Addressing Concerns about Long-Term Care Insurance Rate Increases

As estate planning and elder law attorneys, a key part of your job is helping clients protect their assets while planning for long-term care. For many clients, long-term care insurance (LTCI) plays a crucial role in safeguarding their savings. Unfortunately, concerns about rate increases may complicate their decision of whether to purchase LTCI. That’s why it’s crucial that you understand the factors behind these increases and how to address them with clients.

Read More: Why Talk to Clients about Long-Term Care Insurance?

Understanding the Reasons Behind LTCI Rate Increases

Rate increases on traditional LTCI policies have been a major concern for policyholders. Often driven by historical miscalculations made by insurers, most rate increases resulted from early LTCI products underestimating the lifespan of policyholders and the frequency with which they would make claims. Furthermore, insurers didn’t anticipate the impact of rising cases of cognitive disorders, such as Alzheimer’s disease, which require extended and costly care.

Another factor contributing to premium hikes was the prolonged low-interest rate environment in the 1990s and early 2000s. During that time, insurers couldn’t achieve the investment returns they had originally projected, which further exacerbated their financial strain. As a result, most major insurance carriers implemented at least one round of rate increases to stabilize their LTCI portfolios.

Alleviating Concerns About LTCI Rate Increases

When clients express concerns about LTCI rate increases, it’s important to put these increases into context. Previous rate hikes in traditional LTCI policies were a result of a necessary market correction, as insurers now use more accurate data and actuarial assumptions to better assess risk and longevity. Today’s policies tend to be more stable because they are priced with these factors in mind.

Educating clients on why these increases happen and how they are less likely in modern LTCI products can help dispel fears. Attorneys should explain that while rate increases can still occur, insurers have learned from past mistakes and are now far more conservative in their pricing strategies. Additionally, modern hybrid LTCI products—such as asset-based policies that combine life insurance or annuities with long-term care coverage—are designed to mitigate these risks, offering rate stability and added features like death benefits.

Helping Clients Navigate Rate Increases

For clients who already hold traditional LTCI policies, it’s crucial to help them understand their options. When faced with a rate increase, clients can often choose between several alternatives, including:

• Reducing Coverage: Clients may opt to reduce their daily benefit amount or eliminate inflation protection to keep their premiums more affordable.
• Maintaining Coverage: If clients are concerned about their long-term care needs, they may decide that it’s worth paying the higher premium to retain their current coverage. They should understand that they would be unable to purchase their existing policy for the same amount they’re currently paying, so they should also keep in mind the value of their policy.
• Exploring Hybrid LTCI Products: For clients looking for more predictability, hybrid LTCI products can offer long-term care coverage with the added security of a death benefit if care is not needed.

Estate planning and elder law attorneys play a vital role in helping clients evaluate these options and decide which makes the most sense for their specific financial situation and care needs. By considering the client’s overall asset preservation plan, you can help them balance the need for long-term care protection with concerns about rising premiums.

How to Approach Rate Increases with Clients

It’s essential to approach rate increase conversations with transparency and clear communication. Here are some tips for attorneys when addressing LTCI concerns:

• Emphasize the importance of long-term care planning. While rate increases can be a concern, LTCI remains one of the most effective ways to protect clients’ assets from the costs of long-term care. Explain that the potential costs of not having coverage—such as depleting savings or selling assets—can far outweigh the expense of a policy.
• Offer a comprehensive review of their options. If a client is unhappy with a rate increase, review their policy and provide alternative solutions, such as reducing coverage or switching to a hybrid product. Ensure that any changes align with the client’s overall estate plan and asset preservation goals.
• Leverage available resources. Educate yourself and your clients about state-specific regulations and LTCI products. Many states have consumer protections in place regarding rate increases, and new LTCI products may offer more competitive and stable pricing options.

Read More: Why Work with an LTCI Advocate?

Moving Forward with Confidence

By guiding clients through the nuances of LTCI rate increases and providing tailored solutions, estate planning and elder law attorneys can help clients make informed decisions that preserve both their financial security and their long-term care options. While rate increases on traditional LTCI policies can be challenging, with the right strategies and knowledge, you can help your clients navigate these challenges and ensure their long-term care planning is sound.

For more information on the latest LTCI products or assistance with client-specific LTCI planning, we encourage you to schedule a call with us. We are here to support you and your clients in finding the right long-term care solutions.