Unum LTC Premium Increasing by 50% - Worth Keeping?

[Small Law Survivor]

My employer offered LTC insurance to employees in 2000. I signed up but my wife, who had a lot of health issues and would not have qualified, did not.

It was a good deal in 2000 - $1272/yr. for unlimited duration, $6,000/month facility payment increasing at 5% a year. With the simple 5% increase this is now 125% of 6000, or over $13,000/month.

I am 73 years old. If I were disabled tomorrow after the 90 day waiting period this policy would pay over $13,000/month for the rest of my life. I guess I'd have a private room

The problem is that the $1272/year premium is a thing of the past. Here is the history of cost increases:

2000 (start) - $1,272/year
Feb 2014 - $2,232/year
Feb 2021 - $3,732/year
Feb 2025 (pending) - ~$6000/year
Projected - who knows, but at this rate could easily reach $10,000/yr and highter

I am in good health. I'd be surprised if I ever needed long term care, but who knows? I could have a stroke later today and need care for the next 20 years, right? Or, I could remain in good health and die while jogging at 95.

In any event, this policy has become expensive, and I don't know if I should continue with it. The way I look at this is, if I were offered the policy today at $6,000/year, would I buy it? I'm not sure I would. The initial appeal back in 2000 was that it was so cheap it was a no-brainer. I didn't give it much thought then.

Note that $6,000/year is not a budget breaker for me - not even close. I can afford it.

How should I go about making this decision? Please help me.

[nisiprius]

The way you make your decision is by focussing, not on the cost of the policy, but by assessing the risk and whether you feel confident you can just take on the risk yourself.

Your example was "I could have a stroke later today and need care for the next 20 years, right?"

Genworth says the median cost of a semiprivate room is $8,669/month. If the policy increases its benefit by 5% every year, it's a cinch that the cost of care increases at least that much. But one might hope that an investment portfolio could grow that fast, too. So let's just assume we can work in year-2025 dollar. Your hypothetical twenty-year stay is 240 months @ $8669/month = $2,080,560. Or one million for ten years.

So the question is not whether you can afford $6,000/year, but whether you can reasonably afford the equivalent of $1 million or $2 million year-2025 dollars.

(Of course we need to know whether your policy has a limit on the number of years it will pay).

[Small Law Survivor]

No limit on number of years it will pay. I've spoken to a few knowledgeable people and they say it is an extremely good policy.

[TheGiantess]

My mom is 92 and pays $6000 for unlimited years but only $150 a day. If you can afford it, I would keep it. Does it cover in home care? One of the things my mom did over the years to reduce the cost was lower the daily rate. Could you ask for a 3% increase instead of 5%. Or change the benefits slightly to help reduce the cost?
TG

[simas]

Hating insurance companies is not a good reason, but...

I'll point out that letting LTCi policies lapse is exactly what insurance companies want and were hoping for. Their plans were to take in premiums and have policyholders get discouraged by premium increases and let their policies lapse before they needed to pay out any benefits.

Huh? this is math (that actuaries do), matching the projected liabilities with required funding, per state regulations. and if costs rise, it would be passed to policyholders, again, as required by every state in this country in each and every rate filling required and approved by each state where insurance company does business. 'Hating insurance company' is not understand how this business works and is regulated and yes, there is no free lunch here, just math.

all insurance companies are measured on direct written premium (as one of the primary metrics), they would love for you to keep the policy, do appropriate calculations and price that per state guidance. cancelling your policy is reducing the direct written premium, if you think you are hurting them by staying on, you do not understand how this works.

OP, evaluate it as any other decision - do I need that risk transferred and does it worth it for me based on what I know now. Whether that is down to 2K or up to 10K later on, you cannot control the future.

[rustwood]

I think it is very difficult for at least most of us to determine how confident we are in our ability to self-fund a LTC need of unknowable duration starting in some at an unknown date in the future. The policy appears to be sufficient to cover just about any future need. Given that, you might think about whether it is worth $6k/yr (and rising) for you to know that essentially any need that might come will be fully covered? If you can easily afford it, it might still be a bargain even though it reasonably feels like you are being had by the insurance company. I suspect with that policy you'd be welcomed with open arms by almost any care facility and they'd probably happily work with your insurer to get your care bills paid. If so, that could also lighten that load on your family members.

Even if the premium continues to go up, it seems like the worst case might be $200k in today's dollars over the next 20-25 years - even with future increases. Meanwhile you'll still be earning returns on that money before it is paid out. To me, that doesn't seem like all that much to well and fully check the LTC box. It also might end up being far less than $200k.

