Addressing Concerns about Long-Term Care Insurance Rate Increases

Long-term care insurance (LTCI) is one of the most effective tools available for protecting a client’s assets from the devastating costs of long-term care. But for many clients, and the attorneys advising them, premium rate increases on traditional LTCI policies have become a recurring source of anxiety. Understanding where these increases come from and how to talk about them clearly is an important part of your role as an estate planning or elder law attorney.

Read More: Starting the Long-Term Care Insurance Conversation with Clients

Why LTCI Rate Increases Happened in the First Place

Most of the rate instability in traditional LTCI policies traces back to the early days of the market, when insurers were working with limited data and overly optimistic assumptions. Early products underestimated how long policyholders would live, how frequently they would file claims, and how significant the rise of cognitive disorders like Alzheimer’s disease would become. Extended care for dementia patients is both common and costly, something early actuarial models simply didn’t account for well.

The low-interest-rate environment of the 1990s and early 2000s compounded the problem. Insurers had projected investment returns that didn’t materialize, putting additional strain on policy reserves. The result was a wave of rate increases across most major carriers as they worked to stabilize their LTCI portfolios.

That correction was painful, but it was largely a one-time reckoning. The industry has since overhauled its pricing models, and today’s policies are underwritten with far more conservative and accurate assumptions.

Putting LTCI Rate Increases in Context for Clients

When a client raises concerns about LTCI premiums going up, the most useful thing you can do is provide context. The increases that defined the earlier era of LTCI were the result of a market that hadn’t yet matured, not a sign that the product itself is fundamentally flawed.

Modern LTCI policies are priced with better longevity data, more realistic claims expectations, and greater regulatory oversight. While no insurer can guarantee that premiums will never change, the conditions that drove the dramatic increases of the past are largely no longer present.

It’s also worth helping clients think through the alternative. The cost of not having coverage, which can lead to spending down assets, selling a home, and exhausting a spouse’s financial security, often far exceeds the cost of a premium increase. That comparison is worth making explicit.

Options for Clients Who Are Facing a Rate Increase

For clients who already hold traditional LTCI policies and are staring down a premium hike, there are usually several paths forward:

• Reduce coverage. Many carriers allow policyholders to reduce their daily benefit amount, shorten the benefit period, or eliminate inflation protection riders in order to keep premiums at or near their current level. This isn’t ideal, but partial coverage is generally better than no coverage.
• Maintain the current policy. For clients who can absorb the increase, retaining full coverage may be the right call. It’s worth reminding them that they could not purchase their existing policy at today’s rates. The coverage they have is often more comprehensive than what would be available to them now given their age and health status.
• Explore hybrid LTCI products. Asset-based policies that combine life insurance or an annuity with long-term care benefits have become an increasingly attractive alternative. These products typically offer rate stability, meaning premiums are locked in at purchase, along with a death benefit if long-term care is never needed. For clients who are concerned about paying premiums for coverage they may not use, that return-of-premium feature can make a meaningful difference in their willingness to plan.

Practical Tips for Having the Rate Increase Conversation

Here are a few things to keep in mind when these conversations come up with clients:

Lead with the big picture. Rate increases feel significant in isolation. Framing them against the full cost of an uninsured long-term care event helps clients make a more rational decision. A premium increase of a few hundred dollars a year looks different when weighed against $10,000 or more per month in nursing home costs.

Review the full policy before recommending changes. Before advising a client to reduce or drop coverage, make sure you understand what they have. Some older policies include benefit features that are no longer available in today’s market. Losing those could be a significant setback to their overall plan.

Know your state’s consumer protections. Most states have regulatory frameworks governing how and when carriers can implement rate increases on LTCI policies. Being familiar with those rules and helping clients understand their rights is part of serving them well.

Consider the spousal picture. For married clients, a rate increase on one spouse’s policy can affect the financial planning for both. It’s worth stepping back and looking at how any coverage changes interact with the broader asset protection strategy.

Read More: Refer LTCI Clients to Our Team

Rate increases on traditional LTCI policies have understandably shaken some clients’ confidence in the product. Your job is to help them see the full picture:  where those increases came from, why the landscape looks different today, and what options are still available to them.

With the right guidance, most clients can find a path that keeps their long-term care planning intact without breaking their budget. And for clients who haven’t yet purchased coverage, the conversation about modern LTCI products and hybrid alternatives is one worth having sooner rather than later.

For more information on current LTCI products or help working through a client-specific planning scenario, schedule a call with our team. We’re here to help.