90% Premium Increase?

[ltcadviser]

originally posted by ltcadviser



originally posted by Charlie456




Jack & Charlie,
Well, a little different perspective:

When discussing "average needs and average costs" one can not accurately project what average "needs" will ever be, but you can pretty much make an educated guess on what the average costs will be. Including the future cost of premiums (taking into account possible future rate increases) the cost of care, along with any out-of-pocket costs down the road will give you a total.

I've always felt that LTCi should fall under the same category as any other insurance product. Insurance is about "risk sharing"; risk between the policyholder and the carrier.

For your 68 year old policyholder who will require care for the rest of his life, looking back now that was a pretty bad call on both you and your client's parts to not have purchased a policy with lifetime benefits. That would have suited his needs much better. Now, at approximately 78 years old, for the remaining years of his life he has no insurance.

Now, don't take offense because I'm not implying that you sold an incorrect product. In 99% of the cases a 10-year benefit period is more than adequate.

If I met a prospect that told me he was 100% sure that he would wind up in a nursing home because every elderly member of his family did, then I'd suggest (and he would buy) a policy with an unlimited benefit period (if it's still available) with $1,000/day in benefits.

But, no one is sure they're going to wind up needing expensive care for life. So, we sell policies on the basis of "potential out-of-pocket", vs. the premium. The folks that we're dealing with have both income & assets and in the future they will continue to have income & assets. Therefore, they should to some extent coinsure the risk. Can you insure 100% of the risk? Yes, (and we've all done it) but that's not what insurance is about and very rarely is a policy sold that way.

I agree with your statement: "When a real claim occurs a claimant will most likely never feel they are over insured".

But the question remains, did the benefits purchased reflect a desire for the policyholder to share a comfortable part of his future risk? I'm willing to bet that he was.
Just my 2 cents.........

Well, he is 58 not 68, so his coverage will end at 68. I asked him yesterday if he had any regrets about not buying unlimited and he said no. He just felt the premium was more than he wanted to spend. The benefits in no way represented a desire to cost share. He just felt he did not want to spend more money. He based his decision on how much care his mom needed, which is common. I sure have regrets though. It eats at me. I am grateful he has 10 years and not 3 years; but I wish he had unlimited. I wrote a State Life Asset Care policy with Unlimited benefits today. May write 2 more next week. Wish all carriers would bring back unlimited.

 

[Arthur Rudnick]

originally posted by spedprof

As the original poster, I am both fascinated with and thankful for the discussion... Much for us to consider... But as a question, if we are currently "overinsured", which I understand we are and build up a pool of money that is quite large and perhaps unneeded under current and likely future costs, does the fact that I have a 5 yr policy limit the ability to use those resources within that 5 yr window, or can I use the excess after the 5 yrs? i assume the former, but a comment in the discussion seemed to suggest that the money was there until it was used up.

Let's put it another way:
Don't focus on the benefit period. Focus on your "Pool of Money"
At $512/day for 5 years, you have a pool of money of $934,400 (1825 days x $512/day). If you used $512/day everyday for the full 5-year period, you will use up all your benefits.

But, if you used only half that amount ($256/day), your policy would last you 10 years. (10 years x $256 is the same amount as 5 years at $512/day).

Keep in mind that your daily benefit and your Pool of Money is increasing every year by the amount of the inflation rider you eventually wind up with.

 

[spedprof]

Thanks, this has been most illuminating to read... Here is my last (I hope) question... At ages 68 and 66, what would you folks recommend for an inflation rider if we were to purchase LTC today?? If you say 5%, then my overinsured daily amt. of $512 will lose it's value over the next few years.. If you say 3%, then I think I can live (no pun intended) with 3.85% or even 2.7%. And if I'm not mistaken, our ages play into that decision.

Thanks again.

 

[Mr_Ed]

Thanks, this has been most illuminating to read... Here is my last (I hope) question... At ages 68 and 66, what would you folks recommend for an inflation rider if we were to purchase LTC today?? If you say 5%, then my overinsured daily amt. of $512 will lose it's value over the next few years.. If you say 3%, then I think I can live (no pun intended) with 3.85% or even 2.7%. And if I'm not mistaken, our ages play into that decision.

