Author Topic: Long Term Care Insurance  (Read 1014 times)

Beach_Stache

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Long Term Care Insurance
« on: November 28, 2019, 06:08:02 AM »
Hi All,
Have any mustacians bought long term care insurance?  My grandparents had it and my parents have bought it.  It is very expensive but is cheaper when you are younger.  My parents have