Author Topic: Long term care insurance worth it?  (Read 778 times)

ebella

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Long term care insurance worth it?
« on: April 18, 2019, 11:55:02 AM »
Just started a new job and they have long-term care insurance which they will pay for up to $2000/mo (not adjusted for inflation) that covers things like nursing homes and home aides for three years.  If I pay an extra $7.10 a month out of my paycheck I get it adjusted for inflation and it covers a liftetime.  That seems like a decent deal but I have never heard of anyone actually being able to use these benefits, possibly because they are a new alternative to retirement or social security benefits?  I don't intend to have children but I also don't expect to have alot of retirement savings (no pension, have not had an employer who had a 401k for most of my adult life and my spouse is in the same boat).  Would appreciate some insight  from people who have used or have opted to pay for these benefits and any experiences with the same. 

wenchsenior

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Re: Long term care insurance worth it?
« Reply #1 on: April 18, 2019, 01:15:41 PM »
Just started a new job and they have long-term care insurance which they will pay for up to $2000/mo (not adjusted for inflation) that covers things like nursing homes and home aides for three years.  If I pay an extra $7.10 a month out of my paycheck I get it adjusted for inflation and it covers a liftetime.  That seems like a decent deal but I have never heard of anyone actually being able to use these benefits, possibly because they are a new alternative to retirement or social security benefits? I don't intend to have children but I also don't expect to have alot of retirement savings (no pension, have not had an employer who had a 401k for most of my adult life and my spouse is in the same boat).  Would appreciate some insight  from people who have used or have opted to pay for these benefits and any experiences with the same.

I'm not understanding the bolded part.  Are you saying that your company offers this as an alternative to a 401K or paying into Social Security?  Social Security isn't optional except for some public sector jobs.  And LTC is generally a regular insurance product, not an investment vehicle.  Also, can you clarify what you mean when you say you haven't heard of anyone being able to use LTC insurance?  Do you mean you just don't know people who have needed it? Or do you mean you lose it if you leave this particular job before full retirement age, or what?

ETA: If you actually do have access to LTC insurance that is inflation adjusted and has no caps for that price? It would be an amazing deal.  But it sounds like there are a bunch of caveats.
« Last Edit: April 18, 2019, 01:18:12 PM by wenchsenior »

ebella

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Re: Long term care insurance worth it?
« Reply #2 on: April 18, 2019, 03:22:34 PM »
Oh I know it's not an investment vehicle and alternative to other programs.  My company offers it in addition to a 401k and disability insurance.  But my parents never had it (they had pensions) so I'm assuming it's a newer thing that most people haven't needed to use yet (given that it's usually used by pretty elderly people).  I've read that it doesn't make sense to pay into it unless you're much older or likely to need home care but, since I don't have kids or a pension or other large nest egg maybe it makes more sense for me to get one (even though I am young and healthy). 

wenchsenior

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Re: Long term care insurance worth it?
« Reply #3 on: April 18, 2019, 03:46:47 PM »
Ah, ok.  I get it.

So...regular health insurance for most U.S. retirees is covered by Medicare. As you probably know, although many health expenses are covered by Medicare, there are several gaps in coverage.  Dental is the biggest one most people deal with in early retirement. Long term care coverage is the other (Medicare pays only for a short period of care following hospitalization). 

B/C long term care is staggeringly expensive, most retirees in the U.S. can't hope to pay for more than a few months of such care (e.g., at home care or nursing home care) out of pocket (after all, most Americans retire with very little in retirement savings even setting aside the potential for LTC).  So for those people that require LTC and cannot pay, the options are to pay with LTC insurance (if you have it) or to pay for LTC out of pocket until you become impoverished, at which point you can qualify for MedicAID and that will pay for LTC (there are rules about qualification that allow, e.g., a remaining spouse to keep a car, remain living in the house, and keep a very small amount of cash...I think a couple thousand...the state takes the house after the remaining spouse's death). 