Thanks again.

The home healthcare inflation rate has ranged between 0% and 2% over the past 5 years in most states.

The nursing home inflation rate has been over 3%.

If you were buying a policy today, I'd tell you to buy anything between a 2% and a 4% inflation benefit.

You'll be fine with either 2.7% or 3.85%.

 

[Arthur Rudnick]

originally posted by spedprof

Thanks, this has been most illuminating to read... Here is my last (I hope) question... At ages 68 and 66, what would you folks recommend for an inflation rider if we were to purchase LTC today?? If you say 5%, then my overinsured daily amt. of $512 will lose it's value over the next few years.. If you say 3%, then I think I can live (no pun intended) with 3.85% or even 2.7%. And if I'm not mistaken, our ages play into that decision.

Nothing going forward is based on age. Your original premium was based on your ages when you first applied.

A 3% inflation option is relatively new in the industry. Prior to that the options were 5% compound (which doubles your daily benefit in 15 years) or 5% Simple, (which will double your benefit in about 20 years).

5% compound is a very costly option. Considering that you purchased a "more than adequate" daily benefit in the begining, either 2.7% or 3.85% will suffice. Today, the recommended inflation rider is 3%.

Where do you live in NY?

 

[spedprof]

I understand that the premium is based on the age when I first bought the policy... I was just curious if a new 68 yr. old customer came in and asked for LTC, what inflation rate would be recommended. I have this opportunity now (and only now) to adjust mine and was wondering what the current economic conditions and outlook would warrant.

I live on Long island.

Thanks.

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Also, Thanks, Mr. Ed .. did not see your response.. apologies.

 

[Arthur Rudnick]

originally posted by spedprof

I understand that the premium is based on the age when I first bought the policy... I was just curious if a new 68 yr. old customer came in and asked for LTC, what inflation rate would be recommended. I have this opportunity now (and only now) to adjust mine and was wondering what the current economic conditions and outlook would warrant.

I live on Long island.

All things being equal (and they never are) today, a 3% inflation rider would be the way to go. But, there are a few moving parts here. If the benfit chosen is well below the present cost of care, you might look at a 5% rider. Or, in some cases, at 68 years old, you may start today at much higher daily benefit with no inflation rider.

If I were selling you a policy today, I would recommend a benefit of $300/day with a 3% compound inflation rider.

Very often, the benefts selected has to do with the affordability of the premium.

I'm in White Plains..............

 

[ltcadviser]

A 49 year old New Yorker called me yesterday for a policy with $500 day and 5% compound inflation. His dad needed 24/7 care through an agency at $25/hour. So, Arthur, some New Yorkers will view this coverage amount as appropriate.

 

[Arthur Rudnick]

previously posted by ltcadviser

A 49 year old New Yorker called me yesterday for a policy with $500 day and 5% compound inflation. His dad needed 24/7 care through an agency at $25/hour. So, Arthur, some New Yorkers will view this coverage amount as appropriate.

Just checked Mutual of Omaha. At standard rates, for a single, with $15,000/month, 5-year benefit period, 90-day ep with a Waiver for HC, the premium is $20,000/yr. Probably a once in a lifetime sale for you if he takes it. And, if he's married, it comes to $30,000/year.

Even with a 20% state tax credit that's out of reach for 99.9% of consumers. And, if he can afford the premium, that means he has substantial income. If he has that much income, IMO, he's over-insuring himself. Today, for 24/7, even through an agency, you can work out rates for $300/day.

 

[Mr_Ed]

previously posted by ltcadviser



Just checked Mutual of Omaha. At standard rates, for a single, with $15,000/month, 5-year benefit period, 90-day ep with a Waiver for HC, the premium is $20,000/yr. Probably a once in a lifetime sale for you if he takes it. And, if he's married, it comes to $30,000/year.

Even with a 20% state tax credit that's out of reach for 99.9% of consumers. And, if he can afford the premium, that means he has substantial income. If he has that much income, IMO, he's over-insuring himself. Today, for 24/7, even through an agency, you can work out rates for $300/day.

gnw is a much better value in NY if he's healthy.