The average price a couple in their 60s paid for a new long-term care policy rose 6 to 9 percent in 2016 from the previous year, according to the 2017 Long-Term Care Insurance Price Index.
The Long-Term Care Insurance Price Index is released annually by the American Association for Long-Term Care Insurance in Westlake Village, Calif.
“Insurers are continuing to price this product in anticipation of continuous claim payments and the fact that interest rates are likely to stay low for a number of years to come,” said Jesse Slome, director of the American Association for Long-Term Care Insurance.
“Long-term care is not a commodity like gasoline and so many factors go into the price index,” he added.
A 60-year-old couple will pay between $100 and $150 a month each for long-term care insurance protection, the AALTCI said.
Rates Decline in Some Categories
Rates for single men in some instances declined by as much as 20 percent in 2016 compared with the previous year, the price index found.
A 55-year-old single man could anticipate paying anywhere from $90 to about $150 per month for long-term care insurance available from some insurers, the AALTCI said.
Advisors looking for LTCi coverage for clients should shop around, Slome said.
Costs for virtually identical coverage varies from one carrier to another by as much as 70 percent in some cases, as each insurer sets its own rates and applies its own discounts, according to the price index.
“You generally only buy long-term-care insurance once, so it’s important to do it correctly the first time,” Slome said.
There are fewer than a dozen insurance companies accounting for 80 percent of LTCi sales in the U.S., down from more than 100 LTCi companies at the end of the 1990s.
Companies gradually pulled out of the market as they found they had underpriced their policies and found the long-term care unprofitable.
Two small Pennsylvania issuers with projected long-term care liabilities in excess of $4 billion are on track for liquidation in 2017, the Wall Street Journal reported in December.
John Hancock stopped accepting long-term care applications Dec. 2, and Genworth Financial announced its sale to a Chinese real estate and financial conglomerate in October.
Companies that dropped out of the business last year were not included in the pricing index calculations, Slome said.
New premium issued peaked in 2003 at more than $1.2 billion. It collapsed in 2004 and the number of insured lives has plateaued at 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.
$8.65 Billion in 2016 Claims
Long-term care insurers paid $8.65 billion in claim benefits in 2016, an increase from $8.15 billion in 2015, the AALTCI reported this month.
There were about 280,000 individuals on long-term care claims last year, an increase of about 20,000 people from 2015, AALTCI reported.
Without insurance to pay some or all of the cost of long-term care, the caregiving responsibility often falls on elderly spouses or adult children of aging parents.
With medical advances extending longevity, many people are likely to live longer than they planned and will need long-term care, Slome said.
LTCi policies are unique 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 future value of what an LTCi can buy will most likely have been eroded by inflation unless policies are inflation protected.
A 2 percent yearly increase in long-term care costs means today’s costs will be 61 percent higher in 25 years and 78 percent higher in 30 years, Slome said.
A 3 percent annual increase in costs means that someone age 60 will face costs that are 103 percent higher when they reach 85, he said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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