Hi All,
I have been helping my parents (ages 72 and 73, both retired) weigh the pros and cons of dropping their Genworth LTC insurance policies. I am hoping for a sanity check/general thoughts and input on the decision making here.
Due to a class action against Genworth, my parents currently have the option to drastically reduce their policy benefit down to roughly what they’ve already paid in premiums. In return, they would get to stop paying premiums going forward. I’m including details on this at the bottom of this post.
Currently, we are feeling inclined to take this opportunity to drop most of the coverage. The rationale is:
1. My parents both have significant income between pensions and social security (income exceeds expenses). They also have significant investments, which given their current lifestyle they may never need to tap into. If one of them needed long-term care, most (but potentially not all) of the expenses could be paid for out of their ongoing income.
2. It seems like their LTCI policies have protected them through their financially vulnerable working years already. At their current ages, it seems less likely that they’d have a very extended long-term care need.
3. The LTCI premiums currently cost about $7K combined annually. Genworth is requesting massive rate increases (130% cumulative increase; not sure how much will actually be approved by the state). If approved, keeping up with premiums would begin to significantly cut in to their income.
4. If Genworth doesn't get the requested rate increases, they could become insolvent (they are already in poor shape financially). Presumably most of the policy value would be protected by state guarantees but this would obviously not be an ideal situation.
5. It seems like it could be tricky to actually use the policies. The policies require 2 ADLs or dementia, and Genworth could make it difficult to make claims. Dropping the policies and saving the premiums going forward gives them more flexibility to get the right kind of help when they need it.
The biggest downside I see to dropping the policies is that it does open them up to the possibility of having an extended, expensive LTC need which could lead to them needing to liquidate/spend a bunch of their investments. I could see this being a tough call for them to make, and it would of course affect me in terms of what I would inherit.
I am curious whether anyone else has wrestled with this type of decision, and what your thoughts are. Let me know if any further details would be helpful.
Thanks!!
...........
Policy details:
Currently, parents each have individual Genworth LTCI policies. Each policy has a total lifetime benefit of roughly $400K over 3 years max, with a compounding inflation benefit of 5% annually. The annual premium is currently about $3,450. Due to a class-action against Genworth, they now have the following options available to them:
1. Keep the existing $400K worth of coverage. Genworth notes that they intend to request an eye-watering 130% cumulative rate increase on the annual premiums going forward.
2. Pay no more premiums going forward, lose the 5% compounding benefit, and keep a policy worth 150% of the premiums paid to date (policy benefit would drop to ~$55K).
3. Pay no more premiums going forward, lose the 5% compounding benefit, receive a $10K cash payment now, and keep a policy worth 100% of the premiums paid to date less the $10K cash (policy benefit drops to ~$27K).
Currently, we are feeling inclined to take option 3 above, which would drastically reduce the policy benefit.
I have been helping my parents (ages 72 and 73, both retired) weigh the pros and cons of dropping their Genworth LTC insurance policies. I am hoping for a sanity check/general thoughts and input on the decision making here.
Due to a class action against Genworth, my parents currently have the option to drastically reduce their policy benefit down to roughly what they’ve already paid in premiums. In return, they would get to stop paying premiums going forward. I’m including details on this at the bottom of this post.
Currently, we are feeling inclined to take this opportunity to drop most of the coverage. The rationale is:
1. My parents both have significant income between pensions and social security (income exceeds expenses). They also have significant investments, which given their current lifestyle they may never need to tap into. If one of them needed long-term care, most (but potentially not all) of the expenses could be paid for out of their ongoing income.
2. It seems like their LTCI policies have protected them through their financially vulnerable working years already. At their current ages, it seems less likely that they’d have a very extended long-term care need.
3. The LTCI premiums currently cost about $7K combined annually. Genworth is requesting massive rate increases (130% cumulative increase; not sure how much will actually be approved by the state). If approved, keeping up with premiums would begin to significantly cut in to their income.
4. If Genworth doesn't get the requested rate increases, they could become insolvent (they are already in poor shape financially). Presumably most of the policy value would be protected by state guarantees but this would obviously not be an ideal situation.
5. It seems like it could be tricky to actually use the policies. The policies require 2 ADLs or dementia, and Genworth could make it difficult to make claims. Dropping the policies and saving the premiums going forward gives them more flexibility to get the right kind of help when they need it.
The biggest downside I see to dropping the policies is that it does open them up to the possibility of having an extended, expensive LTC need which could lead to them needing to liquidate/spend a bunch of their investments. I could see this being a tough call for them to make, and it would of course affect me in terms of what I would inherit.
I am curious whether anyone else has wrestled with this type of decision, and what your thoughts are. Let me know if any further details would be helpful.
Thanks!!
...........
Policy details:
Currently, parents each have individual Genworth LTCI policies. Each policy has a total lifetime benefit of roughly $400K over 3 years max, with a compounding inflation benefit of 5% annually. The annual premium is currently about $3,450. Due to a class-action against Genworth, they now have the following options available to them:
1. Keep the existing $400K worth of coverage. Genworth notes that they intend to request an eye-watering 130% cumulative rate increase on the annual premiums going forward.
2. Pay no more premiums going forward, lose the 5% compounding benefit, and keep a policy worth 150% of the premiums paid to date (policy benefit would drop to ~$55K).
3. Pay no more premiums going forward, lose the 5% compounding benefit, receive a $10K cash payment now, and keep a policy worth 100% of the premiums paid to date less the $10K cash (policy benefit drops to ~$27K).
Currently, we are feeling inclined to take option 3 above, which would drastically reduce the policy benefit.
Statistics: Posted by TeenyBitBlue — Sat Jan 06, 2024 3:36 am — Replies 0 — Views 60