Do Long-Term Care Insurance Premiums Increase? Limits and Notice

Yes, long-term care insurance premiums do increase, and on traditional standalone policies the increases have often been large. A nationwide data call reported to the NAIC Long-Term Care Insurance Task Force put the average cumulative approved rate increase on existing policy blocks at 112%, with hikes of 80% or more on a single policy not uncommon.¹ Your insurer cannot raise your premium because of your age or health, and every increase has to clear a state regulatory review, but neither protection prevents a class-wide hike from reshaping what a policy you have held for decades actually costs.

How Big the Increases Have Been

When insurers first sold these policies in the 1980s and 1990s, they were required to certify that initial premiums were “reasonably expected to be sustainable over the life of the form with no future premium increases anticipated.” That language sits in the NAIC model regulation that governs the product.² The projections turned out to be badly wrong.

The NAIC data call covered more than 3,500 approved rate increases. Insurers requested an average single increase of 78%; regulators approved an average of 37% per request.¹ Because many policyholders have been through several rounds, the cumulative effect is far larger than any single increase. The 112% average cumulative figure means the typical affected policyholder pays more than double what they originally signed up for. Financial planners interviewed for the same NAIC study described clients facing cumulative increases of up to 500%.

Why Premiums Go Up

Three structural miscalculations account for most of the gap between what insurers expected to pay and what they actually owe.

Care costs grew faster than the early actuarial models assumed. The federal Long-Term Care Partners program puts the 30-year average inflation rate for care costs at about 2.54%.³ Compounded over twenty or thirty years, a nursing home stay that cost $50,000 when a policy was written can cost well over $100,000 by the time a claim is filed.

Fewer policyholders cancelled than the models predicted. Early pricing assumed that a meaningful share of buyers would drop coverage before ever filing a claim, and those lapsed premiums would subsidize the people who stayed. Persistency ran well ahead of those assumptions, which left insurers with less “free” premium and a larger pool of future claims than they had budgeted for.

Investment returns fell short. Insurers invest premium dollars in bonds and other fixed-income assets to build the reserve that pays future claims. Policies sold in the 1980s and 1990s assumed those investments would earn substantially more than they did during the long low-interest-rate stretch from roughly 2008 through 2021. When investment income misses, premium is the only other place to make it up.

Your Insurer Cannot Single You Out

The fear many policyholders have is that a cancer diagnosis or early dementia symptoms will trigger a personal rate hike designed to push them off the policy before the insurer has to pay. Federal tax law and the NAIC model regulation both require long-term care insurance policies to be guaranteed renewable.⁴ As long as you keep paying, the insurer cannot cancel your coverage or raise your individual premium based on changes in your health or age.

Approved increases apply to an entire class of policyholders. A class is usually defined by policy form, state of issue, or year of purchase. If your class gets a 30% increase, everyone in that class gets 30%, whether they have filed claims or developed health conditions. An insurer that tried to single out high-risk individuals would face regulatory penalties and breach-of-contract litigation.

There is some nuance inside a class. Approved increases can vary by benefit tier, so policyholders who bought richer benefits (lifetime benefit periods, generous inflation protection) sometimes see larger percentage increases than those with leaner coverage, on the theory that the richer benefits drive disproportionately more of the projected cost. Whether a particular variation is permissible or amounts to impermissible sub-classification has been the subject of litigation.

How State Regulators Limit the Increase

No insurer can raise your premium on its own. Every long-term care rate increase has to be filed with and approved by the state insurance department in each state where the affected policyholders live. Those departments follow standards drawn from the NAIC model regulation that most states have adopted in some form.

To request an increase, the insurer submits actuarial data showing that current premiums will not sustain projected obligations. Regulators evaluate whether the proposed increase is justified by actual claims experience, investment performance, and reasonable projections. The legal standard in most states requires that rates not be excessive, inadequate, or unfairly discriminatory. Inadequate matters here too, because premiums set too low could leave the insurer unable to pay anyone’s claims.

Regulators can approve a smaller increase than requested or deny the request outright, and they do. The gap between the 78% average request and the 37% average approval shows that state reviews cut these filings roughly in half on average.¹

One of the tools regulators lean on is the minimum loss ratio, which measures how much of the premium collected actually goes toward paying claims. The NAIC model regulation sets this floor at 60% for individual policies.² An insurer that is already meeting or exceeding that threshold and still burning reserves has a stronger case for an increase; one with losses below the floor has less justification.

