Understanding Long-Term Care Insurance Costs as You Age

“Do long-term care insurance premiums increase as you get older…?”

It’s a question many people ask as they consider whether or not they are going to buy a new policy.


As we age, the likelihood of requiring some form of long-term care increases. The closer you are to maybe using the policy,  the higher the cost of the long-term care insurance. These high costs can be a significant concern as people try to create a budget to handle all of the other factors that demand their money’s attention…

Understanding Long-Term Care Insurance Costs as You Age

But can long-term care premiums increase if you already own a policy ?


In this article, we will delve into the reasons behind the increase in premiums for both new policies as you get older, and why premiums can increase if you already own a policy.


I’ll explain a little about the regulatory process that insurance companies must go through to raise premiums on existing policies, ensuring that increases are justified and applied fairly across all policyholders; not just to someone like you who may have a claim making it so the insurance company wants to get rid of you…that isn’t legal!


Making sense of long-term care insurance premiums is vital for anyone looking to secure their future and manage their finances effectively. By the end of this article, you’ll have a clearer understanding of how age and time can affect your premiums, what you can expect from your policy, and how to navigate potential increases in your rates. 

The Rising Cost of New Long-Term Care Policies with Age

When considering the purchase of a new long-term care insurance policy, a worry people have is “if I wait to buy, then prices will be too high to afford…

It is true! Generally, the younger you are when you buy a policy, the lower your premiums will be. But why do long-term care premiums increase with age? It all comes down to the number crunchers and their data who work for the insurance company…

As individuals age, the likelihood of needing long-term care services increases, which translates to a higher risk for insurance companies. To offset this risk, insurers charge higher premiums for older applicants. For example, a long-term care policy purchased at age 50 will typically have significantly lower premiums than the same policy purchased at age 65. This is because, from the insurer’s perspective, the chances of a 65-year-old filing a claim are much higher than those of a 50-year-old.

Furthermore, the cost of long-term care itself is rising, which also contributes to the increase in premiums as one gets older. Inflation and the rising cost of healthcare services mean that the benefits paid out by these policies are likely to be higher in the future, necessitating higher premiums to ensure that the insurance company can meet its obligations.

Factors contributing to higher premiums for older policyholders.

Several factors contribute to the higher premiums charged to older policyholders for long-term care insurance:

  1. Increased Likelihood of Claims: As mentioned earlier, the older you are, the more likely you are to need long-term care services. Insurance companies price this risk into the premiums, leading to higher costs for older individuals.

  2. Shorter Premium Payment Period: Older policyholders have a shorter time horizon to pay premiums before they are likely to need the benefits. This means that the insurer has less time to collect premiums and invest them to offset future claims, resulting in higher premiums for older applicants.

  3. Health Status: Older applicants are more likely to have pre-existing health conditions that could increase the likelihood of needing long-term care. Insurers may charge higher premiums to account for this increased risk.

  4. Lower Insurability: As people age, they may become less insurable due to declining health. Insurers may either charge higher premiums to offset this risk or, in some cases, may not offer coverage at all.

Understanding these factors can help individuals make informed decisions about when to purchase long-term care insurance. While it may be tempting to delay buying a policy to save money in the short term, it’s essential to consider the long-term implications of higher premiums and the potential for being uninsurable in the future.

Understanding Maximum Long-Term Premium Increases with Long-Term Care

It might come as a surprise to learn that premiums for existing policies can also increase, albeit within certain limits which depend on the age you took out the policy. (Note: This only applies to traditional “stand-alone” policies and not “hybrid” long-term care policies…)

This potential for rate hikes can be alarming for policyholders who may no longer be able to afford their coverage, especially if they are on a fixed income in retirement.

The reason long-term care insurance can have rate hikes on existing policies is because they are issued as “guaranteed renewable.” This means the insurance company can’t cancel a policy as long as you pay your premium but it doesn’t guarantee the premium will stay the same over the insureds life.

