Author Topic: Long Term Care Insurance  (Read 960 times)

CowboyAndIndian

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Long Term Care Insurance
« on: February 13, 2018, 06:39:59 AM »
Even though I consider myself well educated about finance and investing, I know nothing about Long-term care insurance.
My insurance agent, my CPA are all asking me if I have one and when I will get one.


For the record, I am 59 and DW is 54 and we are healthy.

What is the opinion of the community on buying this insurance? What should I look for in buying this?

frugaliknowit

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Re: Long Term Care Insurance
« Reply #1 on: February 13, 2018, 09:37:18 AM »
My opinion is IT DEPENDS.   

1.  What's your family history?  Has there been much in the way of Alzheimers/dementia, others outliving their ability to live independently (such as yours and your wife's parents)?

2.  What's your net worth?  While there's no magic number, if there's not much in the way of net worth, there's not much in the way of assets to protect if you or your wife must go into a nursing home.

3.  How do you and your wife feel about (potentially) ending up in a really crappy (medicaid funded) nursing home?

4.  Run scenarios where one of you (most likely you, because usually women outlive men) have to go into a nursing home.  Figure out how that would be financially handled.

One of the BIG problems I have with Long Term Care insurance is that the premiums are not level (as far as I know...).
« Last Edit: February 13, 2018, 09:42:34 AM by frugaliknowit »

Bucs4Ever

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Re: Long Term Care Insurance
« Reply #2 on: February 13, 2018, 10:47:07 AM »
there are new regulations for newer policies designed to protect policyholders from big rate increases.

wenchsenior

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Re: Long Term Care Insurance
« Reply #3 on: February 13, 2018, 12:14:10 PM »
I'm not sure what the current 'rule of thumb' recommendations are, but 15 years ago when I first heard about it, the idea was that most people (meaning most Americans, who retire with <1 million in assets) should plan to just spend down their assets and go on Medicaid unless they have particular known circumstances (family history of debilitating illness) that would change that decision.  People who intended to retire with at least 2 million in assets were advised to self-insure.  People in the middle (which is a lot us on this board) were the group advised to look into LTC insurance, because you have enough assets that you might want to protect them, but not necessarily enough to support more than a year or so of LTC costs without impoverishing the remaining spouse/family.

However, back then premiums were more reasonable and exclusion guidelines were not as strict.

We decided to try to buy policies through the Feds a few years ago, partly because we look to fall square into the 'risk zone' and partly because my husband is 9 years older and a much higher earner.  It would be very difficult for me to support us without draining our assets, were he to become disabled for a long period of time.  We were able to insure him at a what feels like a reasonable rate for a reasonably generous policy, but I was deemed un-insurable for multiple reasons.

So our plan is to keep his policy as long as possible, and I will attempt to save an additional 200K over the next15-20 years to self-insure myself.

Many on this board think self-insurance is the way to go, but having seen the incredible cash drain required to support all three of my grandparents that made it to old age, and then watching my father's retirement estate of 2 million $+ drained to less than half that in the course of about 5 years (separation and medical bills) before he is even at the point of beginning to need LTC, there is no way I would take the self-insurance gamble unless we had a net worth of 3 or 4 million.  Which is highly unlikely to ever happen.

TheWifeHalf

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Re: Long Term Care Insurance
« Reply #4 on: February 13, 2018, 12:41:12 PM »
Our plan is to self insure, keep the life insurance as long as we can afford it, and consider that a reimbursement of the LTC cost

Roadrunner53

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Re: Long Term Care Insurance
« Reply #5 on: February 13, 2018, 01:04:26 PM »
I have a policy I bought thru a former employer years ago. They told me the premiums would never go up. This past year they did go up but not a lot. Since we bought the premiums when we were much younger, and the costs have remained the same for years it seemed a good deal. I did find out that our policy only pays around $6,000 a month per patient in a nursing home. In my town in 2013 the cost was $12K a month. In Tennessee and KY where two of my aunts have been in nursing homes the costs were around $6,000 a month. So if we stay here in CT and one of us has to go in, we will have to fork over the difference. Plus, there is a cap on how much money they pay. I have forgotten how many years out they pay. Maybe 8 at most. I didn't know that and I didn't know they didn't pay the whole cost. I don't recall that there were different policies to choose from at the time. I was laid off from that job but was able to take the LTC with me. I get billed every 3 months.