Since this increase may cause others to drop the policy, I wonder how that would affect the likelihood and magnitude of future increases.

It may not be an option, but I'd ask if there is an option for you to pay it up for life now. That would be a one and done proposition, thereby eliminating angst about future increases. Of course you'd have to be willing to accept that an early demise would make that a relatively bad deal for you. There'd be no worries about it in the interim though (nor afterwards, really).

[nisiprius]

Hating insurance companies is not a good reason, but...

I'll point out that letting LTCi policies lapse is exactly what insurance companies want and were hoping for. Their plans were to take in premiums and have policyholders get discouraged by premium increases and let their policies lapse before they needed to pay out any benefits.

Huh? this is math (that actuaries do), matching the projected liabilities with required funding, per state regulations. and if costs rise, it would be passed to policyholders, again, as required by every state in this country in each and every rate filling required and approved by each state where insurance company does business. 'Hating insurance company' is not understand how this business works and is regulated and yes, there is no free lunch here, just math.

all insurance companies are measured on direct written premium (as one of the primary metrics), they would love for you to keep the policy, do appropriate calculations and price that per state guidance. cancelling your policy is reducing the direct written premium, if you think you are hurting them by staying on, you do not understand how this works.

OP, evaluate it as any other decision - do I need that risk transferred and does it worth it for me based on what I know now. Whether that is down to 2K or up to 10K later on, you cannot control the future.

I stand corrected and will edit my post accordingly.

I won't put this in that post, but I still say that insurers were counting on being able to collect premiums without ever needing to pay out any benefits, on a large percentage of policies.

American association for Long-term Care Insurance

When insurers calculate pricing for long-term care insurance, they factor in a "lapse" rate. Simply said, they know that over time people will decide they no longer want to pay for this coverage.

Boy were they wrong! Insurers in the 1990s and early 2000s were conservative. But they still projected that (say) 4% would lapse their policy each year. Over say 20 years, 80% of policyholders would thus lapse their coverage.

What really happened? People DID NOT LAPSE THEIR COVERAGE. Only 1% did (or less). So a company that sold 100,000 policies and expected 20,000 after 20 years (20 x 4% = 80% dropped policies) ACTUALLY HAD 80,000 policies still in-force (20 x 1% = 20,000 lapsed policies). More policies meant more claimants.

To be preparded to pay future claims, insurers needed to raise rates.

States approve the increases to raise certainty that insurers are funded adequately to meet their responsibility to pay future LTC claims.

TODAY NEW POLICIES BEING SOLD generally use lapse rates of 1% (or maybe less). As a result, policies holders face little (if any) risk of a future rate increase. That's the good news. But newer policies COST A LOT MORE.

[beyou]

One question does it have any inflation protection ? Or is it really 13k/month forever ?
If you don't need this for 15 years, 13k without inflation adjustments might no longer be sufficient to cover things.
My MIL now spends $12k/month in memory care + pays for private aides to supplement the insufficient care such a facility can offer for her conditions.
So 13k in a decade+ may not be so generous, but the perpetuity aspect does make it more attractive than many policies.

[Mando19]

I had a similar Unum policy. After 2 prices increases that greatly increased the cost, I had them remove the inflation rider and keep the updated fixed benefit. The rate dropped back to about the original purchase rate and has stayed constant since then.

[Artful Dodger]

As noted above you should be able to modify your policy. We have Genworth and premiums have risen as well, but they usually offer options to reduce the cost. Consider lowering or removing the inflation protection. That usually has a pretty big impact.

[simas]

I stand corrected and will edit my post accordingly.

I won't put this in that post, but I still say that insurers were counting on being able to collect premiums without ever needing to pay out any benefits, on a large percentage of policies.

got it. insurance is a business, as any other, with competition, bad decisions and consequences of such decisions for the actors that make them.
while it is NOT easy to create an insurance company (to register it with a state) which could take years of the process due to amount of regulations involved, let us say we create 'nisiprius and simas insurance Co' and start collecting premium based on the models that we would have to first show to the state regulatory board, get their approval, get auditors sign off, get rate fillings approved, etc. And you have to do it for each and every product you offer, with legal, regulatory, etc oversight.

