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Long Term Care Insurance Rates Increase 2%

Armen Hareyan's picture

The announcement of the 2009 long term care insurance (LTCI) price index shows that the rates have increased by two percent compared to the previous year. However, some ages actually pay slightly less for the long term care insurance.

A 55-year-old individual considering long-term care insurance protection can expect to pay $723-per-year for a base level of protection if they are married or $1,060 if they are single according to the 2009 Long-Term Care Insurance Price Index published by the American Association for Long-Term Care Insurance (AALTCI.org). Across various age groups, costs for coverage increased about two percent from the prior year.

The index published annually measures costs for top-selling long-term care insurance policies that offer consumers approximately $115,000 in current benefits, with protection increasing yearly as the individual ages. "A solid base plan of protection will grow in value to over $305,000 of protection 20 years from now," explains Jesse Slome, Executive Director of the national trade organization that conducted the research. The study compares costs for different levels of plans that provide long-term care benefits for 3-years or longer with a compound inflation option that increases the available insurance benefits by five percent compounded each year.

"For some age bands the cost of long-term care insurance actually declined," Slome notes. "What we did see is a far wider range of prices between insurers offering basically the same coverage." According to the Association study, costs can vary by as much as 100 percent. "This could reflect different benefits or simply the individual insurer's pricing assumptions," Slome explains. "Consumers should compare policies or work with a knowledgeable insurance professional who can analyze for them."

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Lower Interest Rates Impact Costs For Long Term Care Insurance Policies

The cost for long-term care insurance is closely related to interest rates that have significantly declined in recent years. "Investment income comprises between 40 and 60 percent of the dollars used to pay eventual long-term care claims," Slome explains. "Premiums paid by policyholders make up the other portion and as interest rates have declined, insurers have found it necessary to raise premiums for protection." The industry paid out $5.8 billion in claims in 2008 to some 180,000 policyholders.

"The cost of long-term care insurance is directly related to how much protection you purchase, the age you first apply and your health at the time of application," explains Slome. "Over half of all individual applicants are between ages 55 and 64, and one third purchase a daily benefit of between $100 and $149." The daily benefit amount actually equals either a cash benefit or a pool of money that the policyholder can access. Most insurers offer significant discounts when both spouses apply for coverage.

The survey compared costs for individuals age 55 with those age 65. "A married individual purchasing $172,000 in current protection will pay about $20 a week ($1,084-per-year) by qualifying for available good health discounts," Slome explains. "By waiting until they are age 65, they'll likely pay $63-a-week because they will need to buy more coverage to keep pace with inflation and will likely no longer qualify for the good health savings."

See the 2009 National Long-Term Care Insurance Price Index.

Written by Jesse Slome of American Association for Long-Term Care Insurance.