Beware Unsolicited Offers From Your Long Term Care Insurance Company

When you own a Stand-Alone “Traditional” Long Term Care Insurance policy, it’s important to understand when to consider making changes to the policy. There are benefits and/or consequences that may affect your Stand-Alone Long Term Care Insurance (LTCI) premiums. Therefore, it’s a good idea to educate yourself on how to recognize an unsolicited offer and when the time may be right to make a valuable change to your current policy. 

You made a wise decision many years ago to purchase a LTCI policy, to protect your assets and pay for a future long term care event. Please do not make any changes or cancel your policy until you fully understand your policy benefits and any options presented to you by the carrier.

Compare The New Offer to your Current Policy

Some insurance companies may send an unsolicited offer suggesting you reduce the benefits of your Stand-Alone LTCI policy prior to the annual renewal. This is unusual and can mean the offer is financially advantageous to the insurance company rather than the policyholder. You need to review your current benefits and establish if the offer is beneficial to you and the goals you have laid out when/if you need long term care.  

If you are questioning the offer and changes, contact MAGA for expert advice. Unfortunately, not all carriers notify us of client correspondence, so we encourage our clients to reach out with any questions (or provide copies of documentation they received).  

Note that when an insurance company offers to reduce LTCI benefits, it often includes a reduction in one or more of the terms or benefits of your policy. Usually, the carrier offers the following reduction options:

  • Reduce or Remove the Inflation Rider
  • Reduce the Daily or Monthly Benefit Amount
  • Change the Elimination Period (increasing your out-of-pocket time in most cases)
  • Reduce the Years of Coverage
  • Reduce the Total Maximum Coverage (pool of money)

These options usually come with reduced premiums.  Will the offer benefit you? Possibly, depending on your personal situation. Will the offer benefit the insurance carrier? Most likely.

Carriers may offer benefit changes when it’s time to renew an annual policy because premiums may increase annually. 

Real Scenario from a MAGA Client 

A client of ours, who we will refer to as Chris, recently received an offer from his insurance carrier to reduce his benefits in exchange for a lower annual premium. Chris was offered three choices. One of the choices increased the elimination period (deductible) from 30 days to 90 days. The elimination period is the number of days Chris pays out of his own pocket for long term care expenses before the LTCI policy starts to pay. 

With his current policy, Chris has an annual premium of $3,482.84 and an elimination period of 30 days. The offer from the insurance carrier reduced the annual premium to $2,189.95, but increased the elimination period to 90 days. 

Chris consulted with MAGA to determine if this offer or the other two offers were good choices. Here’s what we found with the first offer.

Initially, Chris will save $1,292.89 in annual premiums. The carrier also gave Chris the following estimates of the average cost of care in the local area. Using these costs we compared the premium savings to the potential cost increases for 60 additional days: 

  • Assisted Living: $181.55 per day. The premium savings is used in about 7 days. 60 more days would cost $10,893.
  • Home Care: $217.28 per day. The premium savings is used in 6 days. 60 more days would cost $13,036.80.
  • Nursing Home: $341.81 per day. The premium savings is used in about 4 days. 60 more days would cost $20,508.60.

Ultimately, Chris would spend significantly more money on his care during the longer elimination period, so we advised him not to take this offer. 

The other benefit changes Chris was offered provided different reductions in premium. These offers weren’t favorable either. Overall, we advised Chris not to take any of the offers and to keep the policy the same.

Carriers have many levers they can pull

Long Term Care Insurance policies have many terms (benefits) that a carrier can offer to change:

  • Total Maximum Coverage (pool of money
  • Number of Years Covered
  • Daily or Monthly dollar benefit
  • Rate of Inflation Rider
  • Elimination Period (deductible)

Just like with Chris, if you get an offer from your insurance carrier we highly recommend that you compare the savings in annual premium to the reduction in benefits. You also need to read the fine print carefully. Once you reduce your benefits, they cannot be increased in the future.   

Do you have to take one of the offers?

No, not unless the carrier states otherwise. Chris’ offers were optional, but we had to take a thorough look at the details to learn this. In the cover letter Chris received, the carrier made it easy to see that the offers included reduced premiums. Lower premiums can be enticing. The carrier said, “We have enclosed options to reduce the premium through coverage modifications.” This sentence was bolded and easy to find.  Further down in the letter the carrier also said, “To keep your existing coverage, you do not need to take any action.” This sentence was not buried, but it was not exactly easy to find either. 

You can negotiate

Suppose Chris needed to reduce the LTCI policy’s annual premium cost, but the three options didn’t meet Chris’ needs? Chris can negotiate. We help our clients do this from time to time and make them aware there may be other options as well. The annual renewal period is a good time to review current benefit information and determine if a change is warranted. 

Just like Chris was offered different options to reduce benefits and therefore reduce his premiums, Chris can contact the carrier to negotiate and request additional options. For example, Chris could say, “I need to reduce my annual premium by $750. What can I get for that? What are the advantages and disadvantages?” Overall, we strongly recommend you work with an experienced LTCI agency like ours to discuss any offers provided by your insurance carrier before making a decision. The details can be deceiving, and LTCI policies have lots of variables you need to take into consideration.

 

Whether or not you are questioning making a policy change to your Long Term Care Insurance plan, or if your carrier sent you a letter like the one Chris got, it is best to have a reliable LTCI agent you can trust. MAGA advisors assist our clients with this when requested and can consult with non-clients about when to make changes to your Stand-Alone Long Term Care Insurance policy. For more information contact us.