Insurer Nastygrams: When Long Term Care Insurance Premiums Rise

Why This Has Been Happening And What To Do If You Are Affected

If you are a long term care (LTC) insurance policyholder who has had a policy for five or more years, you are likely to get an unpleasant piece of mail if you have not already: a whopping increase in your LTC insurance premium.  Double digit percentage increases are the norm and 85% and higher increases have been levied on some policyholders.  Worse yet, just because you had your premium increased significantly does not mean that you will not see your policy cost rise even further in future years.  To add insult to injury, several significant players in the LTC insurance market have seen their credit profile degrade resulting in lower claims-paying ratings, raising the chance that they will have difficulty paying claims down the road.  In this post I will discuss the economics of LTC insurance, how insurers got themselves into trouble with this product (necessitating giant rate increases), and what to do if you have an LTC insurance policy and get slapped with one or more premium increases.

Cutting Off The Tail, Part 2

Assessing Your Risk Tolerance Compared With The Risks You Run

In my last post (http://lifeinvestmentseverything.blogspot.com/2013/01/cutting-off-tail-part-1.html) I offered some thoughts on how to use various forms of insurance to mitigate some large downside risks that most investors face in real life.  Aside from insurable risks which tend to be characterized by low probability and high severity, every investor is confronted by risks which are much more likely and can have severities ranging from minor to extreme: portfolio risk.  Much ink has been spilled over the years on how to measure your risk tolerance and as far as I can tell it remains more of an art than a science.  In this post I will offer some thoughts on how to assess your risk tolerance and adjust your portfolio so that you only take risks you can live with.

Cutting Off The Tail, Part 1

How To Ensure That You Are Protected If The Worst Happens

 

The US has backed away from the so-called “fiscal cliff,” equity markets have rebounded (with the S&P500 recently at levels last seen in 2007), volatility in the markets have declined, and junk credit spreads are going back down to foolhardy levels.  The US housing market appears to be rising again, and the European debt crisis seems to have died down to the level of an occasional whimper.  Not that there aren’t a few clouds on the horizon, but for now the environment appears to be reasonably calm and at least moderately positive.  Considering the events of the last several years, an oasis of calm is a good time to double check your preparations for calamity, financial and otherwise.  In this and the next couple of posts, I will lay out some common sense preparations everyone should make while things are relatively good so that you don’t have to worry about the worst case scenarios (as much) when the next period of instability inevitably comes about.  As an additional bonus, having ensured that the worst possible outcome shave been mitigated you will be free to take on more investment and/or professional risk if you choose to do so.  Fundamental to personal financial belt-and-suspenders preparation is sufficient insurance coverage. 

 

Fun With Housing Finance

The Mechanics of Refinancing In a Mortgage Market Gone Crazy

As should be obvious to anyone watching the markets, mortgage rates have fallen to record lows once again.  Turmoil in equity markets, sovereign debt fears and probably expectations about central bank actions have continued to drive interest rates lower on a wide variety of fixed income instruments including agency mortgage backed securities (MBS).  For conforming mortgage loans, yields on MBS drive pricing and rates on loans.  However, the mortgage market is a bit of a mess in the wake of the real estate crash and the dissolution of a large part of the mortgage origination machinery in the last several years.  The silly-low rates being dangled in front of would-be borrowers come with a bunch of strings attached and if you do not meet the many requirements to qualify for the advertised rate you are likely to pay far more in rate/fees or simply be unable to borrow at all.  Since the list of requirements moves around not infrequently, potential borrowers who are on the edge will have a tough time figuring out if they qualify until they actually commit time, money and hair-pulling to an application.

Late last week I locked a rate to refinance my current mortgage.  I will now explore the whys, hows, and what has changed over time in the mortgage process.  I am lucky enough to comfortably meet the current requirements for receiving the advertised rate, so my comments will largely be confined to the so-called "conforming" mortgage market.

How To Buy Life Insurance

Cutting Through The Sales Literature, Marketing And Misinformation

Many people at some point in their lives come to the realization that if they were to unexpectedly die their families would be in serious financial difficulty.  Often this realization happens when you start having children or take on a major financial commitment, such as a large mortgage.  A natural response is to buy life insurance to protect themselves, but all too often people do not buy the right amount, don't buy the right kind, or don't buy it from the right provider.  There isn't a great deal in the way of common sense guides out there and the insurance industry and the agents have a vested interest in pushing certain types of products to less-than-well-educated customers.  In addition, the insurance industry seems to thrive on producing an endless array of complex products which often sound a lot better than they are.  This will be an attempt to offer some basic guidelines of buying life insurance coverage.