Why Your Long-term Insurance Premiums Could Skyrocket

Most long-term care (LTC) insurance policyholders have become used to single-digit premium increases every few years over the past decade. But recently some have received the shocking news that their premiums have gone up 50%, 60%, 70%, or more.

So why the huge increase? There are a few reasons ...

First, insurance companies misjudged their customers

People are living longer than the industry had expected. And they’re using their LTC benefits more than anticipated. Plus insurers overestimated how many policyholders would let their policies lapse. The result: Companies paying out more money than had been estimated.

Second, blame the Fed

Insurance companies look to earn money on the premiums you send in. And they invest those dollars mostly in bonds. The Federal Reserve has pushed interest rates down to almost 0%, which cuts insurance companies’ profits.

Low interest rates have also made inflation protection a major liability for carriers. After all, how can an insurance company increase your benefit at 5% when interest rates are at half a percent? And a 5% compounded growth rate could double your benefit in 14-and-a-half years.

Therefore, premiums have to rise to make up the difference.

Third, newer data

Insurance companies now have data that wasn’t available years ago. And they’re using that new data when evaluating older policies, which are getting hit the hardest. This newer data reflects how long and how well people should live. And carriers now have figures showing that the cost of long-term care is increasing at an average of 4.7% to 6.6% a year.

Consequently, insurance companies are adjusting premiums to more accurately reflect this added risk.

However, carriers can’t just raise rates arbitrarily

Insurance companies have to make their case to state regulators for across-the-board increases that would apply to all policyholders. Even once the authorities give approval, there’s a waiting period before the new rates can go into effect.

Still that doesn’t stop companies from raising rates to try to make up past shortfalls or discouraging customers from renewing.

So what can you do about soaring LTC premiums?

Even if you haven’t been hit with a massive increase yet, get prepared. Contact your agent and ask if revising your policy’s benefits could reduce your cost. For example, changing a compound inflation rider from 5% to 3% could make a significant difference.

Review your investment portfolio, too. Make sure you have included inflation hedges, such as REITs, MLPs, and even precious metals that can help offset soaring health care costs.  

And you might want to consider getting a copy of A Boomer’s Guide to Long-Term Care. Inside you’ll find ideas for cutting premium costs, plus alternatives to long-term care insurance.

Best wishes,

George

Why isn’t the country’s biggest real estate holder selling its losers?

The government owns or manages tens of thousands buildings and other structures across the country — office buildings, courthouses, warehouses, and other property types — making it the nation’s largest real estate holder. However, between 55,000 and 77,000 of them sit vacant. It's impossible to tell exactly how many. No precise inventory has been kept.

Whatever the number, they’re costing you and me BILLIONS to maintain each year.

At the same time, Washington is up to its eyeballs in debt, approaching $17 trillion by last count.

It’s no secret that real estate is one of my favorite investments for increasing your income and growing your portfolio along the way. I’ve written about it many times in this blog and have answered numerous questions readers have sent in. And I can pretty much guarantee that if you told me you owned real estate that had negative cash flow with no chance of turning it around and were hurting for money, I’d tell you to sell it … as quickly as possible.

But that’s not how the folks in Washington think. They’re in no hurry. Let me give you an example …

There is an old steam-generating plant with a spectacular view of the Potomac waterfront. The government just sold this building to a private developer for $19.5 million. However, it sat there — vacant and off the market — for 10 years!
It turns out that a for-sale sign wasn’t put up until the day before the House Committee on Oversight and Government Reform drug GSA officials to the dingy facility for a hearing last summer.

Representative Jeff Denham chastised a GSA official, saying, "You can't get your job done! I don't care if it's a Republican or Democratic administration, the job is not getting done!" 

Selling buildings that the government has no use for could save taxpayers between $3 billion and $8 billion a year, according to various analysts. Chump change by Washington standards. But still, it’s money that could be put to better use such as helping to shore up Medicare.

However, it’s not as simple as sticking a for-sale sign out front and waiting for offers to pour in … several hurdles must be cleared.

One is that federal, state and local government agencies must first be given the opportunity to acquire it. Next the property must be made available to shelter the homeless. On top of that, federal environmental and historic preservation reviews are required. Only then can properties be sold to private entities.

Legislation to require the federal government to expedite the sale of underused properties died in the last Congress. At the moment, nothing is pending.

There is something you can do, though. Tell your Congressmen that you’re sick and tired of their dillydallying around with the budget problems. And making it easier to sell government buildings is a no-brainer that shouldn’t offend any special interest groups.  

You can find your Representative’s contact info here. And for your Senators, go here.

Best wishes,

George

P.S. Feel free to use the letter below when contacting them.

------------------------

Dear [Representative or Senator],

I understand that the Federal government owns tens of thousands of buildings and other structures that are vacant or underutilized. What’s more, it’s costing taxpayers billions of dollars to maintain this real estate. I would like to know what you are doing to get these properties off our backs.

I look forward to your reply, as this is an issue I will keep in mind when the next election rolls around.

Sincerely,

[Your name]

 

Added Sun Communities (SUI)

As I wrote back in November, I removed the INVRLPRA:CN fund because it wasn’t meeting expectations. And I felt there were better opportunities for income and growth in the residential REIT sector. So on January 18, I added Sun Communities, Inc. (SUI) to the portfolio.

