What Affects the cost of Long Term Care Insurance?

The history of Long Term Care Insurance began in 1974 when it was sold as nursing home only policies. Over the years the policies have evolved to cover nursing homes of course, but also home health care, assisted living, and adult day care. For years the premiums and cost of this insurance was relatively stable with modest rate increases in-line with inflation until the year 2008-2009 rolled around. That year was of course the time when the financial crisis hit the world and caused insurance companies to lose billions of dollars. When this happened the long term care insurance companies had to raise rates on the insurance at a much higher clip to try and keep the product profitable.

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Interest rates plummeted around that time and the t-bills the insurance companies were invested in went from paying them 5% to around 1.5%. This 300% drop in revenue crippled the insurance companies and the long term care insurance industry. 2008-2009 is when the the cost of long term care insurance began to rise and rise rapidly.

There are several factors that affect the cost of long term care insurance:

1) Rates for long term care insurance are heavily affected by the age of a person. Most companies will sell the insurance to people age 40-79 years old and the younger you are the lower your premiums will be.

2) The cost of long term care insurance is also based on a person's health. Most companies have four or five rate classes with about a 10% movement in cost of the insurance on each level. People with severe health conditions can not get the insurance because the risk would be too great for them to insure.

3) The benefits you choose will effect the rates on long term care insurance. The daily benefit level a person can choose is usually between $50.00 to $400.00 per day. Most customers choose a rate of around $100-$200 per day. The other variable that will affect the cost of the long term care insurance is the benefit period. This variable determines how long your policy will pay benefits. The benefit period choices is 2, 3, 4, 5, 6, 8, and 10 year benefit periods. The last variable that effect the cost and premiums on long term care insurance is the inflation protection rider. You can choose from 1,2,3,4, or 5% compound growth. The higher the number the highest you long term care premiums will be.

4) The state in which you live in surprisingly effects how much your long term care insurance will cost. There are 51 insurance departments around the country and they all approve a company's long term care premiums to sell in a given state at different times. Some states simply will not approve the higher long term care insurance rates for sale for months or even years after other states already approved a higher cost product. This can be because of politics and special interest groups, but also some state's population is much healthier than other states.

5) Your gender. Up until 2014 the long term care insurance cost and premium associated with benefits did not account for the sex of the person applying. What happened around that time was the industry began seeing claims data on long term care insurance policies sold in the 70's, 80's and 90's. What they learned was women file more long term care insurance claims than men do so like life insurance, where men pay more because they die younger, the companies started charging women more than men for their long term care insurance premiums.

6) The agent or agency you use to buy long term care insurance will affect your cost of the insurance. We have been quoting long term care insurance rates since the 1990's and have noticed that most agents will sell the insurance based on their needs and what pays them the most commission. They will insist that these extra riders like shared care, monthly benefits, zero day elimination period for home care all are a must have with out giving the client a choice if they would like to add the rider or not. Clients then just assume they must buy all the extra riders and their is no choice. The extra rider of course are nice to have but believe me, you pay for them. We always give clients a choice and don't even quote the extra riders unless asked to do so.

7) The insurance company you choose will affect the rates for long term care insurance. Every company is different as far what type of person do they want to insure based on things such as as age, state, health, amount of coverage, and gender. All these factors go into what type of client is ideal for the insurance company. Some insurance companies will give better rates on long term care insurance for younger people, some favor the old, some favor women over men and some men over women. These different preferences from company to company make it a MUST for you to find a company like LTC Tree that will shop the entire LTC market to insure you get the lowest long term care insurance premium out there.

Your Future Long Term Care Premiums, After You Buy it

One of the biggest questions we get about the Long Term Care Insurance rates is what will happen to my premiums in the future? Can my long term care insurance premiums be increased? The answer is yes, your long term care insurance rates can go up down the road. However, this is a highly regulated process overseen by each State's Insurance Department. Long Term Care Insurance premiums are initially priced by the actuaries based on the future expected claims. Now these claims are anticipated to happen 20, 30, 40, or even 50 years in the future so the insurance companies must have some flexibility to raise rates if they experience more claims than anticipated. They need this flexibility because if they took on more claims than they were prepared for it could sink the whole company and then no one would have their claims honored.

What you can do to minimize the Long Term Care Insurance price increase

The first and most important thing you want to do when comparing long term care insurance rates is to shop around based on price. Secondly, you'll then want to pivot to analyzing the financial strength ratings of the insurance companies. Logic says that the financially stronger the insurance company the less lilkly they are to raise your rates and if they do need to raise them, the smaller the percentage. Insurance companies take in premiums and they take that money and invest it in things like stock, bonds, US Treasuries, Mortgages, land, timber, etc. How well they invest that money will determine how healthy they are financially.

Believe Me, Take Action Now

Now that you know you would like to investigate how much long term care insurance costs, where to you begin? It's simple, simply fill in the form below and one of our seasoned agents will begin the work and prepare customized long term care insurance premiums from the top five blue-chip insurance companies. We don't work for the insurance companies, we work for you and will help you shop all of the top long term care insurance rates and find the best deal for you.