HELP! The premium just increased for my LTC insurance
Have you recently received a letter announcing a price increase on your LTC insurance? It probably offered to mitigate that price increase if you would just lower the daily (or monthly) amount the policy pays when you need care. Or perhaps it offered another option of lowering the rate at which your policy keeps up with the ever increasing cost of care.
Before you choose one option over another it might be wise to consider how much coverage you need, and then compare that to where your policy currently stands in how much it will pay. Most people do not need as much coverage as they might initially think. When somebody needs LTC services, their lifestyle changes. Vacations that were fun might now be burdensome. Toys such as the boat, camping trailer, motorcycle might no longer be used and thus no longer fed, gassed up, or insured.
Taking this into consideration you might consider how much of your income can go toward the cost of care. If you are not using your nest egg for current income, and wish to preserve the principal, you might add in the available interest you can pull from it.
This will give you an idea of how much you can contribute towards the cost of care with the shortfall coming from the insurance policy. Do you want to be able to cover the cost of a nursing home, or just the cost of an assisted living type of facility at half the cost? Home care can be any price, but if a lot of it is needed perhaps a facility might be less expensive and includes more social interaction as well.
Just because the LTC insurance company gives you 2 choices, does not mean you can’t chose something different. It might be far better to have enough cash-flow to pay for 4 years of care, than insuffiicient cash-flow for 8 years. You can call and ask the company to compute what your premium might be with a shorter benefit period. You might also consider having just enough insurance benefit so that with your available income you can cover home care or assisted living, and plan on Medicaid for help if a nursing home is needed.
One of the reasons the price increases have happened in the past few years is that the insurance industry, as a whole, is earning about 3.2% interest on their assets, while guaranteeing you a 5% compound increase every year on your daily or monthly benefit. If interest rates increase to what we consider normal, this pressure on rates will likely diminish.
It is also possible to look at replacement coveraqge, but considering your older age, and what your policy benefit has grown to with the inflation option, a new policy would likely much more than your current coverage, even with the price increase. A visit to a local expert on LTC insurance for guidance might be the best place to start.
