Up Go the Rates for Long-Term Care

John Hancock, one of the largest long-term-care insurers, plans to raise rates on policies it sold itself for the first time ever. It is filing for a rate increase on long-term-care policies sold in the 1990s and on some newer New York Partnership policies.

The changes will affect about 275,000 people, or about one-fourth of the company's long-term-care customers. Premiums will rise by 13% on policies originally issued by John Hancock; they'll jump 18% on policies that the company took over from Fortis in 2000. The average increase will be $21 per month ($252 per year). The new rates do not apply to group policies.

Premiums are heading up because John Hancock anticipated more people would drop their long-term-care coverage before collecting benefits. Genworth, another major long-term-care insurer, made a similar announcement a few months ago, raising its rates by 8% to 12% for 440,000 existing policyholders. Before these moves, the two companies were standouts for keeping premiums constant once a policy was sold.

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Bottom line: Even if your rate increases, hold on to your policy. Most long-term-care insurers have raised rates for new buyers the past few years, so not only are new premiums on a higher plane in general, but you'll surely pay more because you are older and more likely to have health issues.

If the rate boost is a strain, shorten your benefit period to three years or drop the compound inflation protection (especially if you're in your seventies or older), rather than give up on the insurance altogether and get nothing for it.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.