Questions from a client after we sent him long term care insurance quotes
Client:
I have a few questions on the long term care insurance info you sent me.
- If I interpret what you’ve sent correctly, there is a significant discount (40% with the Genworth proposal) for Denise and me signing up together. I had really gone into this just thinking about myself, since I'm 6 1/2 years older than Denise, but this may make me rethink that.
- Are these “level premium” policies? There is a reference in the Genworth material that “they reserve the right to raise future premiums for all policy holders by class and state.” If this can be done, what are we really guaranteeing with respect to future premiums?
- Approximately how much are the quoted premiums likely to increase for each year we might wait, assuming we both stay in good health? For example, if we decide to “roll the dice” and not enroll for another two years, approximately what would the premiums be for the Genworth 3-year policy? (I know there are no guarantees, but what has been your experience?)
- It would seem like the compounding benefits option makes sense, given how all these costs are increasing, but can you provide an example of the premium difference, with and without the provision?
- What does “Rate Guarantee: No, No” mean?
- How would the “10-Pay” limited pay option for Genworth factor in for us?
- Do you recommend we consider any of the optional benefits? Why/why not?
- How does the CLASS Act provision, which I understand made it into the final health care bill, factor into all this?
I'm sure this isn't all I need to know, but it will finally move the process forward. Thanks,
LTC Tree:
Hi Mr. Client, good questions.
1) Yes, with all carriers there is s significant spousal discount between 30-40% off.
2) Yes, but they can raise rates if they underestimate the actuarial risk. GNW has just done that 1 time since 1974.
3) I'd say about 5% per year. That's not the biggest problem with waiting though. The factor that will cost you the most money down the road is every 18 months or so these companies raise their prices for their products. Each time they increase their product it's at about a 7-10% clip. If you wait 5 years you'll have the increase in age, the 2-3 increases for product cycles and you'll have to buy more per day because of inflation--because keep in mind if you were to buy now the 5% compound inflation protection engine will grow your account without growing the premium every year.
4) the prices are about 1/2 without the 5% compound. I's say save your money and not buy the insurance if you don't get the inflation guard because you probably won't use this for 20-30 years.
5) There are a few companies that will guarantee rates for 5 or 10 years so that's why that field are there.
6) The 10-pay on the 3yr plan would be $5354/yr for 10 years and then it's paid off.
7) Not really, about the only one I think with worth even glance is the waiver of home care elimination period and possibly the return of premium after 10 years. The riders are nice to have but they change you for them...I help people invest their money so this is the investment side in me coming out. Finding the balance between insurance and your investments is key.
8) No factor. It's much more expensive and provides less benefits so the only people that will opt for it will be the unhealthy. Talk about adverse selection, this fact will cause huge claims down the road and HUGE rate increases for the people who buy that Trojan Horse. The real reason it was in the bill in the first place is they double counted the premiums taken in the first 5 years and put them towards the health care bill to show the health care bills was deficit neutral. They did this because the Class Act plan has a 5 years waiting period before you can file a claims so they took the projected premiums taken in the first 5 years and double counted them. The good thing is the Class Act is helping spread the word on Long Term Care Insurance.
If you have more questions just ask away!
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