Hedging Against LTC Rate Increases

Rates increases have become commonplace on traditional LTC policies; almost expected. You know you did the right thing by insuring your client against the risk of needing long-term care, but dread the rate increase conversation. We all do. Instead of just telling them to bite the bullet and pay the increase, be innovative.

There is a way to allow them continued LTC coverage while reducing the impact of future rate increases. Create a hedge using a hybrid policy.

Say your client receives a 40% rate increase on their LTC policy. Instead of paying the higher premium, have the client reduce down their coverage so that the premium remains at the pre-increase level. Then use the 40% difference and purchase a hybrid policy to counteract the reduction in benefits. Why?

- Removes compounding effect from future increases

- Provides LTC coverage with Guaranteed Premiums

- Potential to have Lifetime Benefits

- Death Benefit if LTC is not needed

- Cash Value if they need access to funds

While there is no “magic bullet” for dealing with inforce rate increases, hedging will allow your clients to maintain coverage while limiting exposure to future increases.