Long-Term Care Policy – (Q & A)

Jun 2016


Q Dear Rick:

My dad is in his early 80s. About 20 years ago my dad purchased a long-term care policy. He has never had a claim on the policy and therefore, I was shocked when he received a 50 percent increase in his premium. Basically, it makes the policy too expensive for him. The agent that sold the policy to my dad is no longer in business and the company says they can’t offer any advice. My question to you is: Is there anything that we can do to lower his premiums? I would hate to cancel the policy but unless I can figure out how to lower the premiums, I will have no other alternative.

A Dear Marty:
Unfortunately, it’s not uncommon for insurance companies to raise premiums on long-term care policies. It’s a disturbing trend that we have seen over the last few years. However, that being said, there are some things that you can look to that can potentially reduce the cost of the premiums.

The first area that I would look at is if you have inflation protection on your policy. Inflation protection is a very expensive item and either by reducing or even eliminating the inflation coverage it can potentially save you a substantial amount in premiums. Keep in mind that for all the years your Dad had the policy if he had inflation protection he probably has locked in those increases so reducing or eliminating the protection should not be a major issue.

Another item that you can consider adjusting is the elimination period. The elimination period is the same as the deductible in auto insurance. The difference is that in the elimination period, it’s not measured by dollars but by time. Therefore, if you have a 90-day waiting period which is the norm, you can consider raising it to 180 days. Typically, Medicare covers the first 90 days and therefore, you would be self-insured for the next 90 days; thus, having coverage for long-term issues. At the same time, you should look at the coverage term. If you have lifetime coverage, maybe reducing that can also be a substantial savings.

Lastly, you can look at adjusting the coverage so that it matches your current premium. In addition, there could be a combination of the adjustments to keep the policy affordable.

Typically, long-term care companies are not very helpful in helping you make the aforementioned adjustments. Therefore, you can either get a new agent to help you with this policy or you can contact the company and have them assign you a new agent.

Across the board, we have seen long-term care policy premiums increase substantially. The key for people to remember is that you have more options than either paying the higher premium or just cancelling the policy. The key is that you have to be proactive. These are the times where a good qualified agent can be extremely helpful. Good agents will work with you and provide you a variety of options to suit your needs. All that the bad agents are looking to do is sell you something. That is why, particularly with long-term care, if you are going to buy a policy you need to deal with someone who is competent, who cares and who wants more than just to sell you something.

Good luck!

Rick is a fee-only financial advisor. His website is www.bloomassetmanagement.com. If you would like Rick to respond to your questions, please email Rick at rick@bloomassetmanagement.com