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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Frugal Frieda on December 20, 2016, 05:01:42 PM

Title: Do I need life insurance and long term care insurance?
Post by: Frugal Frieda on December 20, 2016, 05:01:42 PM
I am reevaluating all of my insurance needs.  I have been making a few changes here and there and tweaking things to maximize my coverage.  I have been aggressively cutting costs, investing, and taking steps bring in additional income.  I'm doing well.  I am now questioning the supplemental life insurance and long term disability insurance that I buy through my employer.  What are your thoughts on what further changes might be beneficial?

Single mother, 50 years old, with 4 year old child
Own my own home with no mortgage 450k
No debt of any kind.
240k net worth, excluding my home
Salary 100k

I currently have the following insurance:

Homeowner's (required by coop)
Auto insurance (just dropped the collision and comprehensive on my 17 year old car and switched to Geico)
Health insurance ($500 per month through employer)
Life insurance for 50k (free through employer)
Supplemental life insurance for 100k ($40 per month through employer)
Long term care insurance ($100 per month through employer)

1)  With regard to the supplemental life insurance policy -- I got it because I am a single parent, but since then the value of my home and my savings have increased.  Do I need this supplemental or should I take that $40 per month and put it into Vanguard?

2)  I believe my LTC policy caps out at 500k, but am not sure, and could check if needed.  Since I am single and have no family except for a 4 year old, I live in fear of Alzheimer's (which my mother developed at 78 and she had to be institutionalized due to violence).  I also have a couple of chronic health conditions, but I keep myself in good shape and they have remained in remission for years.  Keep the LTC or put that $100 per month into Vanguard.
Title: Re: Do I need life insurance and long term care insuranc
Post by: MsPeacock on December 20, 2016, 07:37:11 PM
Single mom here, age 47 with 2 kids (10,13). I have a 500k policy, started before age 40. I figured I needed enough to see my kids through college, payoff the house, and ease finances for whoever has custody if something happens to me. (My ex unless I a, lucky enough for him to go first).

As my net worth has inncraesed past 500k I've considered dropping the policy. Unfortunately, the life insurance was court ordered too be continued with the kids as benifciiaries after my divorce.

Is 150k insurance plus your stash enough to care for your little one until adulthood?
Title: Re: Do I need life insurance and long term care insurance?
Post by: Frugal Frieda on December 20, 2016, 07:42:32 PM
MsPeacock:  My main asset that would be used for caring for my little one would be the proceeds from my home, approximately 450k.  He wouldn't be living there alone, nor would his godparents find our little home suitable for their larger family.  Additionally, there's 240k stashed away in retirement and non-retirement accounts, plus a free 50k policy from work.  The extra 100k policy is what I'm debating.  And also the LTC insurance, which is the more expensive of the two.  I'd love to cut these expenses, but want to protect my little family.
Title: Re: Do I need life insurance and long term care insurance?
Post by: mxt0133 on December 21, 2016, 01:27:08 AM
What are the terms of the LTC insurance with your employer?  What happens if you move to another job or retire before you need to use the insurance.

Also why do you think you need LTC insurance in the first place?  Are you aware that in the event you do need to stay in a LTC facility and cannot pay the costs Medicaid that will pay for it.  If you have too much income to qualify for Medicaid, such as Social Security or a pension but can't cover the full cost of a nursing home, you set up a Millet Trust that will help you qualify for Medicaid to cover the gap between your income and the cost of a nursing home facility.  Your primary home is excluded from Medicaid qualification as well.

Other than you wanting to leave an inheritance to your child you don't really have to worry about the cost of long-term care.
Title: Re: Do I need life insurance and long term care insurance?
Post by: Frugal Frieda on December 21, 2016, 03:16:00 PM
mxt0133:  I believe there were a couple of reasons that I was concerned about LTC insurance.  The first was that when we tried to find a facility for my mother, many of them, which seemed to be the nicest ones, did not take Medicaid.  The quality of the facilities between the fully Medicaid ones, ones that were private but had some Medicaid beds, and the fully private ones, was very different.  We were lucky to get her into one that was a mix and was lovely, but had it not been for that, we would have had very bad choices to make.

The other reason I took it was that at the time I signed up for it I did not have my home.  I now have a 450k home with no mortgage.  As long as my child is 20 or so, I am less worried about leaving any type of inheritance and more concerned about not becoming a burden.  Had we not found a nice place that accepted Medicaid, my siblings and I would have had to spend hundreds of dollars each to bridge the gap and get a better place.  I do not want to burden my child.

I've never heard of a Millet Trust and will read up on it.  I do not offhand know the answer to your question regarding what happens if I retire or need to leave my job before I need to use the LTC.  I haven't looked at the policy for a very long time.  I believe I would not have taken it unless it was something that could be continued indefinitely.  In any case, I will check for those answers and report back.  and what say you about the supplemental life insurance?
Title: Re: Do I need life insurance and long term care insurance?
Post by: mxt0133 on December 21, 2016, 03:42:32 PM
@Frieda  - I apologize for the misspelling it's supposed to be a Miller Trust or Qualifying Income Trust.

I agree that not all nursing homes are created equal but there are good quality ones that do take Medicare.

