Long Term Care Insurance – The Cost of Waiting
I am often asked: When should I purchase a LTC Insurance policy?
For the past 6 years my answer has been: “Wait 5 years and your premium will double AND you will pay the delta (the increased premium) for the rest of your life.”
The premium increase is due to the following factors:
1. Cost of care increases at 5-6% annually and in 5 years you will have to purchase higher daily benefits.
2. You will be 5 years older.
3. You will be forced to purchase a policy that is offered 5 years from now and the policy will be more expensive as the carriers reprice due to higher claim experience and lower bond returns.
4. You may experience a health issue.
Case Study: 6 years ago my clients (a couple, ages 53 & 48 and both preferred) purchased the following benefits: $200 Daily Benefit, 5% Compound Rider, Unlimited Benefit Period and a 100 day Elimination Period. Total annual premium: $3,926.
Today, 6 years later (ages 59 & 54), I ran an illustration for the same carrier at $270 Daily Benefit and the other policy features are equivalent. (Today the original policy pays a Daily Benefit of $268 due to the 5% Compound Rider.) I kept both insures at the preferred rate. The total annual premium on the new policy would be $8,542. If either insured had experienced a health issue the cost would be higher.
Additional Note: At the present time 2 major carriers have or will be increasing the pricing on policies that have a 5% Compound Rider.
