Why Your Long-Term Care Insurance Premium Has Soared

Anne JohnsonUpdated 1 hour Ago3 Mins read0 Views

Individuals who have purchased long-term care insurance are now facing significant premium increases. According to Tully Law Group Elder Care and Estate Planning, as different insurance companies propose higher rates, some policyholders could see an increase in their rates as high as 90 percent.

Whether companies receive their proposed rate increases depends on your individual state’s insurance administration. For example, Massachusetts Mutual Life Insurance Company asked for an average of 89.2 percent rate increase for their policies but received a 23.7 percent increase from the Maryland Insurance Administration in 2025.

Long-term care for seniors varies from person to person. According to the Administration for Community Living, someone turning 65 has an almost 70 percent chance of needing some long-term services or support in their remaining years. Many seniors guard against the financial stress of this type of care by purchasing a long-term care insurance policy.

Why Long-Term Care Insurance Rates Are Increasing

There’s no one reason that carriers have asked for a rate increase. Instead, it’s a combination of factors. Here are the main reasons.

Lower Voluntary Lapse Rates

According to the American Association for Long-Term Care Insurance, when insurance companies calculate pricing for long-term care insurance, they factor in the “lapse” rate.

Lapse rate means that over time, individuals decide they no longer need the coverage and drop the policy. Insurers in the 1990s and early 2000s predicted that, every year, roughly 4 percent of policyholders would lapse their coverage.

However, instead, only 1 percent dropped their policies every year. More policies meant more claimants. To be prepared to pay future claims, insurers say they need to raise rates.

New policies that are purchased have the 1 percent lapse rate built into them. But that makes them cost more.

Higher-Than-Anticipated Policy Claims

According to the American Health Care Association and the National Center for Assisted Living, the median annual cost of a semi-private nursing home in 2026 is $114,975. Some policies pay for assisted living, and its median annual cost is $74,000.

Insurance companies didn’t anticipate the number of claims or the cost of those claims. But claims increased, and so did the loss ratio.

According to the National Association of Insurance Commissioners, since the coverage inception in the 1960s, the loss ratio for stand-alone policies has been 66.91 percent. In 2024, the loss ratio was 129.20 percent.

Change in Investment Rate

Northwestern Mutual blamed a low-interest-rate environment in recent history for the rate increase. Generally, premium dollars are invested in conservative investments that are usually tied to interest rates.

The funds earned from investments are used to pay claims.

Granting Rate Increases

Typically, long-term care insurance policies are guaranteed renewable. The insurer cannot cancel the policy as long as you pay premiums. However, insurance companies may request a class-wide rate increase.

According to LTC Tree, a carrier can’t single out your policy because you grew older, your health changed, or you filed a claim.

How State Regulators Determine if an Increase Is Necessary

According to the American Association for Long-Term Care Insurance, a carrier can’t cite lack of profitability. That is not a valid reason to increase rates.

The state regulators require the carrier to justify that the old premium is no longer viable. This justification is based on the reasons previously mentioned.

The state also asks if the increase is actuarially supported. The filing for a higher rate should include experience data, reserves, loss ratios, and assumptions.

State regulators require notices to be sent to insureds so they understand the increase, deadlines, and options. A letter to the insured individual must show ways to lower the premium impact by reducing benefits.

What to Do When Your Rate Increases

You’ll receive a letter from the insurance company explaining your rate increase. There are several ways to handle the increase.

The first, according Crossroads Financial, is to swallow hard and pay the increase. Typically, 50 percent to 60 percent of policyholders choose this option. But of course, that depends on your budget and whether you feel you still need the coverage.

Another option is to lower your premium by reducing your benefits. You have the option to:

reduce daily benefits
shorten the benefit period
decrease the inflation growth option

You could also stop paying the premium and ask the insurer for a paid-up policy. Typically, you’ll receive a policy with benefits roughly equal to the total premiums you have paid.

For example, if you pay $50,000 over the years, you’ll keep about $50,000 of future benefits.

You don’t want to stop paying without communicating with your insurance company, or you could lose all benefits.

Alternatives to Long-Term Care Insurance

According to Brighthouse Financial, you could purchase a hybrid life insurance policy with long-term care insurance. These linked-benefit policies offer payment options.

You can either pay the entire premium upfront or take advantage of a payment plan. Multi-pay plans let you pay your premium over a set period. Once those payments are met, you don’t make any other payments.

Buying an annuity with a long-term care rider is also an option. According to Annuity.org, this rider lets you use part of your contract’s value to pay for your care.

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