At What Age Should You Buy Long-term Care Insurance?

The specter of having a severe illness or injury that requires long-term care is a scary proposition for most anybody, not to mention the financial obligations you would face.

But trying to time when is the best age to purchase a policy is not an easy decision. Obviously, you don’t want to buy the policy too early and unnecessarily spend thousands of dollars on premium over your life for coverage you may not need until you are much older.

The younger you are when you buy a policy, the lower your premiums. That said, people typically do not purchase long-term care policies in their 30s or 40s since they are looking at a long time-horizon for when they would need to file a claim. After all, the policy may not be needed for 30 years or more.

At the same time, if you wait until you are in your late 60s or early 70s, the premiums may be cost-prohibitive for you – not to mention you may have trouble finding an insurer willing to write your policy.

For example, based on the “Genworth 2019 Cost of Care Survey,” if purchased today, a long-term care policy with a maximum daily benefit of $150 a day for three years would cost an estimated:

  • $2,004 a year for a man who is 55
  • $2,846 a year for a man who is 65
  • $9,603 a year for a man who is 75.

 

As you can see, the ideal time cost-wise is probably in your 50s and 60s.

But before pulling the trigger, you should think about how the premiums fit into your life and other obligations. If you have children who have not yet graduated from college, they will be your major concern. You should carry enough life insurance to see them through.

But after your children, if any, are on their own, you might take the funds you were using to pay for life insurance premiums and use them to finance long-term care insurance premiums instead.

 

What policies cover

Long-term care insurance covers:

  • Nursing home care
  • Assisted living facilities
  • Adult day care services
  • In-home care
  • Home modification
  • Care coordination

 

When shopping for a policy, you will have many choices to make:

The trigger – Policies will have a trigger for when payments can commence. Often, policies base qualification on cognitive impairment or the need for assistance in at least two activities of daily living (dressing, toileting, eating, transferring, bathing and continence).

Inflation riders – As you know, health care inflation is never-ending. While $150 may be sufficient to cover your cost of care today, that may not be the case in a decade or 20 years from now.

With long-term care insurance, you often have the option to buy an inflation rider with the policy, which will increase the allowance for daily benefits by a certain percentage a year, like 5% on a flat or compound basis.

But, you need to know that this type of rider comes with a price in increasing premiums. Some experts recommend that buyers aged under 70 purchase an inflation rider, while anybody older than 70 does not need to do so.

Elimination period – The elimination period is the time the insured must wait before the policy starts paying out. During that period of waiting, you will be on the hook for long-term care expenses. Typically, the waiting period is anywhere from one to 90 days, but it could be even longer.

The longer the elimination period, the lower the premium. That said, the premium savings you achieve by choosing a longer elimination period may not be worth it for you.

 

Don’t fall into the disclosure trap

One thing you have to be very careful about when applying for long-term care insurance is full disclosure about your pre-existing conditions or prior illnesses.

If you fail to tell the insurer about an illness, the company may refuse you coverage at the time you file for benefits. It’s in your best interest to be up front about your health, as you would rather be denied during the application process than have your claim denied after paying your premiums for years.

More Firms Being Sued for Discrimination over Medical Marijuana

More and more companies are being sued for discrimination by job applicants who have legally been prescribed medical marijuana, after they failed pre-employment drug screenings or because of their use of the substance.

The issue of medical marijuana is difficult in terms of the employment picture, especially now that 33 states and the District of Columbia have legalized its use. Of those states, 16 provide workplace protections, either through their own law or case law since their medical marijuana laws were enacted.

To confuse the issue further, marijuana is still illegal under federal statutes, putting employers in a difficult position when they are deciding whether to hire someone who uses it for medicinal purposes.

Courts are increasingly siding with workers and job applicants who are using medical marijuana when they sue employers for discrimination. Most recently, in November 2019, the Court of Common Pleas of Lackawanna Count in Scranton, PA ruled that while the state’s medical marijuana law does not explicitly permit a private right of action by an employee who is allegedly discriminated against because of medical marijuana use, it does so implicitly.

