Long term care insurance policies have been assisting individuals pay for their care needs for decades now. Everyone will age and need care when the time comes. And because of the obvious benefits each policy provides, every individual rushed to get his or her long term care insurance quote and coverage. And to this day, these policies have been assisting Americans fund the assistance that they need.
However, premium rate hikes have been increasing in the recent years, and understandably, policyholders are becoming more wary and anxious as to how long these hikes will continue. After all, these hikes are no joke, some average at 80%. Naturally, these rates have also driven people to question whether it is still worth keeping their policies. Some feel cheated because they were promised level premiums for life, while others try to find ways on how to deal with the rate hikes in order to still keep themselves covered.
Despite the significant rate hikes proposed by insurance companies, having a long term care insurance plan in place is still the most cost-effective way to ward off any sharp blows from the devastating costs of care in the United States. Out of all the ways to pay for long term care in the country, this type of insurance remains as one of the most reliable methods. People are slowly realizing that they cannot depend on government programs, such as Medicare and Medicaid, to support their long term care needs in the future. The former does not, after all, pay for custodial care and the latter has very strict financial eligibility measures that often require the patient to spend himself to poverty before getting aid.
All these things point to the reality that people need to talk to their insurance providers and try to strike a deal on how to bring their long term care insurance coverage in line with the cost of their premiums. The good news is policyholders do have several options in coping with the rate hikes—mostly involving adjustments in the length benefits are given and the daily benefit amount.
Ways to Face Long Term Care Insurance Rate Hikes
Continue your policy and pay the new premium
If you can afford to pay the new rate hikes of your long term care insurance policy, and still have money to continue living a well-enough decent life, then keeping it is still the best choice. Unlike car insurance, for example, that you change once in a while, long term care insurance is something that you have to stick with once bought. That is because premium rates increase with your age, and if you decide to discontinue your old policy because of the rate hikes, chances are you will not get a better deal in the future if you buy a new policy.
Lower the Daily Benefit Amount
If the rate hikes on your policy become a bit of a challenge, you do not have to cancel it at once. You can lower the daily benefit amount to a level that still brings your benefits in line with the actual cost of long term care in your location. For example, if you currently have a policy with a $250/day daily benefit, reducing it to $200/day can help a lot in making your policy affordable again. However, before making this move, consult with a knowledgeable long term care adviser who can give you a precise value for current long term care costs in your particular state.
Shorten the length of your Benefit Period
If you own a policy that has a lifetime coverage, and you are facing a rate increase you might not be able to handle in the long run, it could help to cut the benefit period to around three to five years instead. According to the American Association of Long Term Care Insurance (AALTCI), the average claim period for a policy is at 2.8 years. So setting a cap on your benefit period can keep your premiums affordable and even save you a lot of money because you do not need to pay for coverage that you might not end up using.
Adjust your Benefit Inflation Rate
If you have had your plan for 10 years or more, you might want to consider lowering your benefit inflation rate because the time that you have been holding on to your policy has already given you a lot of leverage out of the inflation rider.
Drop your policy
This ought to be a last resort, which means that you should have already thought about this thoroughly. As illustrated, there can be many ways to deal with premium rate hikes and canceling your policy is only an option if you know you’ve already exhausted all your means and can no longer find a way to pay for your premiums.
Which Option are You Choosing?
We’d love to hear your thoughts, suggestions, and advice on how people can face these long term care premium hikes. If you have comments or questions about our blog, we’d love to hear from you, as well.