Archive for February, 2016

Where Did MedAmerica Go?

February 23, 2016

MedAmerica Insurance Company did not go anywhere.  Its administrative/operations offices are still in Rochester, NY.  What has happened is that effective 2/15/2016, MedAmerica no longer sells new insurance policies.  The problem for the company was the regulatory requirement to add to their reserves (used to pay future claims) each time a new policy was issued.  In this continuing low-interest rate environment, tying up more money in reserves, often for decades, had become too expensive for their business model to sustain.

I would not worry if you are one of MedAmerica’s many policy owners.  MedAmerica Insurance Company remains legally obligated (as part of your insurance policy contract) to pay claims now and in the future.  MedAmerica Insurance Company has now joined the ranks of Met Life and Prudential, who likewise no longer offer new long term care insurance policies, but instead collect premiums to be accumulated (and invested to earn a return, however small) against future claims for policy benefits.

Very important: You (or your employer) must continue to pay your premiums when due.  Else your policy will lapse.

Existing MedAmerica policies have good benefits, many of which cannot be replicated.  Call me if you have any questions…you should know that I am always happy to talk with you.

Ray

Disclaimer: This eNewsletter and all links to other sources should not be construed as tax or legal advice because they are neither. Raymond Smith, The Long Term Care Specialist, does not give legal or tax advice.  Consult your attorney or tax advisor  for these matters.

 

© Raymond Smith, The Long Term Care Specialist, 2016

What Happens To My Money If I Never Have A Claim?

February 23, 2016

Are you asking about auto insurance?  Homeowners?  Malpractice/errors & omissions insurance?  Of course not.  I know that your question is about long term care insurance.  I know because I am often asked exactly the same question..

I do not know anyone who has ever complained about never having been in a car crash, or whose house did not burn down, or who has never been sued.  But this “objection” always seems to come up with long term care insurance.

My wife and I have had our long term care insurance since 2001 and we both hope that we never use it.  That will be the very best outcome…peace of mind for all those years, knowing we never needed to ask our kids for help, yet never needing help in getting through the day.  That “help in getting through the day is precisely what long term care is, and long term care insurance pays for that help at home, in an adult day care center, in assisted living, or even a nursing home.

Back to the original question: What happens to the money you paid for long term care insurance if you never need care?  The answer is the insurance company uses your money, and that of others, to pay the claims of those who unfortunately do need help.  If getting your money back is important to you, I can still offer two types of policies that will do that:

  1. A hybrid life insurance/long term care insurance policy that guarantees that you or your heirs will at the very least, get all of your money back.  Your single premium is leveraged by a factor of about 3X to 8X to pay for your long term care services if you ever need them.  At any time (provided you have not yet received any dollars from the policy), you can get all of your money back…but of course the policy then goes away.  If you die without ever receiving money from the policy, your beneficiaries get all of the dollars (plus perhaps a small extra amount) you have paid into the policy as a death benefit.  The catch?  The one-time policy premium runs about $100,000 to $150,000 per person for meaningful long term care benefits.  This hybrid policy is appealing to people who have $100,000+ in liquid assets that are not being used to generate needed income.
  2. A traditional, ongoing premium, long term care insurance policy with an added “return of premium” rider.  The catch?  These riders add what I believe is unnecessary cost to a necessary plan.  Genworth & John Hancock both have this built into their currently available policies, but the benefit goes away if you die after age 65.  LifeSecure, Mutual of Omaha and Transamerica each offer this an optional, and expensive rider.

So why do people ask “what happens to my money if I never need care?”, but never ask the similar question about auto, homeowners, or liability insurance?  I am not a psychologist, but my best guess is it is related to the very human resistance to contemplating loss of independence as we age.  What do you think?  I would love to hear (or read) your thoughts.

Ray

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, 2016