Long-term-care insurance is sold on a simple pitch: lock in coverage while still healthy and relatively young, and the premium stays affordable for life. The first half of that pitch is true. The second half is where buyers get blindsided. Unlike a level-premium life insurance policy, a long-term-care policy carries no ironclad guarantee that the price paid at the start is the price that will be paid forever. Insurers can, and regularly do, come back years later asking state regulators for permission to raise the premium on coverage a policyholder already owns.
Why age at purchase drives the price
The premium on a long-term-care policy is heavily influenced by the age of the applicant on the day the policy is issued. Buying in one’s fifties locks in a materially lower annual premium than buying the identical coverage in one’s late sixties, because the insurer expects more years of payments before a claim and a lower chance of a health condition emerging in the meantime. According to the National Association of Insurance Commissioners, waiting also raises the risk of being declined outright, since underwriting tightens as applicants age and develop conditions that make them ineligible. That dynamic is what makes the early-purchase advice sound. It just does not settle the price permanently.
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The rate increase on a policy already in force
The uncomfortable reality of this market is that an insurer can request higher premiums on policies that are already active. When the original pricing assumptions turn out to have been too optimistic, whether because people kept their policies longer than expected, filed more claims, or the low-interest environment starved the insurer’s investment returns, the company files for a rate increase. The increase applies not only to new buyers but to existing policyholders who have been paying faithfully for years or even decades. The NAIC has documented thousands of approved increases across the industry, with cumulative hikes on some blocks of business reaching well into the double and triple digits over time. A retiree who budgeted a fixed annual premium can face a demand for substantially more, arriving exactly when the coverage is hardest to replace.
The regulator sits between the insurer and the check
These increases are not unilateral. Long-term-care premiums are regulated at the state level, and an insurer must file a requested rate increase with the state insurance department and justify it before it can take effect. Regulators review whether the increase is warranted by the policy’s claims experience and can approve, reduce, or reject the request. That oversight is real, but it does not amount to a freeze. The NAIC’s research arm has described the balancing act regulators face between keeping insurers solvent enough to pay future claims and protecting policyholders from unaffordable increases. The upshot for a policyholder is that a rate hike letter is a filing that cleared a state review, not a negotiable opening offer.
The choices when the increase letter arrives
A policyholder hit with a premium increase generally has more than the two obvious options of paying up or dropping the coverage. Insurers are typically required to offer alternatives that lower the premium by trimming the benefit. A policyholder might reduce the daily benefit amount, shorten the benefit period, or drop an inflation-protection rider to bring the payment back down while keeping some coverage in force. Walking away entirely is the costliest move, because it forfeits years of paid premiums and leaves the person exposed to long-term-care costs that Medicare largely does not cover. The NAIC has pushed insurers to communicate these reduced-benefit options clearly so policyholders understand they are choosing among tradeoffs rather than facing a single take-it-or-leave-it bill.
Reading the policy before signing and after buying
The practical defense begins before purchase. A policy’s rate-increase history, the financial strength of the insurer, and whether the contract includes any inflation protection all shape how the coverage will hold up over decades. Applicants can ask an insurer for its track record of past rate increases on similar policies, and can weigh whether a slightly higher starting premium from a more stable carrier is worth the reduced risk of future shocks. After buying, keeping the policy documents accessible and reading every notice from the insurer ensures a rate-increase letter and its reduced-benefit options are not missed. Long-term-care insurance can still be one of the few ways to shield retirement savings from the expense of extended care, but buyers are better served treating the initial premium as a starting point that state-approved increases can move, not a number carved in stone.
This article was researched and drafted with the assistance of AI and reviewed by The Financial Wire editorial team.
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Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
