CNBC: “Op-ed: How to navigate premium increases for long-term care insurance”
- While long-term care insurance rate increases can be expected, most people are shocked by how much rates can go up over the long term.
- The National Association of Insurance Commissioners has reported rate spikes as high as 500%.
- For those with limited financial means, a significant premium increase can be overwhelming and devastating, often forcing people to choose between financial security and compromising their parents’ quality of life and access to quality care.
Supporting aging parents is an extremely difficult situation that comes with both emotional and financial complications. The cost of long-term care insurance is a prime example.
This insurance, essential for covering costs not typically included in standard health insurance or Medicare, such as nursing home stays or in-home support, can be a financial lifeline. However, it’s not without challenges, especially when faced with an unexpected premium increase.
I know this situation all too well, having purchased long-term care policies for both of my parents in 2000. For my dad, who was 68 at the time, I purchased 5% simple inflation protection, which accrues interest only on the original benefit. By the time my dad needed in-home care starting in 2014, his daily benefit had grown from $125 to $212.50.
Given our family history of longevity, and because my mom purchased her policy when she was a young 54 years old, we selected 5% compound inflation protection. The daily benefit with compound inflation grows quickly because the interest earns interest.
Now, with that compound inflation protection, her daily benefit has increased from $125 to $403.
But her costs have increased, too, in part because that compound inflation protection costs more. Since 2000, my mom’s long-term care insurance premium has jumped 54%, from $1,224 to $1,885 per year. Along the way, we have experienced three rate increases.
How much can long-term care insurance increase? Click here to read more about it on CNBC.com.