Notice You Will Get Before It Takes Effect

Once an increase is approved, the insurer cannot just start charging the new amount. The NAIC model regulation requires at least 45 days’ written notice before the increase takes effect, and some states require up to 60 days.²

The notice has to include specific information:

The new premium that will apply to your policy going forward.
An offer to reduce benefits so your premium stays at or near what you have been paying.
A summary of every premium increase applied to your policy form over the past ten years in any state, including the percentage of each and the years the form was sold.
If the cumulative increase has reached a threshold tied to your age at issue, information about your right to convert to a paid-up policy with reduced benefits.

These requirements exist because insurers used to bury rate increases in routine billing notices. The ten-year history disclosure in particular lets you see the trajectory on your policy form before you decide whether to keep paying, trim benefits, or walk away with nonforfeiture protection.

What You Can Do When the Premium Rises

Paying the full increase is the simplest option, not the only one. Insurers are required to offer ways to adjust coverage so the premium stays closer to what you have been paying. The usual levers, roughly in order of their impact on your long-term protection:

Shorten the benefit period. Moving from, say, five years of coverage to three lowers the insurer’s maximum exposure and cuts your premium while leaving your daily benefit and inflation protection intact. This is often the first lever to pull.
Extend the elimination period. The elimination period is the number of days you pay for care yourself before the policy starts paying. Stretching it from 30 to 90 days reduces premium but means more out-of-pocket cost if you file a claim.
Lower the daily or monthly benefit. A direct reduction in coverage, but it preserves other features such as inflation protection.
Reduce or drop the inflation rider. Stepping compound inflation down from 5% to 3%, or removing it, meaningfully cuts premium. For a policyholder in their late 70s or 80s who has held the policy for a decade or more, the rider has already done most of its work. For someone in their 50s, giving it up can hollow out the policy over the next twenty years.

Contingent Nonforfeiture

If cumulative rate increases push your premium past a set threshold, you gain the right to stop paying and convert the policy to a paid-up status with a shortened benefit period. This is the contingent nonforfeiture benefit, and it exists specifically for people who have paid premiums for years and can no longer afford the increases.²

The trigger depends on your age when you bought the policy. For a purchase at age 55, the benefit kicks in when cumulative increases hit 90% of the original premium. For a purchase at age 65, the threshold is 50%. At older issue ages, the thresholds drop further. If your premium has reached the trigger and you stop paying within 120 days, you are treated as having elected the paid-up benefit rather than simply lapsing. The paid-up benefit is typically equal to the total premiums you have paid over the life of the policy, available toward qualifying long-term care services.

Without this protection, a policyholder who could no longer afford an inflated premium after fifteen or twenty years of payments would walk away with nothing. With it, you get something back even when the economics of the policy have changed beyond what either side originally expected.

Hybrid Policies and Fixed Premiums

The rate-increase problem is concentrated in traditional standalone long-term care policies, especially those sold before the mid-2010s. In response to consumer backlash over unpredictable premiums, the industry has shifted heavily toward hybrid policies that combine life insurance with long-term care coverage.

Hybrid policies typically use a single lump-sum payment or a limited series of guaranteed payments spread over a set number of years, such as ten. Once you have finished paying, you are done; there is no ongoing premium to raise. If you never need care, the policy pays a death benefit to your beneficiaries rather than expiring worthless.

The trade-off is cost. A traditional policy might have started at $2,000 to $3,000 a year, while a hybrid product can require $50,000 to $150,000 as a single premium or $10,000 or more annually during the pay-in period. For someone with the assets available who wants certainty, the fixed-premium structure removes the rate-increase risk. For someone who needs to spread the cost over many years, a traditional policy with the risk of future increases may still be the more accessible choice. Any increase on a hybrid product would apply only to the long-term care rider, not the underlying life insurance premium, and such increases are rare in practice.

1
National Association of Insurance Commissioners (NAIC). Long-Term Care Insurance Rate Increases and Reduced Benefit Options
2
National Association of Insurance Commissioners (NAIC). Long-Term Care Insurance Model Regulation
3
FLTCIP. Costs of Long Term Care
4
Office of the Law Revision Counsel. 26 US Code 7702B – Treatment of Qualified Long-Term Care Insurance