Pricing Study for Long-Term Care Insurance Shows Stability and Affordability
Long-Term Care Insurance remains a very affordable way to address the financial costs and burdens that come with aging. A national study of insurance companies shows premiums for new coverage in 2019 varies slightly from plans available in 2018.
It appears Long-Term Care Insurance premiums for newly approved policies will remain stable and affordable in 2019. The American Association for Long-Term Care Insurance (AALTCI), a national consumer education and advocacy group, released its initial data from its annual pricing study that has tracked costs data for over two decades.
According to the 2019 Long-Term Care Insurance Price Index shows prices for coverage have increased slightly overall compared to the prior year. Premiums are intended to remain level once you purchase a policy, a new policy is priced based on your age at application, health, family history, and the amount of benefits you wish to have in your policy.
“In general costs increased slightly compared to our 2018 analysis, but for many insurers, there was no increase compared to the prior year,” reports Jesse Slome, director of the AALTCI.
Into the Future
Insurance premiums are regulated and must be filed by each insurance company with the state’s department of insurance. Experts are indicating premiums should remain stable for new policies in 2020, although several asset-based "hybrid" policies will see refreshed rates.
Premiums Vary Between Companies for Same Coverage
The spread between the lowest and highest cost for virtually identical coverage was as high as 243 percent according to AALTCI’s 2019 Price Index analysis for a 55-year old couple.
“This is the largest spread I can recall in recent years,” Slome notes. “It’s rare to see one policy costing more than twice another policy when both are large insurers but each company gets to set their own pricing and each has their own target market,” he adds.
Most companies offer spousal or partner discounts and good health discounts. The younger you are the lower the premium will be.
“Married couples often benefit from a significant spousal discount,” Slome explained. Married couples or older adults living together purchase the majority of long-term care insurance policies the association director notes.
Spouses and Partners Find Value
“There are smart ways to protect yourself and save money that agents may fail to suggest or consumer fail to take advantage of,” Slome noted. For example, Slome recommends married couples look into the shared care option where one spouse can use the benefit pool of the other. “Or, consider a two (2) percent inflation growth option instead of the three (3) percent which can save nearly 20 percent yearly,” he adds.
Slome says these features are not offered by all insurers. A Long-Term Care specialist often will be able to help compare the top companies and make appropriate recommendations based on your age, health and the number of assets you wish to protect.
Today's Long-Term Care Insurance is Affordable and Rate Stable
Today’s Long-Term Care Insurance is also rate stable. Unlike legacy policies that were sold a decade ago before the interest rate crash and rate stabilization rules, today’s plans are priced correctly and are expected to remain level.
“Policies priced years ago using different assumptions have seen rate increases so consumers today assume they face the same risk,” Slome said. “That’s simply not the case.”
Slome says that actuaries responding to a research study conducted by the association see little or no the risk of needing future rate increases on recently priced policies. This means people can plan in their 40s or 50s and have peace-of-mind from a budgeting standpoint.
The AALTCI showed examples of premiums based on a 55-year-old couple. Depending on the benefit levels premiums can range from $2,465 annually (about $200 a month) for a couple. Long-Term Care Insurance is custom designed. Consumers, with the assistance of a licensed specialist, can design a plan to fit their budgets and concerns.
Many people can find coverage for under $100 a month depending on the benefit design, age, and health. 45 states offer special Long-Term Care Partnership policies that provide dollar-for-dollar asset protection.
Several Types of Long-Term Care Plans Available
There are also limited duration plans that are available in many states with a very affordable premium. Asset-based policies, with death benefits, can be paid on an annual basis with a guaranteed never to increase the premium. Single premium options are also available.
Research Tools Help With Planning
Start your online research by researching the cost of care services in your state. You will also discover tax incentives and the availability of special Long-Term Care Partnership plans which provide additional dollar-for-dollar asset protection.
A great research tool is the LTC NEWS cost of care calculator. This will show you both the current and future cost of care services where you live. This will assist you in determining how much benefit you will need to safeguard savings and income from the high costs of extended care.
Use Qualified Long-Term Care Insurance Special to Assist in Planning
LTC NEWS can also help you find a qualified LTC specialist. By using a specialist, instead of a general insurance agent or financial advisor, you can find the best plan at the best value based on your specific situation.
Like premium, underwriting criteria can vary dramatically from one company to another. In addition, tax incentives might be available to you a specialist can help you determine if you qualify for them.
It Is About Family
One thing is for certain, the cost of Long-Term Care Insurance is always substantially less than the future cost of care services. Your spouse or adult children are not the best options to provide care. Caregiving is hard on loved ones and paid care is expensive and drains income and savings ... adversely impacting your lifestyle and legacy.
About the Author
An LTC News author focusing on long-term care and aging.
James Kelly
Contributor since August 21st, 2017
Editor's Note
No matter which type of plan you purchase, Long-Term Care Insurance is easy, affordable and rate stable income and asset protection. These policies are custom designed. Be careful, however, since premiums can vary over 100% between companies for the exact same coverage. This is why you should seek the help of a qualified Long-Term Care Insurance specialist.
Items to Discuss with a Long-Term Care Specialist:
- Partnership – Most states offer special policies that provide dollar-for-dollar asset protection. The Long-Term Care Insurance Partnership Program might be one of the best-kept secrets in retirement planning. Make sure the specialist explains this program and how it might help you.
- Tax incentives – There are federal tax incentives available for some people. If you own your own business be sure to ask.
- Health Savings Accounts – If you have an HSA you can use the pre-tax money in your account to pay for the premium.
- Asset-Based or Hybrid policies – These are life insurance or annuities with a rider for long-term care. Careful, only a handful are actually a long-term care benefit. However, one of these policies can provide you with the flexibility of both a long-term care benefit or a death benefit. They are expensive but can be paid with a single premium.
- Health and Family History - Make sure the specialist asks you detailed questions about your health, family history, and retirement plans. Underwriting criteria varies with each insurance company. If they are not asking you detailed questions then find another specialist.
Take a moment and find the current and future costs of long-term care in the area you live in. This will help you decide the amount of coverage is appropriate for you in your situation. For example, if you have a defined pension when you retire the amount of benefits you would need for long-term care would be less than an individual who will fund their future retirement with earnings off investments. In that case, protecting the principal is essential since that will produce your future income.
Find your state and use the LTC NEWS cost of care calculator.
It is always best to start planning before you retire. Once you have your plan in place you will enjoy peace-of-mind and your family will thank you decades from now.
