One size does not fit all.That bit of common sense seems to fly out the window when anyone starts commenting on how to "fix" anything, especially, complicated, dynamic problems like financial planning, retirement planning, investing and insurance. A new opinion about how to make LTC insurance cheaper and more effective is getting widespread attention thanks to an editor at the Wall Street Journal. Quoting from a column in Financial Planning magazine, Glenn Ruffenach (who I know, respect, and who has quoted me several times) writes: "...a policy with a two- or three-year elimination period — and benefits that subsequently cover as much as five or 10 years of care, if needed — would be more effective, [the author] says. "'With an elimination period that high, even the average stay in a nursing home will fall within the deductible period; the actual probability of ever having a material claim against the long-term care insurance would fall dramatically,' [the author] says. 'That’s good, as it means the cost of coverage could fall significantly, while policies could simultaneously have richer benefits (after the elimination period) and do a better job of insuring against extreme events when they occur.'" There are two significant errors in this concept:
While it is true that LTC insurance is less expensive with a longer Elimination Period - essentially creating a "higher deductible". And the advice that the EP should be two to three years is also reasonable IF the client can financially - and wants to - self-insure that much care out of pocket to have even longer benefits after that time. While not common, there are LTC plans available with extra-long EPs. But many clients remain well-served by the typical 30 to 90-day EP with total benefits lasting only three to four years. These shorter-benefit plans can be designed to provide guaranteed Medicaid asset protection in most states if there is a worst-case, very long care event. And many people rightly realize that long-term care planning with well-designed LTC insurance coverage is not about leaving money to heirs, but preserving income - and lifestyle - for others at the very beginning of a long-term care event. Bottom line, what does a particular person or family need? Long deductible plans are available, but "normal" 90-day plans remain financially viable for many. Read the WSJ article by clicking here: http://blogs.wsj.com/totalreturn/2015/01/26/a-way-to-fix-long-term-care-insurance/ You can also find it by clicking here to read it on MarketWatch.com: http://www.marketwatch.com/story/how-to-make-long-term-care-insurance-more-affordable-2015-01-26?siteid=yhoof2 The original article in Financial Planning magazine requires a subscription to view.
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Analysts' opinions are just that, opinions. Yet more and more are suggesting that the market grossly over-reacted to Genworth's charge against earnings to bolster LTC policyholder reserves. I strongly believe that LTC policyholders - and those who still need to buy LTC insurance - should see Genworth's actions as GOOD NEWS, and that policyholder security should be evaluated differently than an investor's returns. But it's also helpful to recognize - both insurance buyers and stock investors - that news and short-term market swings need to be taken in context with long-term goals. Read the Barrons report about Raymond James' upgrade by clicking the following link: http://online.barrons.com/articles/genworth-stock-can-rise-42-1415909893 This information is not intended to be investment advice, nor a solicitation to buy or sell any particular stock or investment, but is presented as information about LTC insurance.
Bad news for INVESTORS. Good news for POLICYHOLDERS. OR: Shareholders lost value. Policyholders gained security. Stock price (shareholder value and return) and claims paying ability (policyholder security) are two separate issues. The reason for the downdraft in Genworth's stock price is actually a good thing for policyholders. The company put more than a half-BILLION dollars into its policyholder reserves. What I take from this is that instead of simply pursuing yet another round of rate increases (which take a long time), the company has taken a charge to earnings which hurts shareholders in the short run in order to keep promises to policyholders for the long run. There may, or may not, be additional premium increases on older policies, but this should not be read as bad news for LTC policyholders, quite the opposite in my opinion. From the web:
This information is not intended to be investment advice, nor a solicitation to buy or sell any particular stock or investment, but is presented as information about LTC insurance.
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