Category Archives: Estate Planning

More reason to be careful in choosing to use a LTC (Long Term Care) Insurance Policy

Add together prolonged low interest rates to advances in both health care and life expectancy, sprinkle in spiraling costs of healthcare and you have a recipe for major change in the long-term care (LTC) insurance industry. These industry dynamics, as well as a few others, have many LTC insurance carriers rethinking how to balance consumer needs with achieving long-term profitability. Many carriers are beginning to make significant adjustments to their product offerings, increasing premiums, changing pricing strategies and reducing product benefits. Even more dramatic, some are exiting the long-term insurance business entirely.

While long-term care insurance (LTCi) isn’t for every client, preparing for long-term senior care is prudent and oftentimes pays off. As we progress through life and age into retirement, it is common to expect new health concerns to greet us. As such, clients may want to consider long-term care planning early because once certain health issues set in, LTC planning gets much trickier and much more costly. LTC insurance can pay for extended care needs that often result from normal aging, and help pay for quality long-term care services that are not covered by health insurance or Medicare.

LTCi is a relatively young industry with a shorter history when compared to other coverage such as life insurance. Although the first traditional LTCi policy was issued close to 40 years ago, actuarially speaking the application of mathematical and statistical evidence to assess risk in this industry is in its infancy. Actuaries across the board have admitted to missing the mark when initially pricing this new form of insurance. Short medical histories as related to activities of daily living, low interest rates and increasing payouts for claims means today’s LTC insurance products are not priced appropriately (i.e., not generating acceptable profit margins for insurance carriers).

Major insurance carriers have begun announcing significant changes to their LTC products and requirements. Just recently, Genworth instituted a new pricing strategy and underwriting practice to reduce risk and improve the sustainability of their LTC insurance portfolio.

While there have been several changes announced recently across the industry (reduced advisor commissions, suspension of new sales), two significant developments on the horizon and already with one major carrier are:

  • Gender-based pricing with premiums for females increasing across the spectrum, substantially in some cases
  • Expanded underwriting requirements for applicants such as paramed exams, and blood/urine samples

Though long-term care is a concern for both men and women, there is greater risk for women. Industry studies show up to two-thirds of new claims are for female policyholders. New policies in gender-based pricing translates into increased cost for future female policyholders anywhere from 15 to 50 percent, while for men it may decrease 15 to 20 percent.

In the U.S., women live longer than men (81 years on average versus 76 for men), according to data released in 2013 by the Institute for Health Metrics and Evaluation.¹ This longevity translates to potentially more unhealthy years on average for women — 11 years compared to 9.7 for men, according to MarketWatch.com.² Women are also more likely to live alone in older age or to be a caregiver for their spouse. Women who need care themselves in old age are less likely to have a family caregiver, which may further increase their potential expense to an insurance company.

Parent's, offsprings and finance

The “Weekend Investor” section of this weekend’s Wall Street Journal has a long article based on a book, “Protecting Your Parents Money.”
To me, the most important of the suggestions expressed are the following:

One, you must act as your parent’s personal fiduciary. Every action must be in their best interest, even though it may lessen the money passed to you.

Two, the end of life issues such as living wills and health care proxies and power’s of attorney and possibly HIPPA Forms are to be dealt with.

Three, it might be easiest to have you (inclusive) see a CFP® who works on an hourly basis or an attorney so there will an objective individual to control the flow of information.