How much (and when) can long-term care insurance premiums be increased?
It depends upon the type of the policy you buy.
There are two types of long-term care policies that can never have a rate increase:
- Single-pay long-term care policies and
- Limited pay long-term care policies with corresponding rate guarantees.
Single-pay long-term care policies are paid up after just one premium payment. You make one premium payment and your policy is paid-up forever. You are covered by the policy for as long as you live. Since there is only one premium payment, you can never have a rate increase.
Limited-pay long-term care policies are paid up after a fixed number of years (usually between 5 to 10 years). If a limited-pay policy has a rate guarantee that equals the premium payment period, then the premiums are guaranteed to never go up.
For example, a 60-year old may decide to purchase a policy that is paid up at age 65 and has a 5-year rate guarantee. Since the premiums are guaranteed not to increase during the premium payment period, the premiums can never go up.
Another example is a 10-pay policy that has a 10-year rate guarantee:
A 10-pay policy is a policy that is paid up after 10 years of premium payments. Some long-term care policies have a 10-year rate guarantee (some don’t.) But, if your policy has a 10-year rate guarantee, and it is a 10-pay policy, then your premium is guaranteed to never increase. After you’ve paid premiums for 10 years, your policy is paid up, you never have to pay another premium, and your policy is in-force for the rest of your life.
“Standard pay” long-term care policies are policies with premiums payable until you pass away (or until you begin to receive benefits from the policy and the premiums are waived). The premiums for “standard pay” policies can be increased.
Regardless of which insurer you buy a policy from, when buying a “standard pay” long-term care policy, you have to sign a form stating that you realize that the premium can be increased. EVERY long-term care insurance application for a “standard pay” policy has a section that asks, “Have you considered whether you could afford to keep this policy if the premiums went up, for example, by 20%?”
In most states, rate increases on long-term care insurance policies cannot be implemented without approval by the state’s regulators. Some states have very strict requirements that must be met in order for a rate increase to be implemented. Some states have stricter requirements than others.
If your long-term care insurance policy does have a rate increase, in most cases, you have the option to keep your premium the same by decreasing your benefits.