LTCi Price Index Falls for Some, Rises for Others

A 60-year-old couple buying new long-term care insurance (LTCi) coverage can expect to pay an average of $3,490 in annual premium for top shelf coverage, 8 percent lower than last year, a new index reported.

Top LTCi coverage includes an inflation growth factor of 3 percent compounded annually and a three-year initial benefit of $164,040 for each spouse, the 2018 National Long Term Care Price Index found.

The lower 2018 rate was due to fewer LTCi insurers participating in the survey, however, not because of lower prices for long-term care services, said Jesse Slome, director of the American Association for Long-Term Care Insurance, which publishes the annual index.

By excluding from the survey insurers selling few high-priced products, the 2018 data more accurately reflects LTCi pricing conditions, Slome said.

Prices rose for 55-year-old individuals, the survey found.

A 55-year-old woman would pay $2,956 in annual premium for a policy with a 3 percent compound annual inflation growth factor and a three-year initial benefit worth $164,000. That compares to a 2017 premium of $2,600, the index found.

A 55-year-old man would pay $1,870 in annual premium for the same coverage compared to $1,665 in 2017, the index found.

A couple age 55 would pay an annual premium of $3,000, while a couple age 65 would pay an annual premium of $4,675, the 2018 index found.

Women and couples buy LTCi more frequently than single men.

Advisors: Shop Around

Advisors who shop around for middle-grade LTCi policies are more likely to be rewarded with lower premiums.

LTCi policies with compound annual inflation growth factors of 2 percent or less, or a one-year LTCi policy, cost less than top flight LTCi policies, Slome said.

LTCi policies are unusual in that they may not begin to pay out in claims until 30 years or more after they are the purchased.

By the time the LTCi policies are called on to protect a policyholder, the value of the benefit will have been eroded by inflation.

Insurers have raised prices on LTCi policies to make up for previously selling those policies too cheaply. Other companies simply left the market, which hurt sales.

Too many agents also focus on products with prices that are financially out of reach and as a result “people take an all-or-nothing approach,” which curtails sales, Slome said.

“If airlines only advertised first-class seats, they would not sell as many tickets as they do,” Slome offered as an analogy.

Fewer than a dozen insurers account for about 80 percent of LTCi sales, down from more than 100 LTCi companies at the end of the 1990s.

LTCi products cover about 7.2 million, according to a May 2016 study of the long-term care market published by The Center for Insurance Policy and Research.

LTCi insurers paid $8.65 billion in claims in 2016.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.