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Deciding whether to buy the inflation protection at the start or later on will take some guesswork. New York Life's new policy with the CPI-protection buy-in starts out costing about half as much as its standard policy with a 5% compound inflation hike. If the policyholder buys extra coverage regularly to keep up with inflation, the premium could eventually become higher than that of the standard policy, depending on how much the CPI rises over time.
In a new twist, Genworth recently introduced the Cornerstone policy, which costs up to 50% less than the company's standard policy. Instead of calculating coverage by the daily benefit, you buy a pool of money, from $100,000 to $1 million. But the policy requires you to self-insure part of the cost, by paying 20% of the daily cost of care until you exhaust the pool. You need to keep this calculation in mind when deciding how much coverage to get.
Cornerstone won't pay room and board for assisted living but will cover only custodial services. "As you see the development of assisted-living facilities, some of them are becoming more resortlike," says Buck Stinson, president of Genworth Financial LTC. This is not a good option if you might want to choose assisted living. But if all you'll want is care in your home or a nursing home, this could be a good deal.
Meanwhile, MetLife's LTC LifeStage Advantage lets younger buyers start with a small benefit and then gives them up to age 65 to double their coverage without a medical exam. "It gives people a comfort level," says Jodi Anatole, vice-president of MetLife Long-Term Care. "They don't have to think about buying all their coverage at once." The cost of the extra coverage is based on your older age, so it's cheaper to buy more coverage when you're younger.
Employers and States Help Out
You might also cut costs by buying coverage at work. Nearly 10,000 employer groups now offer a long-term-care benefit, according to the American Association for Long-Term Care Insurance. The policies tend to have simplified underwriting -- asking a handful of medical questions -- and a group discount of 5% to 10%, says Mike Ashley, a broker with Senior Benefits Consultants, in Prairie Village, Kan. You can keep the coverage when you leave the job.
Ronald Shink, co-owner of a technology sales and consulting business in Yarmouth, Maine, recently chose to offer Genworth's Cornerstone policy to his employees. "It was sort of a no-brainer to make this available and extend our employee benefits," he says. The company isn't paying the premiums, but employees can get a 5% discount.
Shink and his wife, Kathy, both 53, were the first to sign up. They don't mind self-insuring part of the potential long-term-care expenses. "We're willing to take a certain amount of risk and hedge our bets," he says. "We look at it as wealth preservation -- the cost of preserving what you have."
New state "partnership" programs may also provide new incentives for people to buy coverage. In all states, Medicaid will pay the nursing-home tab once an individual depletes significant assets. In states with partnership programs, individuals can buy policies from selected insurers and protect additional assets if the cost of care exceeds the policy's total payout. Say you buy a partnership policy that provides $200,000 of coverage. If you exhaust your policy benefits but need more care, you can protect $200,000 of assets and still qualify for Medicaid.
For years, California, Connecticut, Indiana and New York were the only partnership states. In 2005, Congress passed a law to prod more states to introduce similar programs. About 25 states are expected to offer these programs by the end of the year. If you live in a partnership state, find out whether the policy you're considering is partnership-approved.
If you buy one of the new stripped-down policies, should you expect premium increases in the future? Although some smaller players have imposed double-digit rate hikes on policyholders, most major companies -- MetLife, New York Life and Northwestern Mutual -- haven't increased premiums for policies they've sold in the past.
So it was a big deal when industry leaders Genworth and John Hancock announced that they would raise rates this year. Genworth, the largest long-term-care insurer, is raising rates by 8% to 12% for about 440,000 policyholders. Some of these policies are from the 1970s, and policyholders are paying much less than current buyers.
A few months later, John Hancock announced that it is seeking state approval to raise rates for 275,000 people who bought long-term care policies in the 1990s (and some New York Partnership policies that were issued since then), which is about a quarter of the company's policyholders. Those who have policies that were originally issued by John Hancock should expect a 13% rate increase in premiums at their next policy renewal; those who hold policies that John Hancock acquired from Fortis in 2000 will see an 18% increase.
The premiums are increasing at both Genworth and John Hancock because the companies expected more people to drop their policies before collecting benefits. Instead, consumers held on tightly to their policies and didn't want to drop coverage after paying premiums for years, which was a smart move. But it left some of the older long-term-care insurance policies underpriced. "If we would have experienced a 5% lapse rate, we would have been fine," says Genworth's Stinson. "The reality is that it was closer to 1%."
People who buy policies today are much less likely to face rate hikes. Most states have passed laws that make it harder for insurers to raise rates in the future. To find an agent, check out Long Term Care Financial Partners (www.ltcfp.com; 866-471-4072), which includes brokers throughout the U.S. Also contact the American Association for Long-Term Care Insurance (www.aaltci.org; 818-597-3227).
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POSTED BY: Michael Robinson (July 28, 2008 07:47 PM)
Informing clients about LTC insurance is one of the best things I have done in my life. I have helped scores of people get the peace of mind that they wanted to have so as not to become a burden on their family in their later life. Medicare and Social Security are not going to be of much help and Medicaid is for the very poor who can not afford to pay. If you have assets you must 1st. "spend down" to a poverty level before you can become eligible...
POSTED BY: Dane (July 28, 2008 08:01 PM)
There are so many ways to save on your Long-Term Care insurance premiums and dealing with the top carriers is of utmost importance. There are substantial discounts for excellent health as well as martial or partner discounts. Seek the counsel of a Long-Term Care Specialist. Doing this alone will save you many hours of research and still not have the whole picture...It is important to obtain this type of insurance when you are younger and in great health.
POSTED BY: David Shulman (July 29, 2008 07:43 AM)
A good LTC specialist can custom tailor insurance plans for their clients comfort level. We illustrate "basic" "significant" and "comprehensive" plans so that a client can choose how much of the risk they want to transfer to the insurance company. Most people are surprised by the range of premiums and how affordable coverage can be...
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