Drastic increases in long-term care insurance premiums have many policyholders wondering if they should simply forego their insurance altogether. Policyholders have faced premium hikes from nearly every insurance carrier averaging 50 to 60 percent over the past decade.
“I talk to clients about premium increases every single day,” said Barbara Franklin, a long-term care specialist. She is the owner of Franklin & Associates Inc., a Charleston-based company offering both traditional and innovative approaches to long-term care planning and financing as well as assistance sorting out Medicare options.
These days Franklin is consulting with plenty of people about the best way to handle a long-term care insurance premium increase. She’s proactive in giving her own clients notice an increase is on the way, and she fields calls from non-clients, seeking her expertise.
Franklin offers the following five tips for navigating a long-term care insurance premium hike:
1. It may seem tempting to simply cancel the policy with the hope of qualifying for a cheaper plan. Not so, Franklin said. It’s much harder to qualify now, so they may not even be approved. Plus, a comparable policy would cost even more than the premium increase when secured at today’s prices and current ages.
2. Consider adjusting the policy options, such as reducing the benefits period or changing the inflation protection.
3. To avoid future premium increases altogether consider “hybrid” plans that combine long-term care with life insurance or an annuity. Premiums for these policies are guaranteed never to increase. Also if a policyholder doesn’t end up needing long-term care, the death benefit or proceeds from the annuity are available to a beneficiary.
4. Weigh the costs of the insurance – even with the premium increase – against paying out of pocket for a nursing home or in-home care. The 2016 Genworth Cost of Care Survey shows that the average cost of an assisted living facility in the Charleston area is $4,035 a month. A private room in a nursing home averages $6,596 a month. The monthly cost of a home health aide in the Charleston area is $3,909 a month (based on 40 hours a week of care).
5. Know that if your policy was issued in South Carolina, the S.C. Department of Insurance has – for the time being – capped premium increases at 20 percent for all long-term care insurance carriers.
Why the rising costs? Americans’ longevity is in part to blame for these insurance premium increases along with the rising rate of people with Alzheimer’s disease. Companies also assumed more people (5-6 percent) would let their policies lapse when, in reality, the lapse rate is only about 1 percent.
“Despite the rising costs, having some kind of long-term care insurance – whether a traditional policy or a hybrid approach – is important,” Franklin said. “Research shows 70 percent of all people over the age of 65 will need some kind of long-term care. Dropping your policy may save you some money today, but will likely end up costing you quite a bit more down the road.”
About Franklin & Associates
Founded in 1995 by Barbara Franklin, Franklin & Associates is a Charleston-based company offering both traditional and innovative approaches to long-term care planning and financing. Company representatives are active in the senior services community as both board members and volunteers, including with the Greater Charleston Chapter of the National Aging in Place Council and Lowcountry Senior Network. For more information, call 843-762-4260 or visit www.franklinassociatesinc.com.