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