Did you just receive a notice that your insurance company has sold its long-term care policies to another insurer? Now what should you do? Will you be dropped? Will the rates go up? Should you start shopping for a new policy?
Yes, there has been consolidation in the industry, but there is no need for alarm. You may even benefit if a more reputable and more stable company purchased your long-term care insurance policy.
Unlike the life and health insurance industries with decades of statistics to estimate future claims, long-term care insurance is a business with a short track record. This makes it difficult for companies to determine how much to charge for premiums. If the premiums are too high, consumers won’t buy the policies. And if they’re too low, the insurer loses money. Therefore, some companies have gotten out of the long-term care insurance business because they have not been able to come up with a rate structure that adequately meets both needs.
Your new company won’t drop you, nor will they change the terms of your policy. They can, in most cases, raise premiums for an entire class of policies, but they cannot pick and choose which individual policies will get rate hikes. Whether or not they’ll increase your premium depends on how the original rates were calculated.
There are insurers that charge more for policies but do not raise premiums for a set number of years. Then there’re others that under price their products to capture a larger share of the market. If your policy was significantly less expensive than other comparable products, you will have a greater chance of getting hit with a price increase. And as shocking as that may be, you might still be paying less than other companies charge.
Moving from one company to another is usually not a good option. If it’s been three years since you got your original policy, when you apply to a new company, they will base your rate on your current age. And since starting premiums increase 8-12% annually once you pass age 60, you would pay a lot more to start up with a new policy.
Rate increases with your new company may come in one large hike, or more frequent, smaller ones. Historically though rate hikes have been infrequent and have ranged from 5% to 20% for the top eight insurance companies (http://www.kiplinger.com/retreport/archives/2000/June/manage.htm).
Annual costs average $66,153 (WSJ 08/05/03 Metlife survey) for nursing home care and higher if specialized needs must be met. To protect your assets and maintain your financial security from the possibility of these devastating costs, your long-term care policy is still one of the best investments you can make.
If you do not yet have this important coverage or know others who do not, return the enclosed coupon for a free copy of “Avoid Mistakes in Buying Long-Term Care Insurance.” You’ll learn how to lock in premiums and save money.