There have been similar rulings in federal and state courts, including in Arizona, Connecticut, Delaware, Massachusetts, New Jersey and Rhode Island. Legal experts say the Pennsylvania case and the others have opened the door for people in other states filing similar actions.

More and more courts have therefore been willing to treat workers who use medical marijuana in the same way as those who have to take other prescription drugs.

 

Litigation pathways

There are two avenues for litigation for workers who use medical marijuana, if their employers take adverse actions against them:

  • Discrimination – Claiming medical marijuana as a “reasonable accommodation” for someone’s disability under the Americans with Disabilities Act (or a comparable state law), and that the employer should accommodate the worker’s use. Courts have usually drawn the line at using at work to define reasonable accommodation. In other words, it would not be discrimination if an employer bars medical marijuana-using employees from using at work, but it would if they bar them from using during non-working hours.
  • Protection from adverse actions – This could include firing, demotions or similar actions against someone who uses medical marijuana off the clock and does not come to work impaired.

 

What you can do

Experts recommend that employers make an effort to engage in an interactive process with workers in states where medical marijuana has been legalized.

They recommend engaging any workers who have been prescribed medical marijuana in the interactive process, as prescribed by the ADA. Through this process, the employer can see if they have an underlying disability that requires accommodation.

One of the key considerations for employers is that the reasonable accommodation should affect a worker’s ability to safely perform their job.

If you are in a state whose laws protect medical marijuana users from adverse employment actions, you should review your policies and workplace rules to make sure they are in line with the law.

In addition, since other states have been starting to side with workers in discrimination cases, if you are in a state with legalized medical marijuana, you may want to conduct the same internal review.

If you do conduct drug testing, you should consider which positions you want to test for. Many employers have started only testing for positions that are safety-sensitive, such as those that include operating heavy machinery.

Retired and Facing Stock Market Volatility

If the recent stock market volatility has you spooked, you’re not alone. The COVID-19 outbreak that has spread throughout the world, including the United States, has damaged global supply chains, completely depressed international travel and is likely to have a significant effect on many a company’s revenues and profits.

But as the stock market goes through serious gyrations, bouncing wildly from day to day, individual investors will often over-react out of fear and sell their holdings to avoid further losses. That could result in selling off perfectly good investments that are still strong long-term plays.

If you are concerned about the effect that volatility is having on your investments and retirement funds, you can call us so we can help you devise a strategy that you are comfortable with. In the meantime, here are some tips to consider:

 

Resist the urge to panic sell

The problem with panic selling is that you will likely plan to get back into the market, and the same stocks you had before, when things settle down.

But most people are terrible at timing the market and, in order to profit from this strategy, you need to make two timely decisions:

  1. When to get out of the market.
  2. When to get back in.

 

If you get either of these wrong, it can hurt your financial situation rather than improve it.

Most people who choose to get out rarely get back in on time. This results in them missing out on rallies that are often part of a recovery.

There is another consideration as well: If you have your money in a taxable account, selling will trigger long-term unrealized gains, so you’ll take a tax hit that you could have deferred to the future.

 

Plan ahead

The key to successfully riding out stock market volatility or a downturn in retirement is to plan for it ahead of time. Some financial planners recommend allocating a few years of income in bonds, for example.

During market downturns, you can opt to remove the funds from your bond investments, which will not be affected as much by a stock market downturn ― and may even perform better.

So, during the years that stocks are down and recovering, you can sell bonds for your minimum withdrawals. In this way, you are selling investments that are up or down the least to meet your income needs.

 

Use multiple sources

Develop sources of monthly lifetime retirement income that don’t drop if the stock market crashes. Use these “retirement paychecks” to cover your basic living expenses, or at least come close to doing so. Basic living expenses include housing, utilities, food, medical insurance premiums, and income and property taxes.

For a good majority of Americans, their Social Security check is the main source of income ―

and fortunately, it’s protected from stock market volatility. Try to live a life where this check covers most of your main living expenses.

If you need additional retirement paychecks to cover your basic living expenses, consider using a portion of your retirement savings to purchase a low-cost immediate fixed-income annuity. Talk to us about what your options are.

