Archive for October, 2015

Which Insurance Company Offers the Best Deal?

October 27, 2015

The answer: it depends.

Earlier this month I conducted a survey of long term care insurance companies.  I used the following standardized benefits package as much as possible: $3,000 monthly benefit.  $100,000 total benefit pool (and consequent three year benefit period).  90 calendar day elimination period.  No inflation protection.  This is for a basic policy.  The rate class (which is based on medical history) was assumed to be the middle, or second-best.

All cases in my study were for Colorado residents.  With one notable exception, there are only minor cost differences between policies issued to residents of Colorado and other states.

The six insurance companies surveyed are all good ones.  They are companies that I am currently using in my insurance practice.  While there are slight  unavoidable policy differences between the six insurers, the policies from any one company are identical for single females, single males & married couples.

A few comments about age at time of application:

  1. The younger you are when you apply, the lower the cost (premium).  The cost or premium does not increase because you become older (after the policy has been issued).  If there are later rate increases, the increase would apply as a percentage of the original premium.
  2. Insurance companies often charge the same premium for initial ages 40 and below.
  3. Every insurance company has a minimum and maximum application age.  The minimum age for LifeSecure, MassMutual and Transamerica is 18.  For Genworth the minimum is age 40.  MedAmerica’s and Mutual of Omaha’s minimum is age 30.  Maximum application age: MedAmerica allows up to 85.  Genworth is age 75.  All of the others are age 79.

What about gender?  As you can see when comparing the Single Female, and Single Male costs below, women almost always pay more than men for the same coverage.  Is this fair?  I don’t know.  However: a) women do file long term care claim more often than men and, b) gender-based rate differences have been approved by the various state departments of insurance (including the Colorado Division of Insurance).  On the other hand, women pay less than men of the same age for life insurance women tend to live longer.

 

 

 

Let’s look next at a traditional male/female married couple (important to note that the “married couple” rates only apply if both apply at the same time, and with the same insurance company, and both policies are issued, and both policies are accepted).  For those readers who astutely noticed, the combined male/female married couple rate is less than the sum of the single male and single female rates for the same age.  This difference is the couple’s discount…and it is significant!  Another important note: A same gender married couple would also pay a lower premium, although it would be based upon a discount from the relevant female/female or male/male rates.

Yet another important note: The couple’s discount also applies to committed couples, of the same or opposite genders, who have been living together for about at least two years.  Each insurance company has specific requirements, so check with me before counting on the non-married couple’s discount.

Very, very important: The above three tables are a snapshot of actual policy premiums as of October 9, 2015.  Available policies, benefits, premiums, discounts, underwriting and other details change all the time.  For example, MassMutual is currently an anomaly in that Colorado rates are lower than in other states.  MassMutual also currently has the same rates for men and women.  However, and for new policies only, both could change at any time.  In fact the Colorado Division of Insurance is now processing a MassMutual requested rate increase.  I am expecting MassMutual’s Colorado rates for new policies only to be increased any day between now and the end of 2015.

What is the take-away from all this?  Buying a long term care insurance policy is not a do-it-yourself project.  Trying to select the long term care insurance policy that offers the best value (or even the lowest cost) is impossible for anyone who doesn’t immerse himself or herself in the industry’s minutia each and every day.  There are too many variables and they are constantly changing.  I can help.  Call me at 303-699-4172.

Let me close with an example: I recently helped a single female client select her long term care insurance policy.  Searching industry-wide premium information, MassMutual clearly offered the lowest cost for the policy benefits she wanted.  However when I called the MassMutual underwriter (risk evaluator) to confirm, I discovered that my client’s medical history would result in a lower health classification (and hence a much higher monthly premium).  Knowing that insurance company underwriters with different insurance companies sometimes view medical histories differently, I was able to find another good company that actually did offer the lowest premium for my client’s individual situation.

Disclaimer: Actual policy language, rather than the contents of this eNewsletter always takes precedence. Long term care insurance policies vary widely from company to company & often within the same company. Raymond Smith, The Long Term Care Specialist, does not give legal or tax advice. Consult your tax advisor or attorney for these matters.

 

© Raymond Smith, The Long Term Care Specialist, 2015