LONG TERM CARE INSURANCE - THE COST OF WAITING
by John B. Linvill, Jr., CSA ~ May 2010

I am often asked: When should I purchase a LTC Insurance policy?

For the past 6 years my answer has been: “Wait 5 years and your premium will double AND you will pay the delta (the increased premium) for the rest of your life.”

The premium increase is due to the following factors:

1. Cost of care increases at 5-6% annually and in 5 years you will have to purchase higher daily benefits.

2. You will be 5 years older.

3. You will be forced to purchase a policy that is offered 5 years from now and the policy will be more expensive as the carriers reprice due to higher claim
experience and lower bond returns.

4. You may experience a health issue.

Case Study: 6 years ago my clients (a couple, ages 53 & 48 and both preferred) purchased the following benefits: $200 Daily Benefit, 5% Compound Rider, Unlimited Benefit Period and a 100 day Elimination Period. Total annual premium: $3,926.

Today, 6 years later (ages 59 & 54), I ran an illustration for the same carrier at $270 Daily Benefit and the other policy features are equivalent. (Today the original policy pays a Daily Benefit of $268 due to the 5% Compound Rider.) I kept both insures at the preferred rate. The total annual premium on the new policy would be $8,542. If either insured had experienced a health issue the cost would be higher.

Additional Note: At the present time 2 major carriers have or will be increasing the pricing on policies that have a 5% Compound Rider.

John B. Linvill, Jr., CSA ~ (610) 688-1587
www.jlinvillLTC.com ~ www.jlinvill.com

All Material ©2010 John B. Linvill Jr., CSA
Reproduction of this article is prohibited without the express written consent of the author.
Inflation calculations are based upon current economic statistics and estimates for the Philadelphia area.