Friday, August 30, 2013

Long-Term Care Insurance

Pathways Advisory Group, Inc.
Jeff Karst, CFP®

The landscape for Long-Term Care (LTC) Insurance has changed a lot the past few years.  Policies with a lifetime benefit are no longer available.  And insurance companies appear to be phasing-out the ones that still exist.

Most companies are working to raise their LTC rates.  Increases must be approved by State Insurance Commissioners.  But medical costs and long-term care costs have risen dramatically.  Most insurance companies under-estimated the current and potential future liabilities.  Genworth is one company that recently announced to its employees and affiliates that LTC rates would rise (up to 35%) on existing contracts.

An example of what you might see:  Policy premiums increase by 35%, but if you are willing to reduce your lifetime benefit to a limited duration (i.e. 5 years) your premiums will stay the same.

Many people will take the reduced benefit period in order to stave off paying subtantially higher premiums. This will indirectly phase-out the lifetime benefit on most contracts.  I’m not advocating for or against taking the reduced premium.  Just warning that, if you have a LTC policy, this might be coming your way.

We are not insurance agents.  We encourage you to speak to your agent about any changes or questions specific to your policy.  If you would like to discuss LTC options in general and how it affects your financial plan, please let us know.

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