Author Topic: Active military+SAHW=What LTC insurance?  (Read 1483 times)


  • Magnum Stache
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Active military+SAHW=What LTC insurance?
« on: December 21, 2016, 01:52:13 AM »
Help, please.

We've been putting this off, and I know I need to get this sorted out, but I'm overwhelmed with all the info about long term care insurance.

Husband is active duty military and will be for at least 5 more years, and possibly 10+ (which would likely put us at our FIRE number, though I suspect he'd keep working anyway).  In essence, that means that for a while at least, he would continue to have a job and get paid if something temporarily disabled him.  Eventually he would get medically retired, which would mean VA benefits, including a retirement check and medical care, though we all know that VA medical care can be ... sporty.

I used to work, but since we moved overseas, I haven't had more than a side hustle.  We have no kids.  Once we are back Stateside, whenever that is, I'll probably try to work again, but realistically, my earning outlook is abysmal and my income will likely never be more than a a bit of extra fun money.

We are both in our 40s and in good health.  We have lots (IMO, too much) of life insurance. 

We need LTC insurance, right?  How do I determine what we need?  Any recommendations for specific companies?  I'm totally lost here.   Guide me, Mustachian HiveMind, because I've put this off for so long based on not knowing where to start, and I think it's reached the point where I really need to start. 


  • Magnum Stache
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Re: Active military+SAHW=What LTC insurance?
« Reply #1 on: December 24, 2016, 02:37:36 PM »
You’re mixing financial apples and oranges, but the situation might be better than you’d expect. 

The good news is that you might not need long-term care, and the other news is that you might not want today’s long-term care insurance policies.  You can only get coverage for 2-5 years of care (perhaps with an inflation rider) and I don’t think they’re affordable or reliable or survivable.

Many of the frightening long-term care statistics quoted by the insurance industry are based on data that’s at least 25 years old.  If you need less than 100 days of care then it might be covered by Medicare.  This post includes a link to a study from the Boston College Center For Retirement Research indicating that long-term care is used less often and for shorter periods.

Even if you need more long-term care, you may not be able to find an affordable policy.  2016 has set a new low in the purchase of new policies because most of the large companies are backing out of that sector.  Many existing policies need higher premiums to keep the insurer able to pay out, but over 40 states have already passed legislation which limits premium increases.  If the companies are left holding the bag on losing policies then they’ll make life even more miserable for the caregivers who try to file a claim.  Their “service” may even sink to “delay & deny until they die”.

It’s been two years since I wrote that post, and things have actually gotten worse.  The Federal Long-Term Care Insurance Program raised its premiums on existing policies significantly in 2010 and again in 2016 by double-digit percentages.  (The FLTCIP is not subject to state laws limiting its premium hikes.)  MetLife pulled out of the FLTCIP completely, leaving behind only John Hancock to support the program.  I had a thoroughly miserable experience with John Hancock (incompetence bordering on fraud) and I wouldn’t wish that on anyone. 

A small insurance company in Pennsylvania will soon be declared insolvent and liquidated.  I think this is the first time that’s happened since the 1990s, and it’s due to the aggressive LTC policies they wrote (and underpriced).  Hopefully this won’t set off a chain of falling dominoes.

So even if you need long-term care, and can afford the policy, and you’re willing to put up with the abusive claims process... the company might not be there for you anyway.

The industry may eventually fix itself with new hybrid policies combining life insurance with a long-term care rider.  Don’t hold your breath for that, but check back in five years.  In 20 years, long-term care may cost less by using new tech (including care robots). 

Meanwhile you’re anticipating a military pension and a VA disability rating.  The disability rating will offset some of the taxable pension with tax-free compensation.  If the disability rating reaches 50% or more then your spouse might be eligible for the compensation in addition to his pension (no offset).  In other words the pension & VA compensation will provide the world’s most reliable inflation-adjusted annuity with low taxes.

When your spouse retires you can choose the local VA clinic as your healthcare provider, but you don’t have to.  You may be able to use Tricare Prime with a different care manager (even a civilian one) for premiums of about $50/month.  You could also use Tricare Standard and see any care providers, where there are no premiums and you’re only responsible for 20%-25% of the bill with a $3000/year cap.  At age 65 you’d shift over to Medicare with the military’s Tricare For Life as a supplemental insurer (with no premiums), effectively giving you the lifetime free healthcare that the recruiter promised all those years ago.

When your spouse retires from active duty then you may still care to insure his civilian employment income until he completely stops working for paychecks.  If you have term life insurance then you might just let that ride until it expires.  If you have too much whole or universal life then you might want to try to cash that out for a term policy, or someday convert it to a single-premium (paid-up) policy or one of the aforementioned hybrid LTC/life policies.  If you don’t anticipate being able to earn and save for yourself then you could choose the maximum amount of his military Survivor Benefit Plan policy, which will give you a lifetime inflation-adjusted annuity after his death.  The SBP annuity is not necessarily right for everyone, but if you want an annuity then it’s the world’s cheapest premiums because the federal government subsidizes about 40% of the cost.

In other words, after you both stop working you’ll have annuitized inflation-adjusted income with cheap healthcare and (possibly) a lifetime survivor benefit. 

Worst case:  if he goes into long-term care for an extended stay then you’d spend down your assets to qualify for Medicaid, and then you’d still have your monthly income (your share of his pension) plus Social Security and your residence (permitted by Medicaid).  His substantial annuity income would motivate most care facilities to keep him after you’ve spent your assets and shifted over to Medicaid.  He wouldn’t need a lot of Medicaid assistance (because he still has some pension & Social Security income) and his medical expenses would largely be covered by Medicare and TFL. 

After he passes away then you’d have SBP and life insurance for your own living expenses and long-term care.

Of course you can guarantee the worst case-- both of you needing dementia long-term care at the same time-- by smoking and excessive drinking.  You could gain 50 extra pounds, bringing Type II diabetes and general inflammation and cardiovascular disease. 

Or you could attempt to overcome any genetic inheritance and avoid the health hazards by living a very clean lifestyle.  You could both try to avoid dementia (and long-term care) by resisting its effects until you die of something else.  You might as well do that anyway, and until LTC insurance is fixed then optimizing your health is the best choice.  That's my plan.