What is the truth about long term care insurance rate increases?
There have been long term care insurance rate increases over the last several years. Most people don’t know that policies purchased today are insulated from pricing mistakes made on older policies. If you own or are thinking about buying a policy, then you must understand policy forms. Policy forms can protect you from long term care insurance rate increases.
But what is a policy form and just how does it protect you?
A policy form is similar to the “make and model” of a car. Every year car companies come out with new cars that have new features and new prices. Each new model must comply with the latest government regulations.
The same is true for long-term care insurance. About every year or two, insurance companies come out with a new “policy form”. Each form has new features and new pricing. Insurance regulators require that each new policy form be priced according to the most current claims data. Because of these regulations, today’s policy forms are priced more accurately than policy forms that were sold years ago.
More importantly, any policy purchased today is protected from the pricing errors of policies sold years ago.
For example, if an insurer is losing money on a policy form it sold in 2004, the insurance company CANNOT raise rates on the newer policy forms to try to make up for the losses on the older 2004 policy form. New policy forms are protected from the old pricing mistakes.
Most states have these regulations protecting you from long term care insurance rate increases:
- Premiums CANNOT be raised only to increase the insurance company’s profits
- Premium can’t be raised because you get older or reach a certain age
- Premiums can’t be raised because you make a claim
- You can’t be singled-out for a rate increase
- Any premium increase must be shared by everyone who owns that same policy form
- Any premium increase must be based upon the current and projected claims on that policy form