 

Dial back on withdrawals

If you need to budget but have many of your funds in stocks, see if you can pay for your living expenses without tapping your 401(K) or IRA account. If you can leave it untouched and wait for the eventual bounce-back, you’ll be better off since you won’t be depleting your stock holdings.

So, you if you were considering removing a significant portion of your retirement account to cover upcoming expenses, you would lose money. If you can postpone that decision by tapping other funds that are not tied to the stock market, you could ride out the downturn and not be much worse off.

If you have already started taking out funds from your 401(k) or IRA and are withdrawing more than your required minimum distributions, you may want to cut back to the minimum withdrawal instead in order to reduce the impact.

Coverage Gap Concerns as Cyber Threat Grows

Small and mid-sized businesses are increasingly bearing the burden of cyber threats, as criminals consider them low-hanging fruits that often do not have the resources in place to mount a strong defense.

A severe attack on a small company can incapacitate its ability to do business, and the expenses of getting operations back on track coupled with loss of goodwill can easily force many firms into bankruptcy. That’s why it’s important to not only have safeguards in place to avoid being compromised in the first place, but to also take out the proper insurance.

Unfortunately, with more data breaches hitting the news, one of the main concerns that executives have is if their insurance will cover the costs associated with recovering from an attack. Many business owners and executives worry whether the policies they have in place will be adequate in case they are hit by a breach.

If you are running a small or mid-sized company, do not underestimate the growing threat to your business.

According to a survey by online insurance news service Advisen and Nationwide Insurance Co., the types of cyber losses mid-sized business incur are:

  • Malicious breaches resulting in data losses, 52%
  • Unintentional data disclosure by staff: 16%
  • Physical loss or theft of data: 13%
  • Network or website disruptions: 5%
  • Phishing, spoofing and social engineering: 5%
  • Other: 9%

 

Insurance concerns

One of the chief concerns for executives is any overlap or gaps between their property, liability, crime and cyber policies when it comes to covering the costs of recovering from an attack, according to the report by Advisen and Nationwide.

Some companies feel they don’t need cyber coverage because they believe their property and liability policies will cover any related losses.

Here are some of the main findings:

  • 95% of respondents named data breach as the number-one risk they expect to be covered by a cyber insurance policy.
  • 94.5% said they expected cyber-related business interruption to be covered by a cyber policy.
  • 89% said they expect their cyber policy to cover cyber extortion or ransom demands.
  • 36% said they have cyber-related property damage/bodily injury coverage under another policy, reflecting the belief that some coverage for cyber-related losses can be found under traditional policies.
  • 60% of respondents said they are concerned about perceived gaps and overlaps in their insurance coverage.

For funds-transfer fraud losses, the majority of respondents believed coverage should be found under the crime policy, but also stated they would like to be able to recover under both crime and cyber policies ― or have separate policies with higher limits.

These findings show that businesses are seeking clearer differentiation between cyber and traditional policies, and an understanding of which events are insured and which are not.

 

The takeaway

One thing to be aware of is that since cyber insurance is a new and still evolving product, all policies do not cover the same thing. That’s why it’s important for businesses to weigh their choices carefully with our guidance.

While the cyber threat has grown, more insurers have also changed language in their property and liability policies to limit coverage of cyber events.

Typical property insurance policies offered higher limits for business interruption for covered property damage. And because of the high costs associated with a data loss, more executives want to see similar limits for business interruption coverage on their cyber stand-alone policies.

This market demand may drive insurers to refine their cyber insurance policies, including increasing cyber-related business interruption limits up to the level of standard property forms, according to the report.

It’s important that when shopping for a cyber policy, you work closely with us to find the one that best fits your needs. We can help you evaluate your risks and coverages and identify any gaps by looking at your existing policies.

Why LTC Planning Is Essential for Boomers

As millions of baby boomers in the United States reach old age every year, experts predict the number of long-term care patients will double over the next 30 years.

What does that mean for you? It means that if you don’t have a long-term care plan in place, you and your family may have to face some tough choices down the road.

Read on to learn why a long-term care plan is critical for every baby boomer.