Bucs4Ever

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Re: Long Term Care Insurance
« Reply #6 on: February 13, 2018, 03:24:33 PM »
I'm not sure what the current 'rule of thumb' recommendations are, but 15 years ago when I first heard about it, the idea was that most people (meaning most Americans, who retire with <1 million in assets) should plan to just spend down their assets and go on Medicaid unless they have particular known circumstances (family history of debilitating illness) that would change that decision.  People who intended to retire with at least 2 million in assets were advised to self-insure.  People in the middle (which is a lot us on this board) were the group advised to look into LTC insurance, because you have enough assets that you might want to protect them, but not necessarily enough to support more than a year or so of LTC costs without impoverishing the remaining spouse/family.

However, back then premiums were more reasonable and exclusion guidelines were not as strict.

We decided to try to buy policies through the Feds a few years ago, partly because we look to fall square into the 'risk zone' and partly because my husband is 9 years older and a much higher earner.  It would be very difficult for me to support us without draining our assets, were he to become disabled for a long period of time.  We were able to insure him at a what feels like a reasonable rate for a reasonably generous policy, but I was deemed un-insurable for multiple reasons.

So our plan is to keep his policy as long as possible, and I will attempt to save an additional 200K over the next15-20 years to self-insure myself.

Many on this board think self-insurance is the way to go, but having seen the incredible cash drain required to support all three of my grandparents that made it to old age, and then watching my father's retirement estate of 2 million $+ drained to less than half that in the course of about 5 years (separation and medical bills) before he is even at the point of beginning to need LTC, there is no way I would take the self-insurance gamble unless we had a net worth of 3 or 4 million.  Which is highly unlikely to ever happen.


Just because the federal plan denied you does not mean that every LTC insurance company will deny you.
Have you asked a long-term care insurance specialist to help you find a company that will insure you?


Bucs4Ever

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Re: Long Term Care Insurance
« Reply #7 on: February 13, 2018, 03:25:40 PM »
Our plan is to self insure, keep the life insurance as long as we can afford it, and consider that a reimbursement of the LTC cost

How big is that life insurance policy?

wenchsenior

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Re: Long Term Care Insurance
« Reply #8 on: February 13, 2018, 03:50:01 PM »
I'm not sure what the current 'rule of thumb' recommendations are, but 15 years ago when I first heard about it, the idea was that most people (meaning most Americans, who retire with <1 million in assets) should plan to just spend down their assets and go on Medicaid unless they have particular known circumstances (family history of debilitating illness) that would change that decision.  People who intended to retire with at least 2 million in assets were advised to self-insure.  People in the middle (which is a lot us on this board) were the group advised to look into LTC insurance, because you have enough assets that you might want to protect them, but not necessarily enough to support more than a year or so of LTC costs without impoverishing the remaining spouse/family.

However, back then premiums were more reasonable and exclusion guidelines were not as strict.

We decided to try to buy policies through the Feds a few years ago, partly because we look to fall square into the 'risk zone' and partly because my husband is 9 years older and a much higher earner.  It would be very difficult for me to support us without draining our assets, were he to become disabled for a long period of time.  We were able to insure him at a what feels like a reasonable rate for a reasonably generous policy, but I was deemed un-insurable for multiple reasons.

So our plan is to keep his policy as long as possible, and I will attempt to save an additional 200K over the next15-20 years to self-insure myself.

Many on this board think self-insurance is the way to go, but having seen the incredible cash drain required to support all three of my grandparents that made it to old age, and then watching my father's retirement estate of 2 million $+ drained to less than half that in the course of about 5 years (separation and medical bills) before he is even at the point of beginning to need LTC, there is no way I would take the self-insurance gamble unless we had a net worth of 3 or 4 million.  Which is highly unlikely to ever happen.


Just because the federal plan denied you does not mean that every LTC insurance company will deny you.
Have you asked a long-term care insurance specialist to help you find a company that will insure you?

I haven't, but that's a good idea. 

