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Will Long-Term Care Insurance Premiums Go Up?

Quick Answer

This might be one of the most asked questions by consumers. This might be due to many articles written about older “legacy products” that were sold decades ago prior to rate stabilization rules and the interest rate crash.
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Detailed Answer

The question about potential premium increases may be one of the most asked questions by consumers. Perhaps this is an often asked question due to many articles published about older "legacy products" sold decades ago before rate stabilization rules and the interest rate crash.

The majority of today's Long-Term Care Insurance policies are designed to have level premiums. Some LTC Insurance plans give the policyholder the option of purchasing additional coverage in the future. Some plans are designed to increase automatically as the benefits increase. However, most policies are intended to have level premiums.

There are many good intentions in the world ... however, that usually does not mean a guarantee.

Rate Stability Rules

Most states have Long-Term Care Insurance Rate Stability Rules in place. Developed by the National Association of Insurance Commissioners, these rules make it much harder for an insurance company to get an approved rate increase. 

Your state's insurance department must approve any future increase for actuarial reasons only, not for profit reasons. Increases must be for a class of individuals, not an individual. These rules require insurance companies to price products from the start correctly, so future increases are less likely.

FInd which states have these rules in plcae - Compare State's Long-Term Care Details | LTC News. Keep in mind, however, most insurance companies price their plans in every state as if they have these rules in place. 

Old LTC Insurance Priced Under Old Rules

Older 'legacy' Long-Term Care Insurance is priced under the old rules and priced before the interest rate crash. Today, Long-Term Care Insurance is priced under the new rules and considers the current extremely low-interest-rate environment. 

The risk of a future premium increase is much lower compared to the older legacy plans. 

Underwriting and Lapse Rates

Other factors that influence potential premium increases are underwriting and lapse rates. 

Underwriting refers to the rules they apply to determine if an insurance company will offer an individual coverage in the first place. Lapse rates refer to the percentage of people an insurance company expects to lapse or cancel coverage after being in force.

Underwriting rules are more conservative today than they were decades ago. Updated underwriting criteria reduce unexpected higher claims rates allowing for premium stability. Insurance companies now have 30+ years in data and medical and aging research so they can limit 'quick claims" or individuals that have health issues where they already need care or are expected to need care sooner than later.

Insurance companies have found that very few policyholders ever lapse coverage. Decades ago, insurance companies thought a large percentage of policyholders would lapse their policies. They don't. Because people don't drop their coverage, today's Long-Term Care Insurance is priced based on this fact.

Increasing Cost of Care and Demand for Services

There are articles published that suggest that the increasing cost of long-term care services and the ever-increasing amount of people needing care will impact the premium. 

These articles are wrong. 

The costs of long-term health care are indeed increasing - Cost of Care Calculator - Choose Your State | LTC News. However, a Long-Term Care Insurance policy is custom-designed with specific daily or monthly benefits. Each policy has a 'policy maximum benefit.' There are inflation riders that increase these amounts by a specific percentage every year. 

The policy will only pay up to the pre-determined maximum amount. The pricing has been calculated based on these amounts, so the ever-increasing costs have little to do with policy and potential premium increases. 

There is an increasing demand for long-term health care. More people are getting older and experiencing declining health. While our health, body, and mind decline, actuaries use underwriting standards to accurately predict claims and price policies based on age, health, family history, and other factors.  

Insurance companies do a much better job today than they did 30 years ago when these products are first designed. In addition, there are more regulations in force today than in the past. 

The bottom line is premiums are both affordable and rate stable.

You Want Guarantees?

There are some people, and you may be one of them, that still want more reassurance. 

First, you can always REDUCE benefits in the future without penalty. If you reduce benefits, your premium is reduced as well. If there is an approved premium increase, you could lower your benefits or inflation percentage to avoid the increase or reduce the size of the increase. 

Second, there are available policies who ZERO chance of a premium increase. 

Single premium traditional LTC Insurance

There is one company that offers you the ability to pay one single premium. Since your policy is 'paid-up,' there is NO chance of a future increase. You could also add a 'return of premium rider, which returns the premium if you pass away without using benefits.

Several companies offer limited pay plans. You pay ten higher premiums, and your policy is paid in full. While it is possible an approved rate increase could occur during that period, the chance is much less likely.

Hybrid (asset-based LTC Insurance 

There are several qualified life insurance or annuities with a Long-Term Care Insurance rider that meets federal guidelines. You can pay the premium with one single premium, in five years, ten years, twenty years, or annually for life. 

These policies offer death benefits in addition to the long-term care benefit. Hybrid plans also offer GUARANTEED PREMIUMS. Yes, while a single premium could never go up if you pay the policy over a period of years or annually, the premiums are guaranteed for life to never increase. 

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  • Strong understanding of underwriting, policy design, and claims experience
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Get Accurate Quotes

Work With A Trusted Specialist

  • Has substantial experience in Long-Term Care Insurance
  • Strong understanding of underwriting, policy design, and claims experience
  • Represents all or most of all the leading insurance companies
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