Live Longer Pressure on Life Premium

Retirees and near-retirees are often at a loss about what to do when faced with unexpected premium increases in life insurance and other forms of insurance. One of the challenges that financial advisers face when meeting with clients for financial planning near their retirement is that many clients can no longer afford their insurance policies. Escalating costs for long-term care insurance, medical expenses and life insurance are a threat to fixed-income retirees and near-retirees considering the cost of retirement.

According to the American Association for Long-Term Care Insurance (AALTCI), the average cost of a long-term care insurance policy on a 55-year-old individual in standard health is $2,065 per year. Multiple reports state that significant policy premium increases can be expected over the next several years across the U.S. Many long-term care insurance policy owners, who were already paying above average premiums, were surprised to learn earlier this year that their renewal rates will exceed $8,000 per year. This is a staggering increase, as much as 130% in some cases.

Much of the disparity in costs between expiring rates and renewal rates for long-term care insurance stems from many policies being priced wrong in the 1980s and 1990s. Insurance carriers did not collect enough money in premium payments to cover the expenses and assumed that policy owners would simply drop coverage over time. Another factor impacting the cost of long-term care insurance coverage is that people are living longer than ever. According to the Center for Disease Control, the number of Americans living past age 100 increased by 44% from 2010 to 2014. Securing long-term care insurance at age 60 may mean up to 40 years or longer in premium payments.