En español | Long-term care insurance is becoming a luxury buy. The middle class increasingly finds itself priced out of that market as premium costs rise, not only for individual coverage but for many group policies, too. The number of new individual buyers dropped by 43 percent between 2004 and 2009 and has recovered only slightly since, reports LIMRA, a group that provides insurance research.
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So, should you stretch your budget to own a policy? Can you afford not to?
A good long-term care (LTC) policy helps pay for personal care if you can't manage by yourself. It should cover services at home or adult day care, assisted living facilities and nursing homes. Many employers offer group LTC insurance at your expense and with no medical exam. Individual policies cost more and are sold only to people in reasonably good health.
Prices going up and up
Your pocketbook also has to be in good health. For people 55 to 65, prices for new policies are up an average of 30 to 50 percent compared with five years ago, says Jesse Slome of the American Association for Long-Term Care Insurance. A single person, age 55 and in "standard" health, would pay an average of $2,000 a year for a policy with middling benefits. A couple at 65 might pay $5,000. Many insurers are raising prices on existing policies, too.
This cost uncertainty reveals an industry in turmoil. Insurance companies are paying more claims than expected because people tend not to let their policies lapse. Better medical care extends the lives of the chronically ill. Low interest rates have slashed the returns that insurers get from their investments. In the past five years, at least 14 companies quit selling new individual LTC policies, LIMRA reports, and seven dropped out of the employee-group business. They still service those policies but can raise rates.
Insurers are not allowed to hike premiums on particular individuals but can go after policies by type. For example, take policies with inflation protection that raise benefits by 5 percent a year. That's great for you — the increase just about matches the five-year average increase in national nursing home and assisted living costs. But it's costly for insurers. Some might let you avoid a price hike if you'll reduce your inflation protection to only 2.7 percent a year.
Some policyholders give up. AARP recently heard from a 90-year-old whose premiums had soared by almost 200 percent over the past eight years. This year, she had to let the policy lapse.