While all our clients have their own unique set of health and financial circumstances that impact which settlement option makes sense, some general information has come up frequently that could be beneficial to know for all long term care policy holders.
A Guaranty When a Long Term Care Insurance Company Fails
If the company that has your long-term care insurance fails, you do still have some coverage through the Pennsylvania Life & Health Insurance Guaranty Association as long as the company was a member of the Association or the equivalent association in the state where the company operated if it was not Pennsylvania (palifega.org). Almost all companies licensed to write policies in Pennsylvania (or other states) are required to be members. The amount is going to vary based on the law then in effect and your particular policy, but the maximum amount for long term care is capped at $300,000. So you may not get the full amount of the policy you started with, but you will get something, probably the same as your policy up to the max of $300,000.
Non-Forfeiture Benefit
Some long-term care policies now have a nonforfeiture rider that allows for at least some benefit to still be paid out, even if the policy is cancelled or premiums not paid. However, even if you don’t have such a rider, there is still that benefit if there is a substantial premium increase on your policy. What constitutes a substantial increase? Well, it is set by law. You take the age you were when the policy is issued and the cumulative increases since that time. So for example, if you were 50-54 at the time you got your policy, a substantial increase is 110%. You can check the full table that tells you about substantial increases on the Pennsylvania Department of Insurance website.
The payout under this benefit is either the total of all premiums paid, or 30 times the daily nursing home benefit at the time the policy lapsed—whichever is greater.
Future Premium Increases
Whether you have Genworth or some other long term care insurance, you can pretty much guaranty there are going to be substantial future premium increases. Insurers did not count on the explosion of need for long term care in this country and now premium increases are reflecting the financial distress they find themselves in. Premium increases must be approved by the Pennsylvania Insurance Department and they post pending requests on their website. In a quick scan through pending and recent decisions, requests ranged from small 3% increases up to 292% increases! Approvals were much more likely for the small increases, but I saw approvals of 30% premium increases.
Pennsylvania doesn’t want a company failure, since it might be left holding the bag at the end of the day due to the Guaranty Association—so they will approve big increases if necessary and the alternative is a company failure. If your long-term care policy contract allows for premium increases—count on them happening, and count on them being substantial over the years.
Other Considerations
If you don’t have substantial assets (and I mean about $1 million), a long-term care policy is likely going to make you a more attractive applicant to a better quality long-term care facility. In my last article, I talked about how it’s getting more difficult to find quality care and obtain it—well this can be a factor.
Ensuring availability of assets for spouses and/or heirs is another reason to maintain a long-term care policy. If it’s very important to you to ensure heirs get an inheritance, long-term care insurance will help with that goal.
Every person and every family are different. These are factors to consider, but it’s always important to get individualized advice based on your health, finances, goals and family. Call our office 717-761-4540 to discuss any of your elder law questions.