Broker Check

How to deal with Long-Term Premium Increases

| April 13, 2019

This has never been an easy discussion with our clients but one that needs to be addressed sooner than later. When you purchased the coverage, you thought you would not have to deal with this until either you or your spouse needed care. You informed the kids that you had the coverage, in response you might have heard from them “Why? If that ever happened, you know we would be there to provide the care. Save your money!!!” You both smile knowing the intent was sincere but actually putting the burden on them was not the right thing to do. At Innovative Financial Group-Atlanta, we have sold many long-term care contracts from many insurance companies. We have also dealt with this exact issue and plan to explain what your options could be regarding the increase

We have found 3 options to be standard for most carriers

  • Accept the premium increase
  • Create a reduce paid up contract
  • Adjust contract to eliminate the increase  

Before we get into each of the options, the first step is to call the agent that sold you the coverage. If that person is not around, ask your financial advisor or CPA to refer you to someone they know and trust. Once you are connected with that agent, know you can get down to brass tact’s

Accept the premium increase

This is always hard to tell our clients but if they can financially afford to pay the increase in premium, it may be best to do so. The reason for this is to ensure that the coverage will either remain the same or possibly grow in the future. (if there is an inflation rider included) With that being said, I do emphasize that this doesn’t MEAN you are exempt from future premium increases.

Create a reduced paid up contract

What this means is the coverage you have will be reduced to the amount of premiums you have paid into the contract to date. Here is a example to make it more clear.

  • $200/day benefit - 3 year benefit period – 90 day elimination period – no inflation rider
  • Annual premium of $1500 since Jan of 2000
  • $1500 times 19 years is a total of $28,500 in total premiums paid

With a reduced paid up contract, you would be able to have coverage of $200/day until you exhaust the total of $28,500. What this means in terms of coverage, if you got sick and needed care and used $200/day, you would have coverage for only 142 days. Iin other words just less than 5 months worth of care. Not a whole lot when you break it down like that. If this is to be considered and executed, remember once you make that decision, you cannot revert to the original coverage. This decision is final, no re-dos.

Adjust the contract to eliminate the increase

Most insurance companies are now offering adjustments within the coverage itself to either reduce the increase amount or eliminate it completely. Lets go back to the above example and dive into it a little more

  • $200/day benefit - 3 year benefit period – 90 day elimination period – no inflation rider
  • Annual premium of $1500 since Jan of 2000
  • Next anniversary, the premiums will increase 30% ($450 increase to a total of $1950/yr)

Most carriers will allow an adjustment in either the daily benefit or the benefit years. So the options may be to either reduce the daily benefit to $175 or $150 and the premium will remain the same or reduce the benefit years from 3 to 2 with the same effect. As in the first option, just because you have elected to reduce coverage doesn’t mean you are exempt from future increases.

Whatever you think about premium increases, the reality is there is always a possibility for it. You should not just put your head in the sand and hope it doesn’t happen to you. Take the time to either talk to your agent or find an independent agent to have this discussion before a letter is received.   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