The news last week that Genworth Financial Inc. suspending life and annuity sales was a regrettable milestone in the company’s history. Genworth and First Colony Life Insurance Company before it had a commendable record for high quality life insurance products: the $25,000 no lapse guaranteed UL and the Colony Term UL come to mind. Reading recent Fitch’s ratings downgrade outlines the difficult predicament the company is in. Losses in their LTC insurance business have had a significant impact.
Long Term Care, LTC, insurance has proven hard to price correctly. Part of the problem was due opened ended benefit rich plans being sold with 3% or 5% compound inflation protection. The real problem from a consumer’s point of view is that traditional LTC insurance policies are subject to rate increases and some over the last decade have been significant. It’s hard to justify risking the policy will someday by priced out of a retirement budget.
One viable avenue for coverage still exists: hybrid life insurance plans with either an LTC rider or a Chronic Illness Rider. The consumer can lock into a lifetime fixed premium. Granted the benefit is fixed or limited by the plan’s face amount, but at least the consumer can be certain of the coverage’s scope at a fixed price and be able to derive a benefit from the policy one way or another, either for long term care expenses or a life insurance death benefit.
