On February 2016, Genworth Financial debuted its annuity based long-term care product. This came barely weeks after the company promised it was focusing more on its LTC business and discontinuing sales of some other insurance lines.
Genworth hybrid long term care product is an SPIA (Single Premium Immediate Annuity) typically targeted for Americans over 70 years old. It provides guaranteed income over the buyer’s lifetime.
Genworth is currently the largest provider of long term care insurance in the country. The company’s SPIA is very different from typical stand-alone policies, though. While a traditional policy entails paying premiums over a stretch of years, the new product involves a one-off premium paid by policyholders who have adverse health but no LTC coverage.
Named the IncomeAssurance Immediate Need Annuity, the new Genworth hybrid long term care product is subject to medical underwriting. Essentially, this means that the applicant’s health standing is evaluated via nurse exam and a look at their medical records.
While most SPIAs focus on age and gender, Genworth’s product focuses on health status to determine payouts. By ignoring medical underwriting, typical SPIAs bundle both healthy and unhealthy people together, issuing similar payouts to a sick individual as would be issued to a healthy one.
Wade Pfau, a retirement income professor at The American College, discourages people who are worried about not hitting the life expectancy mark from using LTC annuities that are not medically underwritten.
Genworth’s IncomeAssurance Immediate Need Annuity appears like a plan for people with not-so-excellent health standing in that it allows them to get a better, more representative quote. The company has also said that it expects the SPIA to provide 20%-50% more payouts compared to standard annuities.
More focus on long term care insurance
To increase focus on its LTC business, Genworth announced a suspension of its fixed annuity and traditional life insurance products. This comes even as more companies adopt hybrid long term care coverage plans that expel commons typical with consumers of traditional LTC products. But only a few of hybrid LTC providers offer medically-underwriting SPIAs. Mutual of Omaha also has a product similar to Genworth’s SPIA.
Pros of Genworth hybrid long term care SPIA
- There’s minimal risk that premiums will unexpectedly shoot up
- Unlike traditional LTC, this SPIA does not necessitate ongoing evaluations for health
- Payouts start immediately and are not triggered by ADLs (Activities of Daily Living)
Cons of Genworth LTC SPIA
- By contributing this lump sum premium, you’re effectively locking away money that could be invested. It’s important that potential policyholders weigh the opportunity cost before going ahead to purchase the SPIA.
- Current low-interest rates mean annuities pay lower payouts than they would have in a high-rate environment.
- Currently, the product is only open for older Americans.
Genworth hybrid LTC in the form of an SPIA is a great plan for aging Americans who have adverse health and might be rejected in a traditional long term care insurance application.