but let us say our 'nisiprius and simas insurance Co' got it wrong and the costs are higher than expected (i.e. people are not cancelling where we would have expected them too), then auditors from the state during their exams would come in and say 'you have an issue here, look at your loss ratio - the amount of are paying out is not matching original models and estimates and you MUST (no choice) adjust'. Must is the keyword here, the state that regulates us really does not want to be paying out taxpayer money for other people's bad business decisions and will require a rate rise. Besides we (in our 'nisiprius and simas insurance Co') will get smacked down hard on where were our own actuaries, auditors, required to show all of our studies done along the way, etc. The state would routinely send a team (or teams) that would embed themselves with us for however long it is needed, open every book, look at every number, and come up with their own model and then tell us to explain why our rate filling is what it is (i.e. way too low). None of that is something we would be able to negotiate with the state authority at all, they order, and we do. This is how insurance (risk pooling) works, here in USA. if costs are going up because situation changes (normal cancel rates do not apply), then other levels (premium, benefits, both) must be pushed for pool to continue to be solvent/viable which is the intent of the actions of the regulators. They are not here to make us profitable or not profitable, they are here to make risk pooling possible (and protect the consumer).

[snic]

My employer offered LTC insurance to employees in 2000. I signed up but my wife, who had a lot of health issues and would not have qualified, did not.

It was a good deal in 2000 - $1272/yr. for unlimited duration, $6,000/month facility payment increasing at 5% a year. With the simple 5% increase this is now 125% of 6000, or over $13,000/month.

I am 73 years old. If I were disabled tomorrow after the 90 day waiting period this policy would pay over $13,000/month for the rest of my life. I guess I'd have a private room

The problem is that the $1272/year premium is a thing of the past. Here is the history of cost increases:

2000 (start) - $1,272/year
Feb 2014 - $2,232/year
Feb 2021 - $3,732/year
Feb 2025 (pending) - ~$6000/year
Projected - who knows, but at this rate could easily reach $10,000/yr and highter

I am in good health. I'd be surprised if I ever needed long term care, but who knows? I could have a stroke later today and need care for the next 20 years, right? Or, I could remain in good health and die while jogging at 95.

In any event, this policy has become expensive, and I don't know if I should continue with it. The way I look at this is, if I were offered the policy today at $6,000/year, would I buy it? I'm not sure I would. The initial appeal back in 2000 was that it was so cheap it was a no-brainer. I didn't give it much thought then.

Note that $6,000/year is not a budget breaker for me - not even close. I can afford it.

How should I go about making this decision? Please help me.

Insurance is for catastrophic expenses that would wipe you out and leave you in penury. So, what is the cost of long term care in its different flavors (full-time in-home care, part-time in-home care, skilled nursing facility, assisted living) in your area, how much is your fixed income (social security, pensions, annuities), and how many years of the income shortage can you afford to keep taking out of your savings and other assets (e.g., your house) before your net worth goes to $0? If that number seems low, keep the policy. If it's, say, more than 30 years, the policy is probably a waste of money.

[UM70]

I would make certain the rate increase has been approved by your state insurance regulator.

Several years ago my LTCI company told me they were going to be seeking a 15% rate increase and expected there to be more in the future. Turns out the state regulator allowed a 5% increase. That proved, so far, to be the end of it. The company hasn't been back for any increases since then.

If, in fact, your state regulator is going to allow 50% rate increases that's not a good sign for the future. Personally, I wouldn't go along with the policy.

If your policy was issued in New York state, where mine was, I would definitely wait to see what happens to the "pending" if in your case the rate approval hasn't been given final approval.

[Chardo]

Nisiprius & Simas Insurance Co has a surprisingly good whole life product.

[nedsaid]

Wow. 50% premium increase. I had a Long Term Policy offered to me at work through Met Life when I was about 50 years old. I was concerned that I could get hit with large rate increases at an age when I could not afford them and decided to pass. Met Life announced about a year afterwards that they were exiting the business and that told me something. I also remembered Jim Cramer on TV describing the fight he had with the Long Term Care Insurance company getting care for his father, that opened my eyes. I could be old and vulnerable to see my premiums jacked up and a very slow walk to pay up on the policy when needed. The language that Cramer used to describe the insurance company cannot be used here. Gosh, when I am old am I going to have any energy left to fight the insurance company?

[Small Law Survivor]

I'm the OP, catching up on these valuable observations. Here are answers to some of the questions posed:

Coverage increases by 5% simple interest every year. So after 20 years (2020) the $6,000/month doubled to $12,000/m. It has continued to increase by 5% since then, and into the future.

No limit on number of years it will pay.

Yes, covers in-home care $3,000/m. originally, but that has also increased by 5%/yr. so over $6,000/m. now.

Modifying the policy - yes, Unum has a page dedicated to our company htpp:/unum.com/[name of company] where you can modify the coverage parameters. Inflation adjustment, number of years ... so on.