So How Good An “Investment” is That Long Term Care Policy?

Remembering that we hope to live a long life and never really need the benefit of the coverage it is still a fantastic risk management tool. In recent years we have seen insurance companies either discontinue offering new applicants coverage or offer it at significantly higher rates. In a nutshell, the product appears to have been underpriced – and quite likely may still be.

Partly due to improved longevity, and partly due to low return on investments (principally bonds) that insurance companies expect, another Long Term Care insurer has announced another price adjustments to its long-term care product. These changes affect only new applicants and not existing policy holders. This has been a common trend among Long Term Care insurers and the below changes being made by one major insurer are quite typical of what we see from others.

For this insurer the following changes will take effect on September 25, 2012 in all but 15 states (expect the changes to be rolled out in the remaining 15 states in a matter of months):

• A 15-percent increase on all premium rates (new business only)
• Preferred health discount, applicable to single applicants, reduced from 15 percent to 10 percent (This discount is already 10 percent for couples, and that rate will not change.)
• Couples discount reduced:
  

   
• Both spouses approved: Discount will be 20 percent instead of 30 percent
• Married spouse not applying: Discount will be 10 percent instead of 15 percent

Additional changes— On September 25, the following changes will take effect in all states except New York:

• Sale of limited pay options (i.e., single-pay, 10-pay, and pay-to-65) suspended
• Sale of the lifetime (unlimited) benefit period suspended

The theme here is higher pricing by as much as 31% through premium increases and the reduction in discounts as well as more restrictive coverage and payment options. This price increase is on top of the higher cost that one might expect to pay by delaying to begin coverage for one or more years.

So, congratulate yourself for putting coverage in place for yourself, look more favorably upon your now relatively modest rate for that existing coverage, and advocate coverage to your friends and family – especially those with less than $3,000,000 in invested assets whom you may become the caregiver too if/when they need care.

Understanding The Fiscal Cliff

With the upcoming elections and looming effects of the fiscal cliff individuals need to have resources to understand what lies ahead. The article below has summarized the most comprehensive and efficient websites for that very information. If you would like to be well informed about how this will impact your finances read on.  

... Read the entire Barron's article
 

*Mark Phillips and Associates does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.

Making Good Decisions July 19, 2012         Make good financial decisions can be hard when you see people making bad decisions being rewarded.

It can be really hard to behave correctly if we see examples of people being successful while doing things we know have higher odds of a bad outcome (e.g., buying lottery tickets). But as you’ve probably learned by now, investing isn’t always fair. Bad choices get rewarded, while people who made prudent decisions sometimes appear to be punished—at least in the short run. So even though it’s tempting, I strongly encourage you to judge the investment advice you receive based on the validity of the principle and not the outcome. For instance, one story I shared in The Behavior Gap dealt with a client who had stock in his grandmother’s mining company. Over time, the family had invested and lost millions trying to keep the business afloat. As you might imagine, the family stories around the business made it seem like a sacred thing to protect, regardless of the cost. At this point, the stock had reached a low of $2 a share, and my client debated what to do. He worried that if he sold the stock, then it might recover and his family would regret the sale and wish they’d kept it. I acknowledged that if he sold the stock and it doubled or tripled—which was a real possibility—he’d feel badly. But the catch was that if he kept the stock and it went to zero, he’d feel much, much worse. The underlying factor was that he needed to make a decision based on a principle (e.g., did owning this stock support his long-term goals) instead of the emotion and family lore surrounding the stock. There’s no guarantee that good investment decisions won’t lead to a painful result. But we need to remain committed to making good decisions based on sound principles and not just luck. Carl

Why We're driven to trade

With computerized traders that "hold" stocks for only a few seconds at a time and markets that can swing wildly in a matter of moments, long-term investing seems to be on the verge of extinction.

Perhaps this is inevitable. It turns out that short-term thinking is deeply embedded in the workings of the human brain. New research suggests that in order to avoid trading your accounts to death, you must counteract some of the very tendencies that make Homo sapiens the most intelligent of all species.

…. Read the Wall Street Journal article