Long term care insurance is one of the most underutilized, highly recommended types of insurance available today. Only about 5% of seniors over 60 have LTCI, while experts recommend that anywhere from 30% to 70% of seniors should have it based on their health and long term needs. This is one of the most frequently recommended financial tools out there.
Yet, one of the concerns that many have about long term care insurance is that premiums may not be static. Historically, there have been situations where some LTCI providers have increased premiums.
While most life insurance policies have guaranteed fixed premiums, for example, long term care insurance are a bit different. But not to worry – the reason for this is typically for your protection, and rate increases have to be approved by independent panels at the state.
Can Long Term Care Insurance Premiums Increase?
Yes, long term care insurance premiums can increase after you’ve purchased a policy. Most traditional long term care insurance is sold as guaranteed renewable, which means the insurance company cannot cancel your policy as long as you keep paying, but it also means your premium isn’t locked in for life the way it might be with some other types of insurance.
Why Premiums Increase
Insurance companies set premiums based on assumptions about how many policyholders will eventually file claims, how long those claims will last, how many people will let their policies lapse before ever using them, and how much the company will earn investing the premiums it collects in the meantime. Long term care insurers selling policies in the 1990s and early 2000s built their pricing on assumptions that turned out to be wrong in several ways at once.
- Fewer people let their policies lapse than expected, which meant more people kept paying premiums for decades and eventually filed claims.
- Investment returns on the premiums insurers collected came in lower than projected.
- Claims themselves, both how many people filed them and how long those claims lasted, ran higher than the original pricing accounted for.
Each of those factors on its own would have created some pressure on premiums. Together, they’re the reason rate increase requests became common across the industry.
The Protections Built Into Rate Increases
Even though premiums can increase, they are not increased randomly and they cannot be increased without independent permission.
State insurance regulators require any rate increase to apply to an entire class of similar policies at once, reviewed and approved by the state before it takes effect. The insurance company files a request showing the increase is actuarially necessary, and any approved increase applies uniformly to everyone sharing the same policy series and issue state.
That review process varies somewhat by state. Some states now also require insurers to notify policyholders about why an increase is being requested and how much it will be, with advance notice before it takes effect.
Older Policies vs. Newer Policies
Most of the rate increases that have made news over the past two decades affected policies sold in the 1990s through the early-to-mid 2000s, the generation of policies built on the assumptions that turned out to be wrong.
Policies sold more recently have generally held up better. Carriers adjusted their pricing models after years of rate increase requests, building in more conservative assumptions from the start.
That difference shapes how carriers should be compared today. A company’s history of past rate increases, and how it priced the policies it’s currently selling, both say something about how stable a premium is likely to stay over the life of the policy.
What Happens If Your Premium Increases
If an insurer requests and receives approval for a rate increase on your policy, you typically have a few options:
- Pay the Higher Premium — Keep your policy exactly as it is, with the same benefits, at the new premium amount.
- Reduce Your Benefits — Lower your daily or monthly benefit amount, shorten your benefit period, or remove optional riders to bring the premium back closer to what you were paying before.
- Take a Contingent Nonforfeiture Option — Stop paying premiums entirely and keep a reduced, paid-up benefit based on the premiums you’ve already paid, usually available when a rate increase crosses a certain threshold.
Insurance companies are generally required to lay these options out clearly when they send a rate increase notice, giving you time to decide before the new premium takes effect.
Reducing This Risk When You Buy
The rate increase history of a specific insurance company, and the specific policy series being offered, is public information in most states. California’s Department of Insurance, for example, publishes rate increase reports covering the current year and the nine years before it for every insurer selling long term care policies in the state.
Because LTCR Pacific works as an independent agency rather than representing a single insurance company, comparing that rate history across carriers is part of how a policy actually gets recommended, not an extra step a buyer has to research alone. Premiums are also priced differently based on age, health, and coverage selected at the time of purchase, and buying earlier, while more carriers and options are available, tends to result in a more stable long-term cost than waiting.
Comparing the carrier, the policy series, and the pricing history behind a quote is what actually determines how stable a long term care premium stays over time. Call LTCR Pacific at (800) 499-0067 to talk through which carriers have the strongest track record for rate stability, or to compare policy options before you buy.