Broker Check


| May 01, 2019

My last blog was about how to deal with premium increases on your Long-Term Care(LTC) contract.  What if it happens again? Whether you accepted the rate increase or adjusted the coverage, you may have to deal with this again. After the initial shock and your very descriptive feelings about the insurance carrier, it’s time to deal with the reality and figure out what to do. At Innovative Financial Group-Atlanta, we are a full service independent agency and have helped many of our clients through this very issue. The issues are

  • Another increase
  • Reducing coverage exposes income and assets
  • Supplementing the care

Another Rate Increase

You just dealt with a rate increase a year ago or so and here it is again. After the initial shock of “why am I getting another increase”? I know the following will not help about the increase but at least it will explain why these carriers are having these increases. The biggest reasons include, people are living longer lives, people have kept their LTC policies at a higher rate than the carriers anticipated, people are actually using the coverage and finally low interest rates make these contracts not profitable. You may say, “That is not my issue” and you may be correct. Don’t be fooled though, the carriers are for profit and if a product is not profitable, the carriers can increase the premiums. As I mentioned, this doesn't help with the current increase but at least you understand what is happening with the carriers and why the increase. So what are my options?

Reduce coverage again

As I mentioned in my previous article, most carriers allow you to adjust coverage to help eliminate or reduce the coverage. But if you have reduced the coverage the year prior, will it make sense to reduce it again? Please consider with the reduced coverage will mean that your income and assets will be exposed faster than expected. Meaning if you or your spouse get sick and need care, there is less monthly coverage or less years of coverage so now you will need to use your income (social security, pension-if you’re lucky enough to have one) and then your assets to help provide for the cost of care. If you do consider a reduction, the next option may make sense to consider as well.

Supplementing the coverage

We have used this strategy many times for our clients. It helps provide peace of mind and confidence that there is a plan in place in the event future premium increases happen. So what is it? Many carriers have come out with Hybrid products to help clients deal with increasing premiums as well as the high cost of standalone LTC contracts. Life insurance and annuities that include a LTC rider and for this article, I will only be referring to the life insurance with LTC rider. You maybe thinking to yourself, “I am retired or close to retirement, I don’t need more life insurance!?” And you might be correct but this is not about life insurance, it is about the LTC rider. Here is how it works

  • Purchase a life insurance product (permanent contracts only-doesn’t work with term insurance)
  • A LTC rider is attached to the insurance
    • Depending on carrier-the rider allows you to access between 2% and 4% of death benefit per month
  • The insurance has a duel role – death benefit and a living benefit
  • The rider works much like a standalone LTC contract
    • You will have to qualify for the care
    • Some carriers have waiting or elimination periods
    • Receive care at home or in a facility
    • When the rider is used, there is a dollar for dollar reduction of the death benefit

Let’s use an example

  • $100,000 universal life
  • LTC rider allows access of 4% of the death benefit
  • 4% of $100K is $4000/month to pay for care
  • Once you have been approved for the claim and the waiting period has been met
  • Depending on carrier-re-imbursement or indemnity
    • Reimbursement will pay back what you spent
    • Indemnity will pay the amount you have access to (this example is $4K)
  • Both will reduce the death benefit dollar for dollar

The reason to supplement your current LTC contract is two-fold – In the event you have future increases, this will allow you not to take the increase and adjust the coverage. The second reason is with the hybrid life and LTC together, you know the benefit will be paid out either while you are living or once you pass away.

How you deal with LTC premium increases is never easy but one that should be dealt pro-actively versus reacting. What I mean by this is if you have a current LTC contract and regardless if you have received a premium increase or not, now is the time to get a plan in place if an increase happens. Get with the agent who sold you the contract or ask your CPA or accountant for the name of a trusted independent agent who you can talk to. At Innovative Financial Group-Atlanta, we are a full-service, independent agency and if we can be a resource for you and your family regarding this issue or any other, connect with us at