We begin with the story of a 66-year-old customer with a problem that’s quite common today: the cost of her long-term healthcare coverage is continually on the rise.
Over the last six years, her yearly premium has risen 60%: in 2013, she paid $1,626; last year the same insurance cost her $2,721.
The is some good news: the client was able to make the higher payments and hang onto her vital policy. Her financial adviser was happy with this – the policy is a good one, he notes, and LT coverage is vital for the aging population. Still, premium boosts are always tough to manage, particularly if the subject lives on a limited income.
Major insurers are all raising their premiums, but people tend to hold their policies if at all possible. The cost of long-term care is already high – a private room in a nursing facility can set you back more than $100,000 per year – and the trend points to steady, upward growth.
People holding their policies might sound positive for the insurers, but in many cases their payout calculations were based on attrition rates that aren’t being met. Payments by insurers are therefore higher, in many cases, than forecasted.
This difficult environment for insurers is compounded by stubbornly low interest rates, which are dragging on their investment returns and profitability.
Most advisers counsel keeping long-term policies regardless of premium hikes. No one likes a price rise, but in most cases, specialists say, the burden is manageable. Policies can often be adjusted in order to cut the premium, while maintain the fundamental value of the insurance. For example, paring down the daily benefit payout or cutting the benefit period can both help save on premium payments.
For more information, please read:
Long-term care insurance costs are way up. How advisors can help clients cope | CNBC