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What should you think about LTC planning now?

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Long-term care (LTC) planning hasn’t been a big topic during the recent elections.

But for the aging baby boomers living in states struggling with bursting Medicaid budgets and families dealing with the Alzheimer’s epidemic, it is a never ending focus of conversation and concern.

Of course, part of that discussion is how to pay for LTC and the role long-term care insurance (LTCI) plays.

Here are some recent trends that advisors should keep in mind when discussing long-term care plans.

1. Strength

Despite the exit of several insurers over the last decade, the carrier commitment to traditional LTC coverage is strong and getting stronger.

Recently, Thrivent Financial added LTC to its product offerings and John Hancock announced innovative new products and a re-commitment to a business they’ve been involved with for 25 years.

Add those to industry stalwarts such as Genworth and Transamerica, Blue-cross owned carriers Medamerica and LifeSecure, and strong mutual carriers such as Mutual of Omaha, Northwestern Mutual, Mass Mutual and New York Life. (For those counting that’s at least ten carriers offering traditional coverage!)

2. Interest rates.

The low interest rate environment is hurting insurers’ profits and increasing premium rates. In addition to premium dollars, insurers count on investment earnings off of reserves to pay claims.

Now it’s becoming a challenge for those companies to find the interest rate returns that they assumed they would be getting. The good news is that rates won’t remain low forever and experienced companies have hedging strategies to help them through investment peaks and valleys.

3. Coverage prices.

Existing policyholders and their agents have had to deal with in-force premium increases they were not anticipating.

It’s been tough for both the clients and agents dealing with these increases over the last few years. However, many people have been able to reduce the rate increase impact by adjusting the inflation coverage option on a go forward basis.

When my in-laws received a 40% rate increase on their LTC policies, I was able to keep their premiums the same by dialing down inflation from 5% to a going forward rate 3.2%. It ended up that the 5% benefit they owned had actually increased their coverage greater than the cost of care in their area, which has not been going up as high.

Policy holders wanting comfort can compare their current coverage with new plans available. They’ll almost always find they made a wise decision buying when they did.

4. Gender

Expect new products in the upcoming year to have gender-distinct pricing.

Some recent state filings from carriers indicate they are proceeding with gender-distinct product rates.

Because women have higher claim incidents than men, expect higher pricing for female applicants. For couples, expect similar or slightly higher premiums. In general, females are advised to consider buying plans now before new products are launched.

5. Inflation

For those worried about future inflation, consider an automatic CPI benefit.

Do you have clients worried about the federal monetary policies and the possibility of future inflation? They may want to consider buying an automatic CPI inflation option.

Carriers offering these plans often use hedging strategies, which means there is a counter-party involved. If inflation does increase in the future, the cost of this automatic CPI coverage may increase, so take advantage of the current offerings.

6. Groups

Group LTC has morphed into individual multi-life policies.

It appears the days of guaranteed issue group LTC plans are numbered and anticipated to be replaced by individual products offered on a discounted basis with a simplified underwriting process. This will result in additional opportunities for employers of all sizes.

7. Technology

Electronic applications are gaining traction.

By the end of 2013, LTC e-apps will be a significant part of the LTC world. They will make the experience of signing up for coverage much easier for the consumer and the advisor, and some incorporate learning and planning components as well.

8. Media

This month — November — is LTC awareness month!

LTC is in the news, and this is a great time to raise the issue with clients.

Two key organizations are backing LTC awareness month – the American Association for Long-Term Care Insurance and the Life and Health Insurance Foundation for Education (LIFE).

Take advantage of their LTC awareness materials.

Remember, many of the best businesses (General Electric, IBM, General Motors, Disney, Microsoft, Apple) were started during down economic times. Companies and advisors building LTC planning business now will reap the rewards during periods of growth in the future.


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