This means that as long as you continue to pay your premiums, the insurance company cannot cancel your policy. Moreover, guaranteed renewable policies protect policyholders from being singled out for individual premium increases based on changes in their health or claims history. This provides a level of security, as it ensures that your coverage will continue even if your health deteriorates or you need to use your benefits.

While guaranteed renewable policies protect against individual rate increases, insurance companies can still raise premiums for all policyholders within a certain class. However, these increases are not arbitrary and must be justified. Insurers must demonstrate to the state insurance commission that the rate hike is necessary due to changes in projected future costs, such as increased claims or longer lifespans. The insurance commission carefully reviews these requests to ensure that they are reasonable and fair.

If the commission approves the rate increase, the insurance company can then apply it to all policyholders within the affected class. It’s important to note that these increases are typically spread out over time, and policyholders are usually given advance notice. This allows individuals to make adjustments to their budgets or explore options to reduce their coverage and lower their premiums if necessary.

Understanding these aspects of long-term care insurance premiums can help policyholders better prepare for potential future costs and make informed decisions about their coverage.

The Maximum Florida Can Increase Premiums On Existing Long-Term Care Policies...

Figure 1 shows a chart that outlines the maximum percentage increase in long-term care insurance premiums based on certain insured’s ages at the time of policy inception in Florida (full rate hike found here.) 


You can see younger policyholders may face higher potential rate increases over the lifetime of their policy compared to older policyholders. 

Figure 1

Age at Policy InceptionMaximum Percentage Increase
90 and Over 10%

Dealing with Long-Term Care Premium Increases For Policy Holders

When faced with premium increases for long-term care insurance, policyholders have several options and strategies to consider. These choices can help manage the cost while still maintaining valuable coverage.


Choices Available to Policyholders if Their Premiums Become Unaffordable Due to Rate Increases

  1. Reduction of Benefits: One way to lower your premiums is to reduce the scope of your coverage. This could mean shortening the benefit period, decreasing the daily benefit amount, or extending the elimination period (the waiting period before benefits begin). While this reduces the cost, it’s essential to carefully consider how it might impact your future care needs.

  2. Switching to a Different Policy: Sometimes, it may be possible to switch to a more affordable policy offered by your insurer. This might involve changing to a policy with lower benefits or different features that better align with your budget.

  3. Exploring Group Policies: If you’re employed, check if your employer offers a group long-term care insurance plan. Group policies often have lower premiums than individual policies, although they may offer less flexibility in terms of coverage.

  4. Utilizing Inflation Protection Options: If your policy includes inflation protection, you might have the option to reduce or eliminate this feature to lower your premiums. However, this means your benefit amount won’t increase over time to keep up with the rising cost of care.


Strategies for Managing Increased Premiums

  1. Budget Adjustment: Reevaluate your budget to see if there are areas where you can cut expenses to accommodate the higher premiums. This might involve making sacrifices in other areas, but maintaining your long-term care coverage can provide peace of mind.

  2. Payment Options: Some insurers offer different payment options, such as annual or semi-annual payments, which might result in lower overall premiums compared to monthly payments.

  3. Seek Professional Advice: Consulting with a financial planner or insurance agent can provide personalized strategies for managing premium increases. They can help you assess your options and make informed decisions about your coverage.

  4. Leverage Savings or Investments: If you have savings or investments, consider using a portion to cover the increased premiums. This should be a carefully considered decision, as it involves using assets that might be earmarked for other purposes.

By exploring these options and strategies, policyholders can find ways to manage premium increases without sacrificing the essential protection that long-term care insurance provides.

The information provided on this website is for educational and informational purposes only and is not intended as financial, investment, or legal advice. Kevin Wenke, CFP, CLU, and his companies, Decision Tree Financial and Decision Tree Investment Advisors LLC, do not guarantee the accuracy or completeness of the information presented. No client-advisor relationship is established by the use of this website or interaction with its content.

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