As a broker and a firm believer in long term care insurance policies, it is difficult to open my mail these days. It is not unusual for me to see an increase letter on a book of business that dates back 10-15 years. These increases come from all the carriers—MetLife, Prudential, Unum, Genworth, John Hancock, Mutual of Omaha, Transamerica, Medamerica. If a carrier has been in the long term care market over the last 20-25 years, they have been forced to issue policy increases.
Why Is This Happening?
Many believe that the insurance companies are not living up to their promises. However, it must be said that long term care insurance policies are only 25-30 years old. They were developed to fill an important need but were born in a time when medical procedures, new medications, and emphasis on health and exercise have reached new levels of importance. Unlike life insurance which has been around for 200+ years, the long term care insurance companies didn’t have the statistics for how this product would work in the marketplace.
So how successful are these policies? They are fantastically successful! The number of insureds on claim is staggering and there is every expectation that the number will continue to rise with the increased incidence of Alzheimer’s and longevity. It is a sure sign that the product is needed by insureds when we learn that only 1-2% of all policyholders lapse their policies. This is unheard of in the insurance industry.
This has left the insurance companies with no choice. Even most careful of Insurance State Commissioners look at the numbers of people on claim and the statistics for life expectancy and approve what look like astronomical policy increases.
What Do I Tell My Policy Holders To Do?
I ask clients to focus less on the percentage increase and more on the actual new premium they will be paying. The fact is no matter what the increase, it is always less than what someone would need to pay if they got a new policy today. My advice is– keep your policies. Discuss your options with your long term care specialist but keep your policies. This isn’t fire insurance…this is the stuff that statistically you have a very good chance of needing. Remember why you got the coverage in the first place. That need hasn’t changed, in fact, it’s even more important today.