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How often do individuals purchase insurance policies and then decide to no longer pay premiums? The decision to no longer pay premiums is called a "lapse rate". Lapse rates are factored into policy rates and are one reason long term care insurance policy rates have increased. Consumers value their long term care insurance policies and are not deciding to let their policies lapse; this means that they understand the value and the need for this type of policy when planning for their long term future.
According to the U.S. Individual Life Persistency Update completed by the Life Insurance Marketing and Research Association (www.limra.com) and the Society of Actuaries (www.soa.org), lapse rates for long term care insurance policies are lower than rates for life and disability insurance. Lapse rates for individual long term care policies after ten years were only 2.2% according to the 2004 report. For combined group and individual policies the rate was 2.5%. This higher number may be attributable to the fact that when employees leave employer sponsored long term care insurance plans they are not aware that the policies can be continued on an individual basis.
In terms of numbers, based on 1,000 individuals at the end of ten years, 689 of the original policy holders retained their long term care insurance. Compare this to 465 of those holding individual disability policies or to 425 of individual life insurance.
Additionally, significant discounts exist for consumers who qualify for good health discounts. Under age forty, nearly 61% of those applying qualify for good health discounts that can reduce premiums by 10-20%. Affordable premiums over the long run support retaining long term care insurance policies versus taking the chance of allowing the policy to lapse and then trying to gain coverage again at a later age when one may no longer qualify due to health issues or feel that they can pay the higher premium.
My clients who purchase long term care insurance policies clearly see the value of purchasing early and retaining these policies. Rates are especially affordable for those who qualify for good health discounts and for shared policies for spouses.
The implications of not purchasing long term care insurance are significant and inevitable as the cost of long term care quickly dissolves retirement savings and assets forcing individuals or families to make difficult decisions about lifestyle and housing. While most individuals prefer to be cared for in the home, those without substantial financial resources or long term care insurance often have to rely on Medicaid facilities to provide care which means that assets and resources must be depleted.
Not sure if long term care insurance is for you or if you can afford the premiums? Contact me at (303) 810-1816 and I'll allow you to see the facts for yourself.
Copyright 2011 Pamela D. Wilson, All Rights Reserved.
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