Older individuals pay more for new LTC policies: Study

Roughly 76% of individuals under 61 who purchased long-term-care insurance during the first half of 2010 will pay less than $2,500 a year, according to a study released today by the American Association for Long-Term Care Insurance.
According to the study, which analyzed more than 200,000 policies, 28% of individuals under 61 pay less than $1,000 per year on their new policies. By comparison, only 6.8% of individuals were paying more than $4,000.
Older individuals tend to pay more for their coverage, and the data shows that among those between 61 and 75, the costs tend to rise. About 28% of those in that higher age range were paying $2,500 to $4,000 a year for their LTC insurance, while close to 16% were paying upward of $4,000. Thirty-five percent of the buyers between 61 and 75 were shelling out $1,500 to $2,500 for their coverage.
Still, the initial purchase cost of LTC insurance has been climbing each year, generally rising by 2% to 3% annually, said Jesse Slome, executive director of the AALTCI.
Newer policies are priced to weigh in increasing claims, lower lapse rates and the current low-interest-rate environment. Low interest rates dampen the returns insurers make on fixed-income investments. Those returns go toward paying claims.
“Most of the claims are paid through investment returns, and the rest is through premiums,” Mr. Slome said. “Say you used to be able to assume a 6% return, and now it’s 3% — you’ll have to get the rest of it from somewhere.”
“As each company introduces a new wave of products, each successive round of products is priced higher,” he added.