Women Will Pay More for Long-Term Care Insurance

April 22, 2013

Long-term care insurance will soon be getting more expensive for women. The country’s biggest provider of long-term care insurance has announced plans to introduce gender-based pricing.

Life insurance has long had gender-specific pricing, but long-term care insurance has always been gender neutral. This is changing now that Genworth Financial has decided to charge more for policies purchased by single women. Other insurers will likely follow suit.  Genworth hasn’t said how much it will raise rates for women, but according to the American Association for Long-Term Care Insurance (AALTCI), women will likely end up paying 20 to 40 percent more than men.

The reason for the increase in pricing is that women tend to live longer than men and file more long-term insurance claims. About two-thirds of payouts for claims are made to women, according to the AALTCI. Not only do women claim more often, but they also live longer on a claim.

Genworth’s new rates won’t apply to existing policyholders or married couples who apply for joint insurance. Insurance companies usually give married couples a discount on rates. Genworth is waiting for approval from state regulators, so the new rates will likely go into effect throughout the spring and summer. Several other companies also have gender-specific pricing requests on file with state regulators. Unlike Genworth, the other companies may also charge more to a married woman who outlives her spouse.  The increase in rates will be on top of recent rate hikes for long-term care insurance policyholders. Premiums in general have gone up between 30 and 50 percent over the past five years.  

Gender-specific pricing can be controversial. The Affordable Care Act mandates gender-neutral pricing for health insurance policies, but it doesn’t cover long-term care insurance. Customers in Colorado and Montana will not be affected by the new pricing because both states have laws requiring unisex rates.

For more information on the rate increase, click here.

For more information on long-term care insurance, click here.

To discuss elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

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Federal Government Is Getting Rid of Popular Reverse Mortgage Option

April 10, 2013

The federal government is eliminating its most popular reverse mortgage. Soon homeowners will no longer be able to get a lump-sum payment if they apply for a reverse mortgage under the Home Equity Conversion Mortgage (HECM) Standard program.

A reverse mortgage allows a homeowner aged 62 or older to receive a sum of money from the lender, usually a bank, based largely on the value of the house, the age of the borrower, and current interest rates. The loans do not have to be repaid until the last surviving borrower dies, sells the home, or permanently moves out. The HECM is the only reverse mortgage program insured by the Federal Housing Administration (FHA), and the FHA sets a ceiling on the amount that can be borrowed against a single-family house.

As of April 1, 2013, the federal government is no longer going to allow home owners to apply for a HECM Standard fixed-rate, lump-sum reverse mortgage. Borrowers still can apply for a line of credit or monthly payments at an adjustable interest rate under the HECM Standard program.

The reason for the change is that there were more defaults with this type of loan as opposed to other loans. While it isn’t possible to default on a reverse mortgage payment, home owners must make timely payments of property taxes and homeowner’s insurance in order to keep the loan in place. If taxes and insurance aren’t paid, the loan can default. The high number of defaults on these types of loans indicates that homeowners in serious financial trouble may have been using the loans as a last resort rather than as part of a financial plan.

Borrowers will still be able to get a lump-sum loan using the HECM Saver program, which pays out a smaller percentage of a home’s value compared to a Standard loan.

For more information on reverse mortgages, click here.

To discuss elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.