One of the biggest fears people have about retirement is getting sick and running out of money to cover their health issues.
So in comes long-term care insurance, which can cover the cost of nursing homes, assisted-living facilities and in-home care. Medicare — except in very limited situations — does not cover long-term care. Medicaid covers long-term care, but to qualify for the benefit, you have to be pretty poor.
If you need help with life’s basic activities — eating, dressing and bathing — it can be expensive and the cost of that care can decimate your savings.
The problem is that there have been some steep premium increases for long-term care insurance, and it has many people wondering if the insurance is worth it. Insurance companies have had trouble pricing the insurance. Initial premiums charged haven’t been enough to cover claims.
But how the insurance is priced may be changing significantly. Rather than keeping premiums steady for several years and then having to impose huge double-digit rate hikes, Genworth, one of the largest providers of long-term care insurance, wants to be have the ability to change premiums annually, reports Forbes contributor Howard Gleckman.
“In this design, unfortunately called the Annual Rate Sufficiency Model, buyers of new policies would likely see modest, single-digit rate hikes each year or two,” Gleckman writes. “If Genworth thinks it is likely to pay fewer claims than expected or if investment income is higher than projected, consumers might even see small rate reductions in some years.”
He goes on: “For years, some brokers told buyers that their premiums would never increase. But in reality, while carriers could not raise rates on individual policies, they could boost prices for an entire class of buyers. They often delayed those rate hikes — or were blocked by state insurance commissioners — for five years or more, until policyholders got hammered with increases of 40 percent and up.”
If you’re in the market for long term care insurance you need to read Gleckman’s article: We may be about to see a big change in how long-term care insurance is priced
The pricing of long-term care insurance rankled federal workers last year when their premiums skyrocketed. Here’s what I wrote at the time:
The market for long-term care insurance is going through some tough changes. For many people, getting this insurance is a good financial move. But before you buy, take some time to become informed. Here’s some reading for you:
— Should I Buy Long-Term Care Insurance?: Next Avenue’s Money Editor struggles to answer the question
Your long-term care experience
I want to hear from you. What’s been your experience with buying or using long-term care insurance?
Send your comments to firstname.lastname@example.org. Please include your name, city and state. In the subject line put “Long-term care.”
Retirement Rants & Raves
This feature belongs to you. You get to rave or rant about anything related to retirement. Send your comments to email@example.com. Please include your name, city and state. In the subject line put “Retirement Rants & Raves.”
Here’s a praise report for this week.
Ernest James Schubert of Manteca, Calif., is getting something out of retirement that we all need.
“Retirement for me has been a blessing,” Schubert wrote. “First I had to learn how to sleep. I worked rotating shifts for 38 years. I thought I was Bill Haley (“Rock Around the Clock”). A good co-worker, who retired about 15 years before me told me, “Everyday is Sunday and Monday’s a holiday.” I kept that thought. Amazing how many holidays are actually on a Monday. The Lord blessed me to live long enough to retire and get Social Security for 13 years.”
Live chat this week
Join me on Thursday, April 20 at noon (ET) for a live discussion about your money. My guest will be ESI of blogger ESI of ESIMoney.com. (ESI is all he goes by.) He’s in his 50s and enjoying early retirement.
I featured one of ESI’s blog post in last week’s newsletter: He retired at 52. The 10 things that surprised him about early retirement.
Let’s talk retirement. Click this link to participate in the chat.
Newsletter comments policy
Please note it is my personal policy to identify readers who respond to questions I ask in my newsletters. I find it encourages thoughtful and civil conversation. I want my newsletters to be a safe place to express your opinion. On sensitive matters or upon request, I’m happy to include a first name and last initial. But I prefer not to post anonymous comments (I do make exceptions when I’m asking questions that might reveal sensitive information or cause conflict.)
Have a question about your finances? Michelle Singletary has a weekly live chat every Thursday at noon where she discusses financial dilemmas with readers. You can also write to Michelle directly by sending an email to firstname.lastname@example.org. Personal responses may not be possible, and comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read more Color of Money columns, go here.