It's almost NEVER a good idea to replace an in-force LTC insurance policy.
We are hearing stories almost daily of unscrupulous insurance agents urgently telling their clients to immediately replace their in-force long-term care (LTC) insurance for a variety of reasons, all bad:
- A premium rate increase itself is never a reason to replace your coverage. You will pay much more - in some cases two to three times more - for a new policy with the same benefits. Even with a rate increase, your policies still have an "original issue age" price, and will cost you less than a replacement. If you need to lower your premium after a rate increase you can always reduce your current policy's benefits to a more affordable level, which again will be cheaper than a new policy with lower benefits.
- Just because premiums have increased for older policies, does NOT mean they will continue to increase in the future, or increase at the same rate and frequency. In fact, today's new rates (which the older policies are being adjusted up to) are already showing evidence of being more rate stable than ever.
- A lower financial-strength rating on the current policy compared to a replacement company is also not a good reason to replace your coverage. The risk of financial failure of large insurance companies is rare. (If you are told a scary story about a Pennsylvania company (PennTreaty) that is being liquidated with $8-billion-something dollars in claim liabilities, you should understand that 90% of all policyholders will still receive all of their benefits if they go on claim in the future, and the other 10% will receive most of their benefits through the state insurance guarantee associations. That company also represents only a couple percent of all LTC insurance in-force.)
- Finally, we're hearing that some agents are trying to scare Genworth policyholders into replacing their coverage because a Chinese investor is trying to buy the company. First, Genworth will remain a US company, subject to all federal and state insurance regulations. The policy reserves that provide the foundation for current and future claims payments are protected by law, no foreign OR US buyer can strip the legal reserves out of any insurance company. Did you know that John Hancock is owned by a Canadian company (Manulife)? And that Transamerica is owned by a Dutch company (Aegon)?