Long-term-care policyholders should be prepared for a rate
increase of 20% to 30% every five years, says John Ryan, of Ryan
Insurance Strategy Consultants, in Greenwood Village, Colo.
Planning for price hikes is a good way to estimate how much you can
afford to pay for a policy, even if rates don't end up rising at
A New Strategy for Paying for Long-Term Care
If your insurer notifies you that rates are going up, you don't
have to pay the higher premiums. You can usually shrink the benefit
period or the amount of the daily benefit, extend the waiting
period, or lower the inflation protection. John Hancock, which
announced rate increases of up to 90% two years ago, kept rates the
same for policyholders who reduced the 5% inflation protection to
3.2% or 2.7%, depending on the policy.
Before you decide what to do, calculate how much you've
accumulated in benefits so far and how a change will affect future
benefits -- as well as how much you could pay for care out of your
own pocket. "The 5% compound inflation doubles the benefit every 15
years, and the 3% doubles it every 25 years. That's a huge
difference," says Ryan.
It's rarely a good idea to drop your policy and search for a
replacement. Rates on new policies are 30% to 50% higher than they
were five years ago, says Jesse Slome, executive director of the
American Association for Long-Term Care Insurance. And your
premiums will be even higher because you're older, even if you're
in perfect health. A 55-year-old man would pay $4,680 per year for
a Northwestern Mutual policy with a $6,000 monthly benefit, 12-week
waiting period and 5% compound inflation protection. But a
60-year-old would have to pay $5,316 for the same coverage,
assuming his health hasn't changed.
This article first appeared in Kiplinger's Personal Finance
magazine. For more help with your personal finances and
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