As for insurance, first you have to estimate how much your minor child would need should you pass away.  What do want to leave behind in terms of inheritance, do you want college to be paid for ect?  As other might have pointed out log on to and see how much survivor benefit your child and the caretaker of your child would receive until he is 18 or 19 if attending school.  That should help you determine how much insurance you should get.

From there I would get a few quotes for term-life insurance either 10-15 year terms and compare that to your employer's.  The risk of having it trough your employer is that it stops if leave.  For example you get sick and can no longer work so you are terminated and now don't have any insurance when you really need it.

Here's a good article on the downsides of having life insurance through your employer. (
Title: Re: Do I need life insurance and long term care insurance?
Post by: Frugal Frieda on December 27, 2016, 07:18:51 PM
Thanks mxt0133!  I took some time of the holidays to read up on the Miller Trust and read the article about health insurance through your employer.  So here's some info that I can add:

While I have 50k life insurance through my employer for free, I purchase an additional 100k for $40 per month.  When they offered the additional, we were guaranteed to be accepted because it was a new plan or something like that, can't remember.  Before that, I had also applied for additional life insurance (which did not offer guaranteed acceptance) and was turned down because I have Crohn's disease.  In remission for years and it's not fatal, but I was turned down for life insurance.  I would have understood that better if I was turned down for long term disability or long term care insurance.

When I took the Long Term Care insurance, which I pay $110 per month for, that also had guaranteed acceptance.

So in a nutshell, when I took both of these I only had 35k in home equity.  I now have 450k+ in home equity.  If I die, my child would not be able to remain in my home, but, rather, would go live with godparents.  The sale of my home, plus 225k savings/401k, plus social security would go into a trust and a monthly allowance would be paid for care.

I light of this further info, what are your thoughts about continuing that 100k @$40 per month and the LTC for $110 per month?  This has come up as this point as I am trying to grow my stash and trim my budget in every way possible.  Don't want to make any mistakes or put my child and myself at risk, but I also recognize that a lot of decisions people make are based on fears and not based on reality.  Your thoughts (and anyone else who cares to chime in) would be appreciated as I consider these issues.
Title: Re: Do I need life insurance and long term care insurance?
Post by: mxt0133 on December 27, 2016, 08:11:23 PM
With regards to the LTC insurance through your employer, my initial question was what happens to your policy if you leave your current employer?  Will you be able to continue at the guaranteed rate, will it increase, or will coverage just end?  Going back to the risk of having your insurance tied to your employer is risky because if you get sick and have to stop working you could potentially lose insurance coverage when you need it the most.

I understand that it might be cost prohibitive for you to find coverage on your own but at least you are prepared for the worst case scenario.

As for continuing the $40 supplemental life insurance policy, if I were in your shoes I would focus on other things to reduce your spending on, essentially lower hanging proof that won't keep you up at night.

With your assets, insurance policies, and SS benefits your son should have more than enough until he turns 18 and should have more than enough for college, in-state at least.  I'm glad that you have a trust setup for your son.  I know a lot of people think that trusts are too costly to implement but the risks to me without one is just not something I am comfortable with.

Once you have optimized those aspects of your life, I would personally pivot from a financial standpoint to more of a health and lifestyle focus.  My primary concerns, if I were in your shoes, would be to stay healthy and alive until your son is self-sufficient.  Following a healthy diet and maintaining an active lifestyle will pay huge dividends vs trying to save a hundred or two a month.

I wish you the best and hope you see your son well into his adult life.  Hopefully, you get to spoil some grand kids if he chooses to have them.

P.S.  Don't forget to have a little fun for yourself as well.  As a father of three I know how we can get so wrapped up in making sure are kids are taken care of, we sometimes forget to take care of ourselves.
Title: Re: Do I need life insurance and long term care insurance?
Post by: Frugal Frieda on December 27, 2016, 08:50:56 PM
Yes, my focus is on eating well and having a healthy lifestyle.  I had forgotten your question about the LTC insurance.  Yes, it is portable and goes with me wherever I go.  And yes, the rates can increase, but they can do that now.

I don't so much worry about my son being cared for as everything is already in place:  he will go to good friends and the executor of my will will set up a trust at that point.  My beneficiary for everything is my estate.  All documents are in place.  I think he has plenty, even without the supplemental life insurance.

What I am more concerned about is myself.  My care is totally on my own shoulders.  Thus, I am trying to reduce costs where possible, low fruit, high fruit, you name it, as a way of boosting my savings.  I am also working on earning more.  Now mind you, none of this in any way detracts of my happiness or my lifestyle -- I consider it a big challenge to come up with new ways to beat the system and boost my savings and I've been doing great.  But these two insurances have been on my mind for awhile and in fact, I have to pay to park my car, so that is also picking at my brain and I am working on a work around for that as well.  :)
Title: Re: Do I need life insurance and long term care insurance?
Post by: abhe8 on February 28, 2017, 04:52:48 PM
MedicAID will pay for LTC but will then cube back for the money after you pass, including your house. I would read carefully on Medicaid estate recovery and meet will an estate planning attorney if you are planning to go this route.

I don't think Medicare offers a long term care benefit. Only short stay nursing home.

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