Long-Term Careless

07/09/2012 9:00 am EST

Focus: RETIREMENT

Terry Savage

Author, The Savage Truth on Money

As MoneyShow personal finance expert Terry Savage has been warning for years, insurers have begin to make big cuts in long-term care insurance policies, meaning this may be your last chance to get in at an affordable rate.

It’s happening again. Another long-term care insurance company is limiting the coverage it will offer in the future.

While other insurers have raised premiums, Genworth has just announced that it will suspend offering some of its most appealing policy options. The changes will take place after July 29. So, if you have been procrastinating about purchasing long-term care insurance, you have only until the end of July to get some of the best deals around.

Here’s what Genworth will no longer offer:

  • Lifetime coverage: This feature was especially attractive to those who have cognitive diseases, such as Alzheimers, in their family history. The need for care in these cases often lasts longer than the typical three-year policy. In the future, Genworth will offer a maximum ten-year benefit period.
  • Ten-Pay policies: These policies are the most attractive for those who can afford to make ten larger payments in order to have a fully paid-up policy. With no payments after the ten-year period, there are no worries about future premium increases. I have been advocating these policies for years.
  • 40% spousal/partner discounts: This feature makes policies cost-effective for couples, and encourages both partners to be insured. Of course, it also is costly for insurers. Genworth will lower the premium discount to only 20% in states as they are approved.

For those who do apply in the future, there will be more stringent health inquiries—and people may be denied coverage if they have had Social Security Disability in the past five years, suffer from schizophrenia, or if they have a combination of smoking and certain heart conditions. Also, future applications will require completion of a section on family medical history.

And as a sign that it is no longer encouraging insurance agents to book any long-term care business with Genworth, the company is lowering its commissions to agents.

All of these changes are a reaction to the fact that earlier this year, Genworth imposed only moderate premium increases on existing policyholders, while other insurers such as John Hancock raised premiums as much as 95%. As a result, brokers started directing a flood of business to Genworth—forcing the company to act quickly.

Steve Zabel, senior vice president of long-term care insurance for Genworth says: “With these changes, Genworth is positioning itself for greater stability, future growth and remaining an industry leader.”

Brian Gordon, president of MAGA LTC, an agency devoted solely to LTC insurance sales, understands the need for change: “Insurance companies need to make responsible business decisions in order to pay the promised benefits. But LTC coverage is still the only way to mitigate the risk of spending all your assets on long-term care, leaving nothing for a spouse or your heirs.”

And if you run out of money for care, you will be relying on the state Medicaid program, which is already badly underfunded.

Long-term care insurance is an important part of retirement planning. In fact, it has been such a good deal for consumers that the insurance companies are stepping back. So if you’ve been planning to buy a policy, don’t procrastinate. This good deal is slipping away. And that’s The Savage Truth.