of Omaha not JH. Its a 100 per day equaling 5 years with a 30 day wait. Comes in at 15 per month.

Wish we knew then about LTC what we know now and would have bought more.

 

[Brat]

DH and I purchased a paid up in 10 LTC policy from Allianz in 1998 with a 5% compound annual increase. Smart purchase at the time assuming they will pay out when we need the benefit.

 

[capjak]

There are only 2 companies that offer LTC unlimited lifetime benefits now.

One America (hybrid) and National Guardian Life (traditional insurance). One America Asset Care has 1 premium, 10year, 20 year or lifetime with guaranteed no increase but it is pricey as is NGL.

 

[REWahoo]

Once again, I'm updating this old LTCi thread after receiving notice of a premium increase of 64%. This follows an increase of 50% in 2014 and another 30% in 2018.

Our annual premium for each of our policies started at ~$600, increased to $875 in year 14, then to $1,175 four years later. This increase will bump the annual premium to $1,870. (The details of the policy coverage can be found in previous posts on this thread.)

One option I have is to drop the 5% compounded annual benefit increase, locking in the current maximum benefit amount at its current $290,000 ($265/day x 3 years). This would drop the annual premium from $1,870 to $570. While this is tempting, the new $1,870 premium doesn't seem unreasonable when compared to some of the other amounts I've seen quoted for similar coverage.

I'd be interested in hearing what others have to say about what they would do - and yes, I know many of you would never have taken out the coverage to begin with.

 

[braumeister]

I think $295/day is probably pretty close to the actual cost today. So it would boil down to what you think inflation will look like and how much of the cost you could afford to shoulder without the coverage. Not an easy one.

 

[easysurfer]

Once again, I'm updating this old LTCi thread after receiving notice of a premium increase of 64%. This follows an increase of 50% in 2014 and another 30% in 2018.

Our annual premium for each of our policies started at ~$600, increased to $875 in year 14, then to $1,175 four years later. This increase will bump the annual premium to $1,870. (The details of the policy coverage can be found in previous posts on this thread.)

One option I have is to drop the 5% compounded annual benefit increase, locking in the current maximum benefit amount at its current $290,000 ($265/day x 3 years). This would drop the annual premium from $1,870 to $570. While this is tempting, the new $1,870 premium doesn't seem unreasonable when compared to some of the other amounts I've seen quoted for similar coverage.

I'd be interested in hearing what others have to say about what they would do - and yes, I know many of you would never have taken out the coverage to begin with.

I've been down a similar path til this year said enough is enough. Just feels wrong to chose between paying more or getting less coverage. I'll take my chances for now.

 

[audreyh1]

Once again, I'm updating this old LTCi thread after receiving notice of a premium increase of 64%. This follows an increase of 50% in 2014 and another 30% in 2018.

Our annual premium for each of our policies started at ~$600, increased to $875 in year 14, then to $1,175 four years later. This increase will bump the annual premium to $1,870. (The details of the policy coverage can be found in previous posts on this thread.)

One option I have is to drop the 5% compounded annual benefit increase, locking in the current maximum benefit amount at its current $290,000 ($265/day x 3 years). This would drop the annual premium from $1,870 to $570. While this is tempting, the new $1,870 premium doesn't seem unreasonable when compared to some of the other amounts I've seen quoted for similar coverage.

I'd be interested in hearing what others have to say about what they would do - and yes, I know many of you would never have taken out the coverage to begin with.

Honestly $1,870 annually seems cheap to me.

 

[ziggy29]

Honestly $1,870 annually seems cheap to me.

Barely over $150 a month. I don’t think I could get a quote for both of us for that, at least with inflation protection, and we are still in our early 50s. I think it shows how badly they underpriced that policy to begin with.

 

[REWahoo]

I've been down a similar path til this year said enough is enough. Just feels wrong to chose between paying more or getting less coverage. I'll take my chances for now.

I didn't mention I was offered one more option - stop paying premiums and receive a "paid-up" policy with benefits equal to 150% of the total premiums paid to date. At the current rate of approximately $260/day, the policy would pay for a 90 day stay (actually, with the 90 day elimination period it would pay for the second 90 days of a 180 day stay).

Even with the big rate increase this isn't a tempting offer.

 

[REWahoo]

Honestly $1,870 annually seems cheap to me.

Barely over $150 a month. I don’t think I could get a quote for both of us for that, at least with inflation protection, and we are still in our early 50s. I think it shows how badly they underpriced that policy to begin with.

For clarification, $1,870 is the premium for each of us, $3,740 for both. However, I've seen some numbers which lead me to believe even after these three huge increases the premiums are still low (yes, it does appear the insurer underpriced the policy by a large margin). One example from four years ago for a policy with almost identical benefits:

we took 300 dollars a day for 3 years with a 5% inflation adder each year .

i am 63 and wife 65 . we took it two years ago and pay 7900.00 a year for both of us

 

[Corporateburnout]

While this is tempting, the new $1,870 premium doesn't seem unreasonable when compared to some of the other amounts I've seen quoted for similar coverage.

As a point of reference, my annual premium is $1960 since I purchased the policy 8 years ago. The policy is for 3 years and it pays $275/day with a 3% compounded annual increase. So I don't think your premium is unreasonable.