This Is Why Long-Term Care Insurance is Affordable and Rate Stable Today

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Published: Feb 1st, 2018
This Is Why Long-Term Care Insurance is Affordable
Article Updated:February 6th, 2020

Many people today understand the need to plan for long-term health care. We see family members getting older and spending their savings on care either in their own homes or in a facility. For many families, it means they get the role of caregiver. This role as a caregiver usually falls on a daughter or daughter-in-law, and the burdens are tremendous as they must deal with being a caregiver and balancing that with a career and other family responsibilities.

A Question of Need?

Then we read stories that question either the need for owning a Long-Term Care Insurance policy. They question the ability of the policies to affordability provide the benefits many American families need to protect their retirement accounts, lifestyles and ease the burdens that are placed on families by long-term care.

No question, we live in an aging society. Longevity has become a significant factor in retirement planning. Financial advisors want to make sure you never run out of money. Yet, we see many older people with financial problems, and much of that comes from the financial costs and burdens of aging.

Long-Term Care Insurance an Easy and Affordable Solution

What about Long-Term Care Insurance? Is it true that these policies are expensive? Is it true they have numerous rate increases? Do these policies even work?

Long-Term Care Insurance works. In 2019 the American Association for Long-Term Care Insurance (AALTCI) says the top insurance companies paid over $11 Billion in benefits to American families. This money is giving people access to their choice of quality care in the setting they desire. When you have a policy you maintain control and independence. 

This $11 Billion is making a difference for American families. Without a policy, families would pay for expensive care from income or by draining their savings. When the money goes drive, the taxpayer would then get the bill. The Medicaid program is the bigger payor of long-term care benefits in the United States. However, you must have little or no assets and income to qualify.  

Jesse Slome is the executive director of the AALTCI. He said, "Without insurance to pay some or all of the cost, the caregiving responsibility often falls on elderly spouses or adult children caring for their aging parents."

"Long-Term Care insurance provides more than just money," Slome adds. "It's as much about having control and choices while protecting your retirement plans and lifestyle."

Today's Long-Term Care Insurance is Rate Stable

What about price increases? You may have read stories about rate increases, with some of them being substantial. Experts say this is on what is called "legacy business." These are old policies sold decades ago before the new rate stability rules which are now in place.

The extremely low-interest-rate environment also had a significant impact on these old policies. These older policies were never priced to consider the interest rate crash. Insurance companies also never considered the fact that few people ever drop these policies. 

In addition, underwriting (how they determine who they will sell a policy to do based on existing health conditions) is much more conservative and scientific today than in the past.

In an article in Broker World Magazine, industry leaders Marc Glickman & Scott Olson wrote that both the likelihood and magnitude of possible future rate increases are under control.

They write that the pricing of Long-Term Care insurance policies sold today is more conservative across every major pricing assumption. This includes interest rate assumptions, underwriting, and lapse rates.

Glickman & Olson also explain how the National Association of Insurance Commissioners passed the Rate Stabilization Model Act. Today 41 states have adopted a variation of this Act. Insurance companies are required to price more conservatively and are penalized should a rate increase be needed. The direct result is more conservative pricing across the industry to help protect consumers from sizeable future rate increases.

See if your state has adopted these rules by clicking here.  You can read the full article by clicking here.

Fact: Today's Long-Term Care Insurance is Affordable

OK, so the pricing is much more conservative, does that mean it is expensive? The answer is no. Long-Term Care Insurance remains very affordable for most people.

"People are usually pleasantly surprised when they see how low the premium is when I speak with them," said Mary Ann DeKing, one of the leading experts on Long-Term Care Insurance in the country.

"These policies are very affordable, especially if you are in good health. A good majority of people who purchase these policies are in their 50s. These are great plans at a great value. This way, people can not only protect their retirement funds but add a great deal of peace-of-mind knowing their adult children will not have the burden of caregiving," she explained. 

A survey of a handful of top specialists nationwide shows an average premium at all ages in 2019 of $163.10 a month. Much lower for those under 60 many under $125 a month, some even under $100 a month. 

Premiums are based on numerous factors. The factors include your age health, family history, and the amount of benefits being applied for. Long-Term Care Insurance is custom designed.

People who live in states where the cost of care is more expensive tend to buy bigger benefits than those who live in lower-cost states.

Partnership Policies= Dollar for Dollar Asset Protection

Most states also have Partnership Policiesavailable which provide additional asset protection. Tax incentives are also available for some people. You can find key information, including the current and future cost of care services, by using the LTC NEWS cost of care calculator. Click here now to use this resource. 

There are several types of Long-Term Care Insurance. These include traditional plans, including partnership certified policies, asset-based, or "hybrid" policies which include death benefits, and short-duration policies with more relaxed underwriting. 

Get the Help of a Qualified Specialist

An experienced Long-Term Care Insurance specialist is best able to find the right solution based on your needs and concerns. Most financial planners and general insurance agents are not suited to help with this type of coverage. Find a specialist by clicking here.

LTC NEWS provides many resources to help you research how to best plan for the financial costs and burdens of aging. Click here to access these resources 

Be sure to start your research before you retire to enjoy the most affordable options.

LTC News Contributor Linda Kople
Linda Kople

Contributor Since
January 1st, 1970

Freelance writer interested in retirement planning, health and aging.

About the Author

Linda is a freelance writer interested in retirement planning, health and aging.

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