According to a recent study by AgeWave, retirees are more afraid of being a financial burden on their families than anything else, including death and taxes. Accordingly, the anticipated rise in premiums for long term care insurance is most unwelcome news. What makes this increase even more irksome is that existing pricing models are essentially broken. The current low interest rate environment means that not only are insurance companies earning less on their investments, long term care policies are also lapsing at a lower rate than what was previously estimated. Indeed, once people jump through a series of hoops to qualify for and purchase the coverage, they usually keep it. On a final dreary note, the claims for benefits are historically high, sky high. In fact, claims jumped a whopping 50% from 2007 to 2010 and are expected to climb another 20%.
Despite the bleak statistics above, there is a silver lining. If you currently own a long term care policy and continue holding on to it through the increase, your higher premium will still be lower than if you were to go out and purchase a new policy today. Even more good news is that there are a few steps you can take to ease your premium:
- You can lower your premium by reducing the benefit period from unlimited-term to three or five years;
- If you are part of a couple, you can enhance affordability by taking advantage of a spousal/partner discount when purchasing new policies; and
- A portion of your premium, which increases each year with inflation, can be treated as a medical expense and is therefore tax deductible.
To explore all your options, we encourage you to consult your insurance agent for additional ways to mitigate this looming premium increase.