BeanCounter

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Re: Long Term Care Insurance
« Reply #9 on: February 13, 2018, 05:16:03 PM »
My mother bought a policy in 1998 because she had some assets, but at that time not over a million so she thought it made sense to try and protect those assets for me and because she didn't want me to be burdened with her care. She would have been 52 at that time. I recently had to investigate getting in home care for her or putting her in a SNF. Here is what I learned.
For the $30,000 she paid in premiums for that 20 years, she was still subject to a 90 day waiting period. This was going to be somewhat reduced by a rider she had paid for, but I don't remember the specifics. Once that waiting period was exhausted, the benefit covered about 65% of a SNF. It covered quite a bit more of in home care because she had purchased an additional benefit for that, but they required that we use an agency and have a licensed CNA which drives the cost per hour considerably than if you wanted to hire help yourself. I could have hired comfort care myself for about $15 an hour and the agency charged $25 for the same service.
Mom got cancer and when she became sick enough to need care, she wasn't going to live long enough for the waiting period to be exhausted. Ultimately friends and I took care of her until Hospice kicked in. This is another factor, in most cases family want to keep their loved one home as long as possible so they can watch over their care as much as they can manage it. So the policy goes unused until it is really too late.
Bottom line, in my analysis the only time LTC is worth it is for Alzheimers because in many cases you really don't live that long needing that kind of care. I read somewhere that the average stay is actually 2.4 years and that 65% of nursing home residents die within the first year. So at 2.5 years the total cost would be about $270k depending on your region.
 I think one would be better off to pay for life insurance for as long as possible and recoup the costs that way. 

Bicycle_B

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Re: Long Term Care Insurance
« Reply #10 on: February 13, 2018, 07:31:10 PM »
Agree that the biggest case for Long Term Care Insurance these days is Alzheimer's.  Due to family risk, I am in process of obtaining LTCI.  You have to evaluate for your own case. 

Older policies had higher benefit to premium ratios.  Those proved unsustainable for the insurance industry.  Not all advisors recognize the change.  As a single person, early 50s, I am seeking the newer weaker type of policy anyway because it provides for the case where my mind is shot.  If I run short financially in life but my mind is sharp, I can take care of myself by thrift and craftiness.  If I get Alzheimer's, the insurance provides the extra money for care so that my relatives can just be responsible for administration, not providing funding or direct care.  Since my stash is modest, roughly 450k, I think this provides a reassuring extra security layer for my relatives at a price I can tolerate.

For reference, policy costs generally vary based on waiting period (big cost jump for 30 day wait, savings for 90 day period - I chose 90 days), amount to be paid out monthly in case of need (I chose $3750), and duration of payment (I chose 3 years, if IIRC).  In the policy I am applying for, the duration of payment extends longer if you don't draw the max, and goes until policyholder dies or the max payout is done.  In other words, my payout max would be 12 mos x 3 years x 3750/mo = $135,000.  If only 2500/mo is drawn, for example, the draw would last for 54 months (135,000 / 2500).  Any amount used for expenses can be drawn as reimbursement for each month, up to the policy's monthly max.
 
For reference, we paid $3250 to $4500 per month for two of the best assisted living facilities in a LCOL city for my dad as couple of years ago.  Assisted living is different from a nursing home, technically.  Like rehab facilities, true nursing homes have more medical care and higher costs than assisted living, but often can get medical insurance to pay.  Assisted living is cheaper but is considered a residential cost, meaning it will not be paid for by medical insurance, and therefore must be paid out of pocket or by LTCI.  (However, for tax purposes, our accountant said we could consider it be a deductible medical expense.)  Nursing home stays often last months where assisted living often lasts 2-3 years.  Each of these can be longer, but average cases get cut off at that point because various health conditions pile onto each other and the patient dies.  You have to decide whether your goal is to cover average cases or all cases, and whether your stash is sufficient on its own.  I chose my LTCI amount to be what would be useful without paying for unneeded care.  I wasn't trying to pay everything, because I knew I have other assets.  I just shopped for the amount that will get used if I get Alzheimer's, so I can reassure my relatives and ask them to administrate in time of need.

My premium is to be about $700/year.  It can only go up if the company raises the premium for every person in the company who has that type of policy.  I assume that premiums will get raised, but estimated that the future premium will be no more than double the initial premium.  Supposing 25 years of years of premiums and a linear rate of increase, I estimate about $1050/year on average for a total of roughly $26,250 in premiums. 

