Prices for long-term care insurance policies have jumped over the past year. Why is LTC insurance skyrocketing, and do you really need to pay such high premiums?
Whether it’s personal care services like bathing assistance and household chores, community services such as adult day care and transportation, or nursing home services, the Department of Health and Human Services estimates that 70 percent of us will need long-term care at some point after turning 65. What’s more, most health insurance programs—including Medicare—do not cover these costs, leaving the burden on the consumer.
Some people choose to buy private long-term care insurance to try to fill the gap. But the problem is, those private insurance premiums are rising, too. Prices for new policies have risen between 6 and 17 percent over the past year, according to the 2012 National Long-Term Care Insurance Price Index published by the American Association for Long-Term Care Insurance.
The Reasons Behind Rising LTC Insurance Costs
Why is long-term care insurance more expensive than ever? One major factor in the price jump has been the decline in interest rates in the wake of the economic recession, which caused insurers to increase premiums.
“The cost of long-term care insurance has risen because claim costs are increasing and interest rates are at historic lows,” explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance. “Most affected are policies which contain the five percent inflation growth option; but with inflation so low, there are other options available where costs are surprisingly affordable.”
That last bit, at least, is good news; with many policies paying up to 60 or 70 percent of long-term care costs, the savings could be considerable if you take the time to shop around for more reasonably-priced options.
Does Mom Really Need Long-Term Care Insurance?
Private long-term care insurance may not be the right option for everyone. If your loved one has a fairly low income and savings, and/or a high level of disability, then they might qualify for Medicaid or a state-funded program to pay for LTC services. Conversely, those with a lot of income or savings may be able to afford the actual costs of care. However, if you fall somewhere in the middle, you might want to shop around.
What’s the right approach to shopping for LTC insurance? “Buying some coverage with no inflation growth,” suggests Slome, is a good place to start. “A better plan could look at the same initial benefit with the ability to add to the coverage in future years even if your health changes.”
Do you or your loved ones pay for long-term care insurance? If so, what has your experience been with the claims process? Is it worth it to buy LTC insurance? Let us know what you think.