Why an Increase is Needed?
Long-term care insurance (LTC) is a critical component of a comprehensive financial security plan. As a Northwestern Long Term Care Insurance Company policyowner, you already know that. However, the long-term care industry has been faced with several factors that have made it difficult for companies to maintain the premium rates on existing policies.
When companies began selling long-term care insurance, premiums were set based on several assumptions. Actual experience has proven to be significantly different than what was assumed for several reasons.
- Long-term care needs are changing. People now live longer thanks to advances in medical care, treatment, and prevention. But as people grow older, diseases such as Alzheimer's and dementia have increased the need for assisted care. This has created a larger number of claims over a longer period of time.
- We're in one of the longest low interest rate environments in recent history. Generally, we invest premium dollars in conservative investments that are typically tied to interest rates. As a result, these low rates have reduced the amount of investment returns available to pay claims.
Learn more about the changing long-term care landscape in this video.
Northwestern Long Term Care Insurance Company believes long-term care insurance (LTC) is an essential part of our clients' long term financial security plans.
- More than 3.7 million people are turning 65 every year1
- As of 2014, there were 72,197 Americans 100 years old or older, a 44% increase since 20002
- 70% of people over the age of 65 will need long-term care3
It is critically important that individuals have a strategy in place to protect their assets and cash flow in the event that they need long-term care, and the cost of facing a long-term care event would typically far outweigh the cost of long-term care insurance.
Most insurance companies have raised the premiums they charge for existing long-term care insurance policies. This is something Northwestern Long Term Care Insurance Company has not done until now. In fact, we have kept our premiums on existing LTC policies unchanged for nearly two decades. Unfortunately, we are not immune to the factors experienced across the industry, so a premium increase for some Northwestern Long Term Care Insurance Company policyowners is now necessary.
How We Seek Premium Increases
Our long-term care insurance policies are "guaranteed renewable" for life, which means that as long as you continue to pay the premium, we cannot cancel or change your policy, other than to adjust premiums as may be necessary by class. This means that the premium rates for this product may be increased, though they cannot be increased due to a given person's increasing age or declining health; rates may go up based on the claim experience of all policyholders with a policy similar to yours. Before any premium increases may be implemented on existing policies, we must first submit a request to the insurance regulators in each state where LTC policies were sold. Because each state regulator may have different criteria for allowing an increase, the amount and timing of premium increases will vary by state.
Once your state insurance regulator has completed its review and given permission for a premium rate increase on your policy, we will send you a detailed letter setting forth the specific amount and timing of your increase along with an outline of the options that will be available to you to help mitigate the impact of the increase. We are committed to helping you understand those options so that you can make a decision that aligns with your financial plan and is best for you and your family.
Learn more about options that may be available to you for modifying your coverage to help offset the premium increase in this video.
- The actual options available to you will depend on the design of your individual policy
- You can combine more than one option
- Your state may have restrictions that impact the options available to you
Option 1: Maintain your existing coverage
You can preserve the original integrity of your policy design and the coverage it provides by paying the premium increase. Your bill will be adjusted automatically and the increase will become effective on the date included in your personalized letter.
Option 2: Modify your existing coverage
There are several policy change options that may be available to help offset the premium increase, depending on the state where your policy was issued and the type of policy and optional benefits you purchased. These options may allow you to reduce the level of coverage and benefits available under your policy with a corresponding reduction in your premium. (See below for details.)
Option 3: Pay nothing more
You can also choose to stop making premium payments altogether and keep a significantly reduced paid-up policy in place. Under this option, called the Contingent Non-Forfeiture Benefit, the total amount of benefits payable will be equal to the amount of premiums you've paid since you first bought the policy, which will be less (and likely much less) than what would be available if you continued to pay your premiums. If you wish to take advantage of this option, you must do so within 120 days after your anniversary date and have paid all premiums due up until that anniversary date.
Ways to Modify your Coverage
Lower Your Benefit Amount
This is the maximum amount that can be reimbursed for long-term care expenses on a daily or monthly basis. You can reduce the maximum benefit amount your policy would pay each month/day which would lower your premium. (Example: $300 of daily benefit can be reduced to $250 per day.)
Impact: If you reduce your maximum monthly/daily benefit amount, you'll have to pay more out of pocket for any expenses that exceed your new, lower benefit amount.
Reduce Your Benefit Period
This is the minimum number of months or years that you can be reimbursed for benefits. You can reduce the minimum length of time over which the benefit could be paid which would lower your premium. (Example: Shortening a lifetime benefit period to a 6-year benefit period.)
Impact: If you reduce the benefit period, you'll be reducing the total amount of time that benefits can be paid on your policy. This means that you'll have to pay more out of pocket for any expenses that you incur after your benefit period has expired.
