We have had Genworth LTC for 14 years and the rate increased 3 years ago 40%. The renewal is due for this year but it has increased another 70%. When we purchased the LTC it was with GE and we have lifetime coverage, 5% compounded, home care, and spousal stop of payments. It was a good policy. Our concern is the increase is enormous and the statement included a letter that stated future increases are possible. With the credit rating down and the sale to a China company we are not sure if to continue. Your suggestion? Thanks

None of us in the industry expect Genworth to fail. The management is working very hard to ensure that every obligation is met. Also, Genworth has a great track record with claims payments. On the rate increases, yes, there will be more. The first thing I advise is comparing the premium you have already paid in plus what you would pay in with the new premium for the next 20 years. Then compare that with the benefits available at that time. You have a very rich policy with the 5% compound inflation and unlimited benefit period. You can calculate what the daily benefit will be in 20 years with this compound calculator: http://www.moneychimp.com/calculator/compound_interest_calculator.htm If the premium looks small compared to the benefits in 20 years, you probably want to accept at least this 70% rate increase and keep your benefits the same. You can always reduce at a later date. If you do reduce, compare the savings over the 20 year period with the benefits you will lose and decide if it is a good decision. My opinion is to reduce the benefit period before reducing the daily benefit. Genworth is a reimbursement policy which means any day the charge is less than the daily benefit, the difference stays in the pool and makes it last longer. So a 5 year benefit period could wind up lasting 8 years or even longer. When you get older, it may make sense to reduce the 5% compound inflation to 3%. 5% doubles in 15 years and 3% doubles in 24 years. To really be sure about what you are doing, ask the cost of a “country-club” assisted living facility in your area and use the calculator I’m giving you to see what it will cost in 20 years, using 5% compound growth. Be sure and get the cost for people who need help with at least two activities of daily living, like dressing and bathing, so they don’t give you the rate for independent living. Home care is growing much slower than care in an assisted living facility, so if you can fund the really nice ALF out of the insurance benefits, you will also have enough to pay for a lot of home care. Most people are never in a nursing home but again, if you can fund the nice assisted living facility with insurance, you can use your savings to pay the difference between the ALF and a nursing home, if you or your wife wind up needing that level of care as a last resort. As for the Chinese purchase, we hope this gives Genworth the capital to lessen the need for future rate increases.

 

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