Based on family history, I estimate 30% chance of using it for Alzheimer's.  The average case of Alzheimer's pays out around 2.5 years, but due to good underlying health, I could easily exceed that.  30 months x 3750 would be $112,500 of benefits.  30% of that provides expected return of $33,750.  I would get a higher average return investing in stocks, but in the case of actual need, the policy is slightly ahead, and the format is much more reassuring to my not-as-Mustachian relatives. In addition, the policy could pay out in various other cases if they occur, such as getting lupus or something to the extent that I can't take care of myself.  Make your own estimates of need and calculate for yourself. 
« Last Edit: February 13, 2018, 07:47:59 PM by Bicycle_B »

Bucs4Ever

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Re: Long Term Care Insurance
« Reply #11 on: February 13, 2018, 07:42:08 PM »

 I think one would be better off to pay for life insurance for as long as possible and recoup the costs that way.

My relative is in an assisted living facility right now. She needs help with bathing and dressing. That's all. If it wasn't for her long-term care policy, we would have been forced to sell one of her rental properties (and pay the capital gains taxes which are enormous in California).

Her long-term care policy has a $10,000 monthly benefit, but her care is only costing about $6,000 right now. Her policy has about $400,000 of benefits so it should last about 6 or 7 years. She is still very healthy, she's just frail and needs some basic help. She could easily live another 5+ years. There are people in her facility who have been there for 10 years and longer (even the ones who don't have Alzheimer's).

I looked into buying life insurance for her when she got her long-term care policy but it was way too expensive. To get $400,000 of life insurance would have cost about $10,000 per year (unless we bought term, but what's the point of buying a term policy.) Her long term care was about $3,000 per year (we don't pay the premium anymore because the premium stops when care starts).

If we'd gone the "life insurance route" instead of buying long-term care insurance, we would still be paying $10,000 per year for the life insurance PLUS the cost of her care PLUS the capital gains taxes on the rental property(ies).

CowboyAndIndian

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Re: Long Term Care Insurance
« Reply #12 on: February 17, 2018, 11:35:25 AM »
OP here. Sorry for flaking out and not responding to all the great posts.

Family history is relatively good. No Alzheimers or dementia. My father passed away at 94 and was relatively mobile except for the last six months. My mom is 88 and in good health.  DW's parents passed away earlier (63 and 79). Both healthy until the very end.

For now, I think I will self-insure. Have more than my FIRE amount and that can either become an inheritance or pay for a couple of years of a nursing home.

CowboyAndIndian

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Re: Long Term Care Insurance
« Reply #13 on: February 17, 2018, 02:01:01 PM »

Yankuba

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Re: Long Term Care Insurance
« Reply #14 on: February 17, 2018, 03:24:36 PM »
« Last Edit: February 17, 2018, 03:30:29 PM by Yankuba »

Sibley

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Re: Long Term Care Insurance
« Reply #15 on: February 17, 2018, 07:06:10 PM »
Re the LTC insurance - my understanding is that the companies were finding them very unprofitable, so they were being tightened up. Might change the calculation.

Let's be honest here. We don't have a crystal ball. We don't know who's getting dementia, cancer, falling & breaking a hip, or anything else. Any of us could end up in long term care situations, at any time. I'm one of the people looking at my parents and trying not to hyperventilate. For god's sake, I'm at their house for the weekend and my dad didn't brush his teeth this morning. Thanks Dementia!

Bucs4Ever

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Re: Long Term Care Insurance
« Reply #16 on: February 20, 2018, 08:33:45 PM »
Recent article on long term care. I am not buying any -

https://www.nakedcapitalism.com/2018/01/long-term-care-crisis-aging-adults-confront-costly-safety-net-gap.html

I will self insure


You can't believe everything you read on the internet.


TheWifeHalf

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Re: Long Term Care Insurance
« Reply #17 on: February 21, 2018, 03:34:33 PM »
Our plan is to self insure, keep the life insurance as long as we can afford it, and consider that a reimbursement of the LTC cost

How big is that life insurance policy?

1.2 million

Bucs4Ever

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Re: Long Term Care Insurance
« Reply #18 on: February 22, 2018, 10:39:38 AM »
Our plan is to self insure, keep the life insurance as long as we can afford it, and consider that a reimbursement of the LTC cost

How big is that life insurance policy?

1.2 million


Is it a term policy, or a universal life or a whole life?