Friday, January 24, 2020
Do You Have the Old Kind of Life Insurance or the New Kind? Part 2
In the last post, I discussed how life insurance carriers were struggling with the long term care market. Check out the post if you want to catch up.
As the stock market dropped in 2008, claims reserves (where your insurance company keeps your premiums) dried up like a raisin. And claims were higher than expected. To offset this, almost all of these policies had a provision that allowed for a rate increase if need be. After 2008, several companies put in requests with state insurance commissions for rate increases, from 17-20% on policies that were in effect. Some companies did this multiple times.
I've always considered people who buy long term care coverage, to be "forward thinking". Unfortunately that forward thinking wasn't paying off for many as they saw their rates increase.
Also, at the end of the last post I mentioned the number one objection when people discuss LTC with an agent. The conversation usually goes like this.
Client: How much is this going to cost?
Agent: $120 a month.
Client: That's a lot of money. What if I drop dead and don't need long term care? What happens to my premium?
And that was the deal killer for many. Of course you could purchase a "return of premium" rider, but that would nearly double your premium. There had to be a better answer.
Now we have life insurance with long term care riders which are handled differently by different companies. Some underwrite the rider separately, others just underwrite the life insurance part. Some just called them "living benefits" to work around certain requirements by state commissioners. On the whole, it's just life insurance that you can use while your living.
It's life insurance that you can use for long term care if you need it. And some now have other benefits. We offer one with a critical illness component in the event of a heart attack or stroke. And the cash value can also be used as a retirement supplement. And being life insurance the rates are locked in. No rate increases!
So there's the old kind of life insurance and the new kind that you can use before you die. If you have questions or want to drop us a comment below or go to our website and request information.
Chris Castanes is the president of Surf Financial Brokers, as well as a professional speaker helping sales people be more productive and efficient.