She Paid $2,800 a Year for Long-Term Care Insurance for 19 Years. At 81 the Insurer Raised the Premium 60%, and Dropping the Policy Would Have Thrown Away $53,000

The letter arrives on a Tuesday. After 19 years of paying $2,800 a year, the long-term care insurer wants 60% more. The policyholder is 81, and dropping the policy means walking away from roughly $53,000 already paid in premiums. That pull toward walking away has a name: the sunk cost fallacy. The money is gone either way. The real question is what the next dollar buys.

Insurers are generally required to offer middle options between paying the new premium and losing everything outright. The worst outcome is the quiet one, when the policyholder simply stops writing checks and receives nothing in return.

Why the 60% Increase Landed in the First Place

Legacy long-term care policies were priced on assumptions that proved badly wrong. Too many people kept coverage, interest rates on insurer reserves stayed too low for too long, and claims lasted longer than actuaries had planned. Rate increases require state insurance department approval, which is why the same insurer can raise premiums by different amounts in different states. The increase isn’t arbitrary, and it probably won’t be the last one.

Premium increases have accelerated in 2026, with many policyholders receiving notices of rate hikes ranging from 20% to 50% or more. Insurance carriers cite increasing longevity, higher-than-expected claim rates, and low interest rates as justifications. The problem has reached striking scale: in Maryland alone, some 12,600 policyholders could see annual costs jump over the next few years, with four companies proposing rate increases ranging from 27% to 242%.

Genworth, one of the largest long-term care carriers by in-force policies, has been operating a formal multi-year rate action plan since 2012. As part of its strategy, Genworth has been implementing significant premium rate increases and associated benefit reductions on legacy policies in order to maintain the self-sustainability of its insurance subsidiaries. State regulators do push back: Maine’s Bureau of Insurance reduced a Genworth rate increase request, requiring the company to spread any approved increases exceeding 25% over multiple years, and reduced one proposed 233% increase to 76%, spread over three years at roughly 21% per year.

Clark Howard has described the underlying pattern on his podcast: as premiums climb, healthy policyholders drop coverage, leaving only those most likely to file claims still paying in. That shrinking pool pushes the insurer’s costs up again. Suze Orman has noted that Genworth policyholders in particular have faced serious increases because carriers failed to actuarially account for the true cost of care from the start.

Five Options on the Table

Every policy differs, so treat these as commonly available levers. Read the insurer’s offer letter alongside the policy itself before deciding.

• Pay the increase. Preserves the full daily benefit, benefit period, and inflation rider. Gives up cash flow now, and probably again when the next rate filing occurs.
• Reduce the daily or monthly benefit. Cuts what the policy pays per day of care but preserves coverage length. The family covers any gap out of pocket or from retirement income.
• Shorten the benefit period. Trims coverage from, say, five years to three. Preserves the daily benefit at full strength. Gives up the tail end of coverage, which matters because the longest stays are the ones that wipe out savings.
• Drop or reduce the inflation rider. An inflation rider grows the daily benefit each year, usually at 3% or 5% compounded. It is often the largest single driver of the premium. Trimming or freezing it can slash the bill sharply. Giving up future growth stings less at 81 than it would at 61.
• Accept contingent nonforfeiture. When a rate hike crosses a threshold set by state regulation, the insurer generally must offer a paid-up policy tied to premiums already paid. No more premiums are owed, and reduced benefits remain available if care is needed. This preserves something for the $53,000 already spent. Terms vary by contract.

The Lapse Trap Nobody Warns About

Silently stopping payment is the outcome the sunk cost instinct produces. Lapse means the policy terminates for nonpayment, and in most cases the policyholder forfeits everything. Contingent nonforfeiture exists precisely to prevent that outcome, but it usually must be elected in writing within the response window printed on the notice. Miss the deadline, and the middle options disappear.

Why Replacing the Policy at 81 Is Not the Answer

Underwriters price new long-term care coverage on age and current health status. Suze Orman has put it plainly: the average age of entry into a nursing home is around 84 or 85, and premiums on most long-term care policies skyrocket once you turn 60 or older. By 81, replacement coverage is generally unavailable or unaffordable. The existing policy, even after the hike, is worth more than the invoice suggests.

About 70% of adults aged 65 and older will require some form of long-term care at some point in their lives. The financial exposure is substantial. A nursing home costs a national median of $9,581 per month for a semi-private room and $10,798 per month for a private room, roughly $115,000 to $130,000 per year. The average nursing home stay runs two to two and a half years, putting total costs in the range of $230,000 to $290,000 before any coverage applies.

Long-term care insurance operates separately from Medicare and Medicaid, and understanding both programs clarifies exactly what is at stake. Medicare covers up to 100 days per benefit period in a skilled nursing facility. The first 20 days are fully covered with no copay, but days 21 through 100 come with a daily coinsurance of $217 in 2026. Medicaid covers custodial nursing home care only after the applicant spends down assets to state-defined limits. When a private long-term care policy ends, whatever gap it would have bridged falls to the family or, ultimately, to Medicaid.

A Framework the Family Can Use

Three questions to work through with the offer letter in hand:

1. What does the household need the policy to do: cover the full bill, cover a gap on top of Social Security or pension income, or protect a spouse from asset spend-down?
2. Which available lever (benefit reduction, shorter period, trimmed inflation rider, or contingent nonforfeiture) hits the premium hardest while still accomplishing that goal?
3. What is the deadline on the letter, and who signs and returns the paperwork before it passes?

The $53,000 is already spent. The next decision is about the next dollar, and making sure the paperwork gets returned before the clock runs out.

Editor’s note: This update adds 2026 nursing home cost figures (national median of $115,000 to $130,000 per year, per the CareScout 2025 Cost of Care Survey), the current Medicare skilled nursing coinsurance of $217 per day for days 21 through 100, the statistic that roughly 70% of adults 65 and older will require long-term care, and recent context on the broader rate-hike environment, including Maryland proposals ranging from 27% to 242% affecting more than 12,600 policyholders and Maine regulators reducing a Genworth rate-increase request from 233% to 76%.

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