The rough rule of thumb for who should buy LTC insurance used to be: If you have >2 million in assets at the time you are likely to need it, you can probably afford to pay out of pocket.  If you have less than 2 million, AND you can reasonably afford coverage, it might be a good idea to buy it.  If you are a more typical American, with less than 500K of retirement savings and not a lot extra cash to pay for insurance, you can expect to have to impoverish yourself at the end of life to get care.

For most people, the $ trade-off of when to get coverage usually fell sometime in their 50s.  However, over the years LTC insurance has become harder to qualify for (I do not qualify b/c of preexisting conditions, but DH qualified in his mid-50s through work, at a cost of ~130$/mo), much more expensive, AND less generous in terms of coverage.

We bought it for my husband b/c he is the primary earner and is 10 years older than I, so I would be in trouble if he required LTC.  I am younger, and uninsurable at any reasonable price, but also less healthy.  I am planning on continuing to work beyond what our FI state would require to keep building savings partly to offset this risk.  But if I were to require LTC after he is dead,  I would presumably spend down my estate as necessary.

There have been tons of threads on this forum where people argue about it.  Younger people seem inclined to poo-poo this risk (possibly b/c they haven't yet had to deal with parents or gparents in LTC).  Others, like me, have seen grandparents linger for close to 10 years in LTC and think it's a very real risk.  Some people have chronic debilitating illnesses or dementia in their families and don't dare wait to try to qualify for LTC for fear they will wait too long.

Unfortunately, you have to look very carefully at your family history and risk factors, the size of your expected pension (if big enough, it could disqualify you from ever being able to qualify for Medicaid), cost to you versus how long you could expect to be alternatively investing that premium money, what exactly the coverage is, etc.

It's a real challenge.  Perhaps some people who have tackled this at a younger age might weigh in.

bogart

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Re: Long term care insurance worth it?
« Reply #4 on: April 18, 2019, 10:08:25 PM »
$7.10/month for inflation protection alone seems worth it to me.  I know we're supposed to sweat the small expenses, but even as a "subscription," that's a tiny amount of money.  No, you may never need the insurance, but having it available (and adjusted for inflation) would be worth that to me...

FIREstache

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Re: Long term care insurance worth it?
« Reply #5 on: April 18, 2019, 10:57:36 PM »
This comes up from time to time on this forum.  Here's one discussion from not long ago.

https://forum.mrmoneymustache.com/investor-alley/long-term-care-insurance-92330/

And an older thread.

https://forum.mrmoneymustache.com/welcome-to-the-forum/long-term-care-insurance/
« Last Edit: April 18, 2019, 10:59:32 PM by FIREstache »

NV Teacher

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Re: Long term care insurance worth it?
« Reply #6 on: April 19, 2019, 06:26:45 AM »
A family member had long term are insurance and used it when an accident caused a traumatic brain injury.  The family was very positive about their experience.  My elderly mother spent six months in a minimal care facility where her costs started at $2900 a month and quickly climbed to $5000 a month when she passed.  The last month or so of her life the facility was pushing us to move her to a skilled nursing facility where costs started at $10,000 a month for a shared room.  Luckily she had saved and invested her school lunch lady money and had resources available to cover the costs.  I have a long term care policy.  I hope to never use it but it gives me some peace of mind.

TheInsuranceMan

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Re: Long term care insurance worth it?
« Reply #7 on: April 19, 2019, 08:34:14 AM »
Both of my grandparents are in the nursing home right now, and without their long term care policy that they have in place, they would have been required to sell the 160 acres of farm ground ($1.4m asset) that they own and has been in our family for over 100 years, to be able to foot the bill.  I believe their bill this year was around $90k (I think I'm light on that number, as well...). 

Long term care is worth it.

wenchsenior

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Re: Long term care insurance worth it?
« Reply #8 on: April 19, 2019, 08:45:26 AM »
I just noticed in one of the older threads that someone mentioned that LTC insurance is also available through the VA? Does anyone know any details about this? DH is a veteran, though not of a combat zone.  If we bought LTC insurance that he actually doesn't need b/c he qualifies for some such care through the VA, then I'd drop it...