Sorry, I did not discuss costs of LTCi.
Yes, premiums can and do rise. Ours have risen substantially over the last 22 yrs, but I was certain that insurers were underpricing the business (there was a lot of competition back then) and I told my spouse we had to be sure we could afford a doubling or more of costs. We have individual policies; women always pay more because their longevity is better.
There was a modest premium increase 8 yrs later. 4 yrs after that, a more serious increase, about 25%. There have been four premium increases over the last decade, substantially increasing costs.
Policyholders are always given options (from our insurer):
- You can "freeze" benefits; payments will remain the same and never rise, but benefit amount never changes. Remember that inflation eats away cash worth: if you buy something in 2022 that costs $100, by year 2042 that same item will cost you almost $164 with average inflation of 3%/yr.
- Or, you could drop all options (home healthcare, inflation compounding) and stay with just a flat SCN benefit; your premium would drop a bit.
- Or, you could keep your base benefit and options, but accept a "cap", either in dollar amount (say, $350K) or in length of benefit (5 yrs or 7 yrs is usually offered). Your premiums would rise by about 15-20%, depending on what the insurer calculated.
- Or, you can take the "Rolls Royce" option, keep everything the way it is, and pay 45-75% more premium (again, depending on what the insurer calculated).
We have always opted to keep what we have. We have extremely generous benefits, having grown 5% every year due to our purchase of the Inflation Rider; home healthcare; and an unlimited benefit period (which is no longer sold by any insurer).
Our original premiums, in total for BOTH policies, were originally $2300/yr. There is a final phase-in of the last premium increase coming in Nov 2022, at which point our total for (again) both policies, will be roughly $8300/yr.
My rough calculations are that we've spent about $51K in premiums to date - plus any future premiums.
It's a lot of $$$$. We are fortunate to have sufficient funds. I do not agree with those who say,
if I save my money and invest it, I'll have enough to pay for any LTC needs.
#1, you need to save that money through thick and thin, for decades. What happens if you suffer a disability, or even just a job loss, and can't work? Even paying for SCN for six months can be a whopping sum these days. There are additional costs for being in a SCN facility. You want Depends? Pay for them yourself. You want a bathrobe and slippers? Medicaid doesn't pay for that. Medications are usually an extra cost not included in SCN charges.
#2, investing for gain carries risk. What if you have $500K in a special LTC-designated portfolio, and a true Bear Market wipes out 30% of your portfolio? And THEN you suffer a disability and need to start taking the money, with no more contributions?
#3, Not to mention, taking that money in distributions is taxable. Modern LTCi policies pay benefits tax free. And if you run out of assets and have to go on Medicaid, LTCi is not considered income, since it's paid to the facility.
Modern LTCi policies have limited benefit periods, inflation rider option is usually limited to 3%. A 51-yr old friend of mine in good health received a 2020 quote of $3K/yr. for $250/day benefit with home healthcare reimbursement and the 3% inflation rider, capped at 5 yrs length.