Life Insurance Quote Overview

Americans have been responding to warnings that without long-term care insurance, they may be plunged into poverty if chronic disease incapacitates them. But now many of the 6 million policyholders are hearing the part of the story their agent didn't tell them.

Policyholders have been getting notices that their annual premiums are increasing as much as 50 percent. That's because many companies underpriced the long-term care insurance they sold in the 1990s, and policyholders are now paying for the companies' miscalculations.

A North Dakota man, Frank Rose, 97, has filed a class action lawsuit against Standard Life, alleging the company did not disclose the risk of premium increases. He bought his policy in 1982 with a "guaranteed" premium of $418 a year and is now paying more than $1,900.

CNA, a major long-term carrier, asked state insurance commissions for premium increases of up to 50 percent on some older policies last year. At least 18 states granted the full 50 percent, Consumer Reports found in a study published in November 2003.

Like Rose, many consumers thought they were protected from premium increases. The AARP Bulletin in its April issue cited the case of Charles and Nancy Hinckley Jr. of Shaker Heights, Ohio.

The Hinckleys bought their CNA policies in 1995 and last year were hit with a 50 percent premium increase -- $3,245 to $4,862, even though their insurance agent had told them the premiums would never increase.

Unfortunately, the agent and the Hinckleys overlooked a key provision buried in the fine print: While CNA promised purchasers that premiums could not be increased because of their age or individual claims history, it reserved the right to ask state insurance commissions for across-the-board increases based on total claims.

The situation is not unique to CNA. All but three of the top 10 companies asked for significant increases last year, state insurance officials say.

Insurance broker Benjamin Lipson, author of J.K. Lasser's Choosing the Right Long-Term Care Insurance, says policyholders are paying for the insurance companies' failure to correctly estimate the cost of nursing home care.

"It's like a Ponzi game," Lipson said. "They're using the new premiums, particularly from younger people, to pay for the claims in the older policies."

Referred from: (http://www.consumeraffairs.com)