Insurance is based on risk and risk is always changing, so it makes sense that insurance industries will undergo significant ebbs and flows over time. The Long Term Care Insurance market is no different and some notable changes are set to happen in the industry this summer.
I spoke with LTC Tree advisor and agent Rex Stephens recently about the changes that are coming up in the Long Term Care Insurance market and why they are happening. Rex explained the reasons behind the changes and filled me in on what to expect in the next few months. Watch the video discussion below or read on to find out more.
What to Expect in the Long Term Care Insurance Market this Summer
If you are looking into Long Term Care Insurance, now is the time to buy. Waiting will only cost you. Genworth Financial, the largest Long Term Care Insurance provider on the market today, has plans to release a new product in most states across the country sometime in the next few months. The new product will be called Privileged Choice Flex 3 and will include some serious differences from the most recent product the carrier released, which was called Privileged Choice Flex 2. The new product means a number of different things for consumers, as Rex explained.
The policies will be more expensive than the policies that are currently on the market, for a couple of different reasons. Genworth is changing two core assumptions in their actuarial models to allow for more conservative estimates. The company is lowering their interest rate assumption due to the low interest rate environment and low returns on investments that companies are currently experiencing. On top of that, the are adjusting their assumptions for lower lapse rates. Original estimates of lapse rates for Long Term Care Insurance were around 5%, but companies now realize that the actual lapse rates are closer to half a percent. Once people buy a policy, they hold onto it because they recognize the inherent value.
Limiting Benefits in New Product
Not only will the new Genworth policies cost more, but they will also be more limited in the benefits they provide. It’s currently possible to purchase a policy with a 10-year benefit period, but with the new products, that will not longer be an option. Because the cost of care is so high (and still climbing), lapse rates are so low, and subsequently, claims rates are higher than expected, most companies simply can’t afford to offer policies that include such long benefit periods. The new products will include a maximum benefit period of 5 years.
If you are considering buying a policy right now, you can still reap the benefits of the current product before the new one is released. If you were to buy now, you would be grandfathered into the currently existing rate structure, meaning you could buy a policy that lasts 10 years and you won’t be paying nearly as much as someone who buys the same policy with the same benefits later this year. The LTC Tree Analytics Department estimates the new product will cost somewhere between 25-40% more than the product being offered now.
Plan Ahead and Get Better Rates
It’s nearly impossible to predict exactly when these changes will take place, but word of mouth information has led us to believe that they will occur sometime in June or July. My takeaway from this discussion was this: if you’re thinking about buying a policy, don’t wait much longer. Now is a great time to lock in lower prices and better benefits from one of the top rated companies in the industry.
You can learn more about what Long Term Care Insurance is and who needs it here. At LTC Tree, we strive to provide our clients with the most up-to-date and accurate information about Long Term Care Insurance. Rather than set up a sales meeting to pressure you to buy like some agents will, we will mail you a comparison of the top rated carriers in the industry and help you navigate your options in a no-pressure process. Find out the best companies or request your free quote today.