Increase Your Elimination Period
This is the number of days or weeks that you must pay for covered care before your policy begins to pay benefits. You can increase the length of time you'll pay for your care before the policy begins to pay benefits, which would lower your premium. (Example: Increase your elimination period from 12 weeks to 52 weeks.)
Impact: If you increase your elimination period, you'll be increasing the amount of time in which you'll need to pay out of pocket for expenses you incur before your policy begins to pay benefits.
Reduce Your Inflation Protection
If you chose this benefit at the time you purchased your policy, this protection helps your insurance coverage keep up with the rising cost of care by growing your daily or monthly coverage over time. You can decrease your inflation protection which would lower your premium. (Example: Reduce your inflation protection from 5% to 3%.) Additional inflation options may be available; contact the dedicated client service team or your financial representative for more information.
Impact: If you reduce your inflation protection, your maximum monthly or daily benefit amount will be lower in the future than you originally planned for, which means you'll need to pay more out of pocket for any expenses that exceed that lower amount.
Note: Your state may have specific rules about the types of inflation protection required to maintain partnership status on your policy. If you have any questions about these rules please call our dedicated client service team.
Drop Survivorship Benefit
If both you and your spouse or companion chose this benefit at the time you purchased your policies, then if one of you dies and your policies are in force, no further premiums will be due. You can remove the survivorship benefit. which would lower your premium.
Impact: If you or your spouse or companion passes away, the survivor will have to continue paying their premiums in order to maintain his or her policy.
Note: If one spouse/companion drops the benefit from his or her policy, it is automatically dropped from the associated policy as well.
Drop Non-forfeiture Benefit
This benefit, selected at the time of issue, allows you to stop making premium payments at any time and keep a reduced policy in place equal to the amount of premiums you've paid. If you choose to remove this benefit, your premium would be reduced
Impact: Without this feature, if you stopped making payments in the future, the policy would end and there would be no reduced coverage available to you, unless at some point in the future an option to exercise a contingent non-forfeiture benefit is made available to you.
As you think about the options available to you, please know that you can combine and choose more than one option to further reduce the impact on your premiums. You will be provided with ample time to review all available options as you work with your Northwestern Mutual financial representative and Northwestern Long Term Care Insurance Company.
Value of LTC
The Value of Your Long-Term Care Policy
When you purchased your policy, you decided this coverage was a critical part of your financial plan, based on how it could help give you and your loved ones the freedom of choice and control should you experience a long-term care event.
It's important to remember the reasons why you chose to incorporate long-term care into your retirement planning and the impact that a major health event could have to your financial goals without coverage in place. Here are some considerations as you decide what option is appropriate for you in response to the premium increase.
Consider the quality of life value that you receive from your policy. While substantial numbers of Americans express concerns about being able to pay for their long-term care, those worries decline as planning increases.4 In addition, large majorities of individuals with long-term care policies said their coverage provided greater access and flexibility with their choice of care setting.5 This reduces the growing strain felt by caregivers, many of whom have to make workplace accommodations to care for elderly family members.
Consider the likelihood of needing long-term care (LTC). People have a 50 percent chance of needing LTC at some point in life, and about 30 percent of people who do need care will need it for five years or more.6
Consider the cost of care and how much more you may need to pay out of pocket if you reduce your existing coverage. People often underestimate the cost of LTC services, which are significant and continue to grow. Visit our interactive cost of care calculator to estimate the costs of services in your own community.
Consider how much more you might have to save now to account for lowered available benefit amounts at claim time. Review the Realities of Self-Funding to see how even the most established retirement savings can be affected by a long-term care event without the proper funding methods in place.
"Americans vastly misjudge their own likelihood of needing long-term care, underestimate its cost—and, if it is needed, tend to expect a spouse or partner to provide it."
– The SCAN Foundation
We know that if you're faced with a long-term care event, it can be a stressful time. For this reason, we will assign a single point of contact that will become familiar with your case to help you and your family with any questions or needs. We will help answer questions about care options, help provide information on care facilities and work with you and your family to understand the value your policy offers. We are committed to:
- taking the time to develop relationships with you and your family to ensure the process of submitting a claim is as easy as possible during a very difficult time.
- utilizing our in-house physicians and nurses to help you and your family make informed choices and understand your policy's benefits.
- answering your questions about care options and provide information on care facilities.
We are dedicated to paying all claims promptly, fairly and accurately, compatible with the principle of fairness to all policyowners.
We understand when long-term care services are needed it can be a stressful and emotional time. That's why we're committed to being there when you need us, from our courteous claims professionals to our knowledgeable financial representatives. If you'd like to learn more about our claims process, please contact us directly at 800-748-9493.
You've got questions, we've got answers.
Feel confident in your decision
Do you need help or have specific questions regarding your policy? Our dedicated client service team is available and has the expertise to provide you with customized options to help you evaluate your needs.