More and more families are recovering from foreclosure and looking for affordable housing. Plus many Boomers are viewing manufactured home communities as an attractive retirement lifestyle. With all that, I think Sun could be a real winner.

Sun Communities owns, operates, and develops manufactured housing communities in the mid-western, southern, and southeastern United States. As of February 21, 2013, it owned and operated a portfolio of 183 communities comprising approximately 52,800 developed sites. Through its subsidiary, Sun Home Services, Inc., the company markets, sells, and leases new and pre-owned homes. Sun Communities, Inc. was founded in 1975 and is headquartered in Southfield, Michigan.

You can read more about Sun Communities on the company’s web site.

Here’s where the REITs in the e-FinancialWriter portfolio stand as of Friday’s close, not including dividends.

REIT	Sector	Blog date	Price	Price 03/01/13	RTD* %	Yield %
PSA	Self storage	3/14/2010	90.75	151.95	67.44	3.29
VTR	Health care	12/30/2010	52.87	71.26	34.78	3.76
HCP	Health care		36.81	48.9	32.84	4.3
HCN	Health care		47.53	64.62	35.96	4.74
IAECREIN:CN	Canada	9/27/2011	19.45cn	26.58cn	36.66	0
ZRE:CN	Canada		16.29cn	20.97cn	28.73	4.64
	Retail	1/29/2012	27.18	34.56	27.15	4.57
NNN
SUI	Res.	03/03/13	47.43	46.97	-0.97	5.37
Avg yield of REITs in portfolio						3.26

Source: Bloomberg  *Does not include dividends paid

If you have trouble seeing the chart, just in zoom in with your web browser.

Enjoy your weekend!

George

P.S. Would you like to know the moment I post something? If so, just submit your e-mail address in the box in the upper right of this blog post.  

Women can expect to pay 20% to 40% more for long-term care insurance starting in 2014

 

A provision within Obamacare will prevent health insurance companies from charging women higher premiums than men beginning in 2014. However, it doesn’t apply to long-term care insurance. And the country’s largest provider, Genworth Financial, recently said it will start boosting its prices based on gender this spring.

Bonnie Burns, a policy specialist at California Health Advocates, a Medicare advocacy and education organization, stated: "Gender pricing is good for insurance companies. But it’s bad public policy, and it's bad for women."

Genworth says the new pricing reflects the fact that women receive two of every three claims dollars. The change will affect only women who buy new individual policies, or about 10% of all purchasers, according to the company. The new rates won't be applied to existing policyholders or those who apply as a couple with their husbands.

Experts say they expect other long-term-care insurers will soon follow suit. And women’s premiums may increase by 20% 40% under the new pricing policy.

In A Boomer’s Guide to Long-term Care I point out why a woman is at greater risk. And I lay out what to look for when shopping for a policy and offer several ways you can reduce your premium cost. Plus I give you several alternatives to consider if you can’t get insurance or simply find it unaffordable.

Best wishes,

George

P.S. You can download a copy of A Boomer’s Guide to Long-term Care for just $9.95, or order a paperback copy today.

Want lower premiums … KICK BAD HABITS

According to ehealth data, health insurance policyholders in the obese category pay an average monthly premium 22% higher than those in the normal category. It’s even higher for obese men, who pay 29% higher than normal weight men.

Smokers cough up 14% more each month than non-smokers. For women smokers it’s 22% higher on average.

Best wishes,

George

 

P.S. I’m on Twitter. Follow me at http://twitter.com/efinancialwrite for frequent updates, personal insights and observations on how to have a healthy retirement. 

 

If you don’t have a Twitter account, sign up today at http://www.twitter.com/signup and then click on the ‘Follow’ button from http://twitter.com/efinancialwrite to receive updates on either your cell phone or Twitter page.

 

The scary numbers for pre-retirees

The AARP reports that health insurance coverage among pre-retirees is declining. The facts:

·       The number of uninsured Americans age 50-64 continues to rise, hitting 8.9 million in 2010. That’s 3.7 million more than in 2000.

·       One out of three Hispanic and one out of five African-American older adults are uninsured.

·       The share of the 50-64 age group with employer coverage declined over the last decade from 71% to 65%.

·       Individual health insurance is harder for older adults to get. More than one in five insurance applications from individuals age 50-64 are rejected.

Now that you’ve seen the numbers, let’s look at …

Obamacare and pre-retirees

The Patient Protection and Affordable Care Act is going to change the way pre-retirees get health insurance. According to AARP, the following changes will come about in 2014:

·       Insurers in the individual market must accept all applicants, even if you have pre-existing medical conditions.

·       The practice of varying premiums by age will continue, but will be restricted.

·       Medicaid will cover all non-Medicare eligible U.S. citizens under age 65 based on income, regardless of whether they have dependent children.

·       Up to 81% of the uninsured 50- to 64-year-olds may be eligible for assistance through the exchange or Medicaid in 2014.

So if you’re in that phase of your life where you can’t get affordable health insurance and you’re too young for Medicare, next year should prove a whole lot easier on you.

Whether the care you’ll receive will be compromised is another story.

Best wishes,

George

P.S. I’m on Twitter. Follow me at http://twitter.com/efinancialwrite for frequent updates, personal insights and observations on how to have a healthy retirement.

 

If you don’t have a Twitter account, sign up today at http://www.twitter.com/signup and then click on the ‘Follow’ button from http://twitter.com/efinancialwrite to receive updates on either your cell phone or Twitter page.