By Frank Darras
As an insurance lawyer specializing in long-term care policies, I deal everyday with clients who’ve had serious problems collecting benefits from insurance companies. Premiums for long-term care insurance have risen over 90 percent for some policyholders in recent years. It can be discouraging for those Americans who are getting older and worrying about what will happen to them as they age, particularly the baby boomers. Long-term care insurance is essential to have, whether single, married, young, or old. However, the rising premiums have forced many to cash in and forfeit their policies, or be forced to reduce or give up their benefits. Until legislation is put in place to protect consumers from this happening, there are smart ways to avoid rising premiums, or at least soften the blow.
One option is to purchase inflation coverage, especially when buying a plan young. Compound inflation protection at 5 percent might cost a little more now, but it will leave your clients better protected years from now. As shown recently, premiums are subject to change and a 90 percent increase 15 years from now isn’t a risk your clients want to take.
For clients nearing closer to the time they might have to use their long-term care benefits, you should advise them to choose to lower the inflation protection or the benefit period. Doing this is called a “landing spot”. This will allow your client to maintain coverage, but avoid the premium increase. If they’ve stayed healthy and feel they won’t need the extended benefit period on their policy, this might be the best option for your client.
Sometimes the best protection against premium increases can be adhering to a budget. I always advise clients to never spend more than 5 to 10 percent of their income, both earned and unearned, on long-term care insurance premiums. While a premium increase will still hurt if your client is first paying in this range, it most likely won’t break the bank. Long-term care insurance is important, but never forget to stick within a budget and maintain a simple savings account. Paying lower premiums now will allow your client’s security when premiums rise later.
Despite the rising premiums, the alternative to long-term care insurance is a lot worse. Often, Medicare doesn’t cover custodial care – leaving children to pay the high costs of private long-term care or worse, being placed in a state-funded Medicaid facility that is funded by a diminishing budget. Lawyers need to advise consumers to do what they can now to protect themselves from rising premiums and insurance companies should consult an insurance lawyer with questions about the policies they are selling.
DarrasLaw is the nation’s top disability and long-term care insurance litigation firm. Frank Darras has recovered nearly three quarters of a billion dollars in wrongfully denied insurance benefits. www.darraslaw.com