Americans are living increasingly longer lives. Recent estimates give a healthy 65-year-old man a 24% chance of living to at least 90, and a healthy woman a 35% chance of living that long. While this is great news, the longer we live, the more likely we are to suffer from a long-term care event.

This all means that now is the time to put a plan in place.

 

The hefty price tag

If you or a loved one suffers from an illness that requires long-term care, get ready for some sticker shock. A year-long stay in a nursing home typically can cost between $40,000 and $80,000, often more. While prices vary by state and the type of care required, one thing is consistent across the board when it comes to long-term care: it’s phenomenally expensive.

Just take a look at the average costs of various types of long-term care in the U.S.:

  • $5,566 a month for a semi-private nursing home room
  • $6,266 a month for a private nursing home room
  • $2,968 a month for care in an assisted living unit
  • $19 per hour for a home health aide.

 

These costs can quickly add up and eat away at your nest egg. For example, let’s say you hire a home aide to assist your husband just three times a week for four hours. At $19 an hour on average, that would come out at $228 a week. That adds up to nearly $12,000 a year. Unfortunately, Medicare does not cover these exorbitant long-term care expenses.

To top it off, informal home care is simply not a realistic option for most families these days. After all, most children of baby boomers are struggling to balance their own work and family life. They simply don’t have the time or resources to care for sick parents.

This is why it’s critical for each and every family to plan ahead for a potentially expensive long-term care event. Without the proper protection, such an event could devastate a family’s finances.

 

The simple solution: LTC insurance

How can boomers handle the skyrocketing costs of a potential long-term care event? The answer is simple: long-term care insurance. Without LTC coverage, a nursing home stay or another long-term care event could destroy your family’s finances.

Because LTC insurance covers many of these expenses, this valuable coverage will not only protect your finances ― it will also help you to maintain your current standard of living if you or your spouse requires long-term care.

 

The takeaway

Without LTC insurance, the cost of a nursing home stay or a home health care aide could wreak havoc on your finances and whittle away at that nest egg you’ve worked so hard to build. Don’t burden your loved ones with this kind of emotional and financial strain. Create a long-term care plan today to save your family a lot of heartache and stress tomorrow.

If you want to discuss your long-term care insurance options, call us. A professional can evaluate your unique situation and help you customize an effective plan.

How to Avoid Running Afoul of Wage and Hour Laws

With increases in litigation and federal and state enforcement of wage and hour laws, employers should make sure they comply with laws at both the federal and state levels.

All businesses should conduct periodic self-audits addressing the various wage and hour issues that are applicable to their workplace, in order to avoid the most common source of litigation by workers against their employers.

The goal of an audit should be to ensure that:

  • Exempt classifications are properly applied to each employee;
  • Exempt employees are paid on a “salary basis,” and that absence and leave policies comply with Fair Labor Standards Act (FLSA) and state law requirements regarding authorized and unauthorized deductions;
  • All forms of pay required to be included in overtime calculations are, in fact, included;
  • Non-exempt employees are paid for all hours worked;
  • Payroll records are complete and accurate and are retained for the proper amount of time; and
  • To the extent that state law requirements exceed those of the FLSA, such stricter requirements become the standard.

Any issues you identify in a periodic audit should be addressed immediately. At the same time, employment policies and actions should be implemented to create an environment in which compliance becomes part of your operational mindset.

The compliance strategies below cover some of the more common potential errors in the wage and hour context.

Meal and break laws

  • Implement written policies regarding meal and break times of non-exempt employees, and require approval for additional hours worked.
  • Implement measures to ensure that breaks are uninterrupted and employees taking such breaks are completely relieved from duty.
  • Tell supervisors not to assign tasks to non-exempt employees or allow them to perform work during their breaks.

Misclassification errors

  • At the time of hiring, inform employees of their exempt or non-exempt status, review job requirements and descriptions and describe in writing terms of their payment ― for straight time and overtime.
  • Periodically review duties performed by exempt employees after they are hired, to ensure they remain properly classified.
  • If you find you’ve made an exempt/non-exempt classification error for an employee, immediately consult your attorney to determine the appropriate remedial action, such as a change in status from exempt to non-exempt and making payments to such employee.

