One couple, ages 69 and 70, came to her because their long-term care premium rose 25 percent from 2012 to 2013. Yuste evaluated the policy, which had an unlimited benefit period, and a 5 percent inflation protection rider.
“The couple had bought the policy 13 years ago. I looked at the original premium, and how much the premium had increased compared to the increase in benefit because of the inflation protection,” Yuste said.
She found that the couple had a 3.8 annual increase in premium, compared to a 5 percent annual increase in daily benefit.
“He was coming out ahead. Plus he had an unlimited benefit, which is not being offered much today,” Yuste said. “It’s important to look at the individual policy. He would have lost a lot if he had switched policies.”
The average nursing home stay is 18 to 36 months, Yuste said. “The fact that he had coverage for a longer period of time is very valuable.”
Salazar-Realini bought her long-term care policy 10 years ago. She has a $150 daily benefit, a 5 percent inflation rider and lifetime coverage. She pays $1,500 per year, and has not had a premium increase. “But even if they doubled my premium, it would still be a good deal,” she said. With the national average of $70,000 a year for a semi-private room in a nursing home and $39,000 for an assisted living facility, she said the potential benefit is greater than the cost.
Here are several strategies to cope with long-term care rate increases:
Adjust your inflation protection
When John Hancock raised its rates, it offered customers who had 5 percent compound inflation protection a chance to reduce the inflation protection to 2.8 percent instead of paying the rate increase. “Virtually all of my clients took that option,” Braddock said.
Spiegel said she and Wolk, 62, an interior designer, were offered the inflation protection drop, but decided not to take it. “We didn’t want to lower our protection,” she said.
Shorten benefit period
If you have an unlimited benefit period, you can shorten the time frame to save on premium, Braddock said. “Most people don’t need a policy for more than five years,” he said.
Change the daily/monthly benefit
The average daily benefit that people buy is $100 to $200 per day. You could reduce that amount to save on premium, Braddock said.
Lengthen the elimination period
The elimination period is the time period that you pay your own expenses before long-term care kicks in. Most people have a 90-day elimination period, Braddock said, so extending it is not the best idea. If you doubled it to 180 days, you would double your costs without a proportional reduction in premium.
Decide how much coverage you need
“There’s no rule that you have to protect 100 percent of risk or go naked,” Braddock said. “You don’t have to drive a Lexus or keep walking. The idea is to have enough money between all of your resources to take care of your needs.”
Yuste advises clients to look at the “safe income,” such as pensions, Social Security and annuities, that will be coming in on a monthly basis. “You might not need the maximum daily benefit of a long-term care policy,” she said.
If you don’t have long-term care