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A hot topic often discussed in the media is how long-term care insurance (LTCI) rate increases will force people to cancel their coverage. Here’s the truth: Each state has a Division of Insurance that regulates an insurance carrier from arbitrarily raising rates on policyholders. Think of them as your consumer watchdog! If an insurance company files for a rate increase with a state, the state then makes the company prove why it needs a rate adjustment. The state has the power to either approve or deny the request. They can also limit the amount of the rate increase if granting anything at all.
Potential rate increases that will cause you to cancel your coverage is the myth of all myths! It’s been perpetuated by individuals trying to discourage folks like you from having long-term care coverage and thus paving the way for them to recommend other investments, insurance, or legal products you should buy.
I’ve helped a small number of my clients through a rate increase and none of them were forced to cancel their coverage because it was too expensive. Typically, if you experience a rate increase the carrier will give you three options. In fact, this is what happened when I recently helped some of my clients in this situation.
First Option: You’ll be able to keep your coverage the way it is and pay the extra amount, which almost everyone does.
Second Option: The insurance company may allow you to reduce your coverage to allow your premium to stay unchanged.
Third Option: You can cancel your coverage and discontinue making payments.
In my opinion, if you decide the increase is too much then the best option is to reduce your coverage to have your premium remain unchanged. It’s almost always a very small decrease in coverage, not a large reduction. This is a better option than canceling coverage completely.
Now remember, not one my clients who found themselves in this situation chose to drop their coverage, not one! So, don’t believe the bunk. The good companies in the industry fully understand how rate increases are bad for them, their policyholders, AND the industry as a whole. Like most industries, a price increase is the last option to control increasing costs or decreasing investment returns or loss. Every company and industry experiences what we commonly refer to as inflation adjustments. It’s no different with the LTCI industry. Rates for LTCI are more stable than health and auto insurance. Don’t believe the hype that LTCI companies are constantly and consistently raising rates on their policy- holders.
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