There is a substantial difference between the cost of traditional and hybrid LTC policies.
Let’s focus first on traditional policies...those that provide only long-term care benefits, and that are not associated with life or annuity products. Premiums for traditional individual LTC policies are not guaranteed. An insurer can, with the permission of the state insurance department, raise rates on a class of in-force policies. A company cannot, however, single out an individual insured for a rate increase.
Please be sure to read A Perspective at the beginning of this website.
HIPAA Qualified policies have a built in “contingent non-forfeiture benefit” that provides several options if cumulative increases in your original premium exceed that premium by a fixed percentage based on your age at the time you bought your policy. Those options, which we are not going to discuss here, are fixed and final. You should, however, know that they are included in every qualified LTC policy without additional cost.
It is also, and we think realistically more important to know, that policyholders hit with an unacceptable rate increase...one you simply cannot afford to pay . . . (some have been as low as 8% and as high as 94%) may have other more flexible options to lessen and even avoid such increases.
For example, if your benefit has grown substantially over the years by virtue of an inflation rider (a 5% compound automatic annual benefit increase will have doubled your initial benefit in about 14 years,) you could drop that rider from your policy, likely cut your premium in half, and, under the terms of many proposed premium increases, avoid any increase in your premium. Or, depending on the terms of your policy, you may be able to reduce the percentage of your inflation provision from, for example, 5% to 3% and significantly reduce your premium while also avoiding any premium increase.
Another option to consider, by itself or in combination with what we’ve just discussed, is reducing your pool of LTC money—your maximum benefit period—particularly if you are significantly further along in years. Please note that, if you and your partner have Shared Care, you will each need to make identical changes in order to maintain that benefit. I realize that we’re in the weeds a little here, but the point is that you need to very carefully read the terms of any premium increase notice you may receive for options that might make sense for you if your financial obligations have lessened while your retirement savings have grown.
If you haven’t already done so, you should consider visiting with your financial advisor and an elder law attorney to assess the most sensible way to deal with a substantial increase in your premium. Reducing your benefits may have unintended consequences that they can foresee and help you to avoid.
Discounts can range from 10 to 40% depending on the company and depending on your health, whether or not you’re married or in a committed relationship, and whether or not you and your spouse or partner are applying together and in good faith. An application by each of you when one is clearly not insurable will typically result in a reduction for the insurable applicant from what is called a “spousal” to a “marital” discount or to no discount.
Discounts can add up so it is worthwhile to explore the cost of coverage for you together, even if one policy is structured differently than the other. But remember, if you want Shared Care, you both need to be insurable and your policy benefits need to be the same.
Virtually all policies on the market today provide for waiver of your next premium due once you are eligible for benefits. Waiver means waiver, not a loan. Should you recover, you’ll simply start paying your normal premium.
Some policies offer a rider at additional cost (which you must select at the time you and your spouse or partner apply for coverage) which provides for dual waiver of premium—while one of you is on claim with your premium waived, so also is your partner’s premium waived.
In any event, do be certain that the policy you are considering provides for waiver of your premium.
Only one company still offers the option of paying a traditional LTC policy premium over a limited period of time, 10 years, with no premiums due after that. If having a paid-up policy is important to you, you should consider hybrid policies, which we will discuss under the Are There Other Options? section of this website.