Dear Clients and Friends:
Having Long term Care insurance is a good idea until you can’t afford it. Read my client’s letter to me and my response.
CLIENT QUESTION:
Hello Lawrence,
We enjoy your Listen To Lawrence email letters.
We received a Genworth Long Term Care 69% Premium increase announcement. Keeping our same coverage would go from $8,648 up to $14,617. It was about 6 years ago the premium went from $5,400 to $8648, and you personally suggested accepting the increased premium at that time.
To their credit, they offer options such as fewer years of coverage, different levels of inflation protection, or just pay no more as a Paid-Up Policy.
My wife and I will be 75 this year, did not get Covid, and are in good health.
We each have a Revocable Trust with you. What is your advice for us?
MY RESPONSE:
I strongly believe in Long Term Care Insurance. It can protect your assets, give you more choice of care, and certainly can provide peace of mind. The alternatives are to use some or all of your assets to pay for your own care (nursing homes on Long Island are about $200,000 per year) or give away your assets (to a trust or otherwise) to obtain Medicaid. The vast majority of my clients opt for Medicaid because the insurance option is unobtainable (they are uninsurable) or they simply cannot afford it.
What is patently unfair is that many who opted for the best plan, to purchase Long Term Care Insurance, because they were insurable and could afford it, later get what they call in the law, SCREWED! You see, the fine print in all of these policies is that they can raise your premiums in the future. All they have to do is apply to the New York State Insurance department and show them that they do not have the resources and/or income stream to meet future claims. New York State may grant them their increase or not, whole or in part. I personally have a John Hancock policy and have received two modest increases over the last 15 years.
John Hancock is a strong company that not only sells Long Term Care Insurance but has many other types of products and a gazillion dollars in reserve. They have the ability to cover losses in their Long Term Care division. Genworth is not so fortunate and has been passing significant premium increases to their policyholders. Should you pay these increases? Can you afford to pay these increases? Can you reduce the benefit but keep the policy? Can you reduce the inflation protection or the number of years or the daily benefit? The ultimate answer depends upon your risk tolerance, your ability to pay, and your other options. Would pursuing Medicaid planning make sense, even if it would take five more years to work?
Obviously, each client will have different answers to all of these questions. My client above is being asked to pay about $7000 per year per person (about $14,000 for both of them) for the privilege of keeping their insurance. Keep in mind that that cost is about two weeks in a nursing home. Is it worth it? Can they afford this cost and maintain their accustomed manner of living?
The best course of action is to come in and discuss all of your options with us.
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