Overtime/off-clock errors

  • Adopt clear written policies on schedules and hours of work, and require approval for overtime work.
  • Adopt written policies requiring employees to report all time worked, and that you will pay for all time worked.
  • Train employees and managers on timekeeping policies and discipline for violations of policy.
  • Do not pressure employees to meet deadlines or perform assignments that can only be met by working off the clock. Workload expectations should be realistic.
  • Regularly review overtime records. If you find overtime was not paid, pay it immediately, even if work was not authorized.

Record-keeping mistakes

  • Implement and disseminate a timekeeping policy. The policy may, for example, require exempt and non-exempt employees to complete time sheets on a weekly basis, and to note meal and other breaks.
  • Require non-exempt employees to review and sign their time cards or time sheets every week, and to initial any changes made to them. This is your evidence if sued for an off-the-clock violation.
  • Retain time and payroll records for all employees. This will help you quickly correct any mistakes you uncover, and helps work with an employee who says they were short-changed on their paycheck. Also, accurate records are the best defense in a wage and hour complaint.

Top 8 Reasons Why Homes Catch Fire and How to Prevent Them

Fires are the most common claim for homeowners and they can start in a variety of ways.

The causes of these fires range from food left unattended on the stove to candles left burning. A majority of these fires are preventable with some forethought and care to minimize the risks.

Here are the eight most common causes of house fires as identified by the National Fire Protection Association.

  1. Candles

The NFPA says more than half of all candle fires start because of candles that were left too close to flammable items. They should always be kept at least 12 inches away from anything that can burn.

Remember:

  • Never leave a candle burning near flammable items.
  • Never leave a candle burning in an unoccupied room.
  • Candles should fit securely into holders so they won’t tip over.
  • Blow out any candles before leaving a room or going to sleep.

 

  1. Smoking

There are some 17,600 smoking-related fires a year, resulting in 490 deaths and more than $516 million in property damage.

Remember:

  • If you smoke, consider doing so outside.
  • Use wide, sturdy ashtrays to catch butts and ashes.
  • Look for cigarette butts under furniture and between seat cushions to make sure no lit butts have fallen where they can’t be seen.
  • Don’t smoke in bed or on your sofa.

 

  1. Electrical and lighting

Electrical fires can be caused by an equipment malfunction, from an overloaded circuit or extension cord, or from an overheated light bulb, space heater, dryer or other appliance.

Remember:

  • Don’t overload outlets or electrical cords.
  • Don’t leave Christmas lights or halogen lights on overnight or when not at home.
  • Have an electrician perform an annual checkup of your wiring.

 

  1. Dryers and washing machines

The most frequent causes of fires in dryers are lint/dust (29%) and clothing (28%). In washers, they are wire or cable insulation (26%), the appliance housing (21%) or the drive belt (15%).

  • Remember:
  • Clean the lint screen often and don’t run the dryer without it.
  • For gas and propane dryers, make sure there aren’t any leaks in the lines.
  • Vent the dryer to the outside of the house and ensure nothing blocks the vent pipe.
  • Keep the area around the dryer free of combustible materials.

 

  1. Lightning

NFPA says an average of 22,600 fires per year are caused by lightning strikes.

During lightning storms, remember:

  • Do not use computers, TVs or other electrical equipment.
  • Unplug major electronics to minimize damage.

 

  1. Children playing with fire

The NFPA says that children start an average of 7,100 home fires per year, causing about $172 million in property damage.

Remember:

  • Keep matches and lighters out of the reach of children.
  • Teach children fire safety at an early age.
  • Make sure children have adequate supervision.

 

  1. Christmas trees

The NFPA says an average of 230 fires are attributed to Christmas trees each year and they are more likely to be serious because of the factors that can contribute to the fire: a dry tree, electrical lights and a fuel supply (gifts) under the tree.

Remember:

  • Keep trees watered and dispose of them before they are dry.
  • Turn off tree lights before leaving the house or going to bed.
  • Check lights for any shorts or other electrical issues before putting them on the tree.

 

  1. Cooking

Two-thirds of cooking fires start because the food or other materials catch fire. Fires are more likely to start on a range (57%) as compared to in the oven (16%), mainly due to frying. Most injuries occur when the cook tries to put out the fire.

Remember:

  • Be alert when cooking and don’t leave food unattended.
  • Don’t throw water on a grease fire; put a lid on the pan to smother the fire.
  • If an oven fire flares up, turn off the oven and leave the door shut until the fire goes out on its own.
  • Keep clothing, pot holders, paper towels and other flammable items away from the stove.
  • Have working smoke detectors in the house. Keep a fire extinguisher nearby, just in case.

A Reality Check Concerning Long-Term Care

Despite expected longevity increasing, more and more people will also need long-term care at some point in their life.

Most people prefer to create their own reality about long-term care rather than face the truth.

But, in the event of a long-term care need, it’s important that the family stays focused on the emotional and physical needs of the person needing care. Having properly planned for this eventuality with insurance coverage allows them to do so.

Many families assume that they will be able to handle the demands of long-term care on their own. What they don’t realize is that having the responsibility of being a caregiver has a major impact on your life.

The demands often cause people to give up jobs so they can devote the necessary amount of time needed to provide care. It can also drive a wedge between family members if a spouse becomes an absentee parent because they are spending most of their time providing care for their own parent.

That’s why it is so important to have long-term care insurance to provide suitable care without placing undue stress on the family of the person requiring the care.

While this makes sense in theory, many people are reluctant to purchase insurance because they don’t grasp the reality of long-term care costs and if they can pay for them.

Many people believe that they can pay for long-term care costs from their own assets. They think  that a reverse mortgage or stock portfolio can take the place of a policy. However, the cost of caring for an extended illness can easily wipe out one’s assets and bring a family to bankruptcy.

Some also falsely believe that long-term care is only administered in nursing homes. In fact, the majority of people receive long-term care today in their own homes or community based facilities, not nursing homes.

Depending on the policy, long-term care insurance can cover nursing home stays, home health care and community-based services.

And finally, many people believe they can rely on Medicaid for long-term care. However, the policy changes to the Medicare program mandated by the Deficit Reduction Act of 2005 have made fewer people eligible to receive benefits.

The safest course of action is not to wait and learn that your family member cannot qualify, but rather prepare for the future with a long-term care policy.

 

Comparing policies

When you are comparing policies, there are several factors to consider before making your decision:

  • The financial strength of the insurance company underwriting the policy.
  • The cost of care in your area, so that you can choose a daily benefit that will cover the needs of the person receiving the care.
  • The length of the benefit period. Since it is difficult to determine how long they may require care, many people choose policies with lifetime benefits.
  • The number of days the policyholder will be responsible for paying out of pocket before coverage begins. This is known as the elimination or waiting period.
  • The inflation protection provided by the policy. This feature ensures that benefits provided by the policy will be adequate to cover future needs.

Most Commercial Insurance Lines Seeing Increases

A new report by Willis Towers Watson predicts that most commercial insurance lines will see increases in 2020 as the market continues to harden almost across the board, with the only exception being workers’ compensation.

Overall, 19 commercial lines are expected to see price increases according to the report, with property, umbrella, and public company directors and officers (D&O) experiencing the most widespread hikes (20% and higher) and a retreat by some insurers.

Commercial auto has been pressured for many years as distracted driving has driven up accidents that result in injuries, as well as increasing repair costs for modern vehicles.

For property coverage, the increasing amounts of natural catastrophes in many parts of the country have forced many insurers to raise rates, curtail their underwriting or leave markets altogether.

“We’re seeing the biggest upward price shift in years. We expect rate hikes and capacity constrictions will continue throughout 2020 and likely into 2021, but a more orderly market to emerge by mid-2020,” Joe Peiser, global head of broking at Willis Towers Watson, said in a prepared statement.

Another line of business coverage that is seeing new rate increases is liability, partly tied to the deteriorating auto insurance market as well as increasingly costly litigation.

“We are experiencing what appears to be a fundamental and systemic change in liability losses – and not for the better,” the report states. “Loss severity in auto and general liability, and therefore umbrella, is spiking due in large part to so-called ‘social inflation,'”, it adds.

Of the 19 commercial insurance lines that are expected to see price hikes, six will see a mix of increases or decreases or flat renewals. The latter include:

  • Fiduciary,
  • Environmental,
  • Marine,
  • Kidnap & ransom, and
  • Terrorism insurance.

 

The rest, including property and casualty lines, will all see increases. Here’s what’s happening with the two lines that are seeing the highest rises:

 

Property

The steady stream of natural catastrophes has taken its toll on the insurance industry and policyholders. Hurricanes are increasing in both number and intensity and the destruction is severe as real estate developments have continued in high-risk areas and coastlines. In addition, rising tides are contributing to increasing floods during storms and hurricanes.

The West of the U.S. has had its worst fire seasons ever in the last five years. Many insurers have therefore started raising rates on commercial properties in high-risk areas and are requiring property owners to reduce the chances of their properties catching fire by building buffer zones around their structures. Those who don’t may not have their policies renewed.

Insurers are tightening underwriting in any parts of the country that have been experiencing increased levels of natural disasters. Additionally, some insurers have decided to curtail the amount of policies they are willing to write, while others have pulled out of the market altogether.

While overall rate increases vary from region to region, properties with greater exposure to catastrophes and claims histories have been seeing the largest increases.

 

Liability and umbrella

This includes the liability portion of auto policies, which has been the driving force in increasing personal and commercial auto insurance rates.

Since the advent of the smartphone, there has been a steady increase in automobile accidents and injuries. The growing economy also meant more cars on the road and more people driving to work, which has translated into more accidents.

Another issue is that companies are increasingly being sued for societal issues where they may have been an actor or middleman. A good example is the opioid litigation that is catching many companies in its web – not only the opioid makers, but also doctors who prescribe them and pharmacies that dispense them.

Also, with the advances of social media, when a company may have injured someone through its actions, the word spreads, which can lead to others coming forward and suing.

On top of that, jury awards keep growing. Businesses are easy targets for litigation, and juries consider that they have deep pockets and can afford to pay out substantial awards.

Willis Towers Watson adds that another reason liability claims continue climbing is the increasing cost of health care, and often liability claims include those where a third party is injured and needs medical treatment of some kind.

Insurers to Rebate Record Amount of Premium

Health insurers are set to refund a record amount to consumers who purchased health plans on government-run marketplaces or in the private market during the last few years. 

Rebates for individuals who bought their health plans from Affordable Care Act marketplaces will average $420 apiece, according to a report by the Kaiser Family Foundation. In total, health insurers are expected to refund $1.97 billion to 4.7 million people who purchased coverage on exchanges around the country.

Not everybody who has an individual market plan will see a refund. Only policyholders whose insurer spent less than 80% of their premiums on claims will have to be paid back.

 

How the rebates will be paid

Insurers can pay out the rebates by issuing a premium credit to people who are insured by the same company as they were in 2019 (for those who are currently enrolled with the same insurer as in 2019), or as a lump-sum payment. Last year, most insurers paid out rebates by check as a lump sum. 

Rebates that will be issued in 2020 are based on the insurer’s financial performance in 2017, 2018 and 2019. 

The ACA requires that insurers refund policyholders under the law’s medical loss ratio provision, which requires them to spend at least 80% of their premium income (85% for large group plans) on claims and quality improvements over the previous three years. Insurers that do not meet that requirement must refund the difference as rebates.

The goal is to have insurers spending the majority of your premium dollars on medical claims so that rebates aren’t necessary.

But because insurers set their premiums a year in advance, they usually cannot predict how many policyholders they will have or how much they will pay out for claims. The rebates serve as a backstop, ensuring that even if premiums are ultimately set too high in a given year, policyholders will be paid for essentially being overcharged.

The majority of insureds do not receive a rebate check, as most insurers’ administrative costs are less than the allowable amount.

The high rebate estimates come as insurers are working on submissions to regulators for proposed premiums for 2021 in the midst of uncertainty about how the coronavirus pandemic will affect health care costs.

But even if they lose money in 2020, insurers could still owe money to consumers in 2021 because the refunds are based on the previous three years, and health insurers made high profits in the ACA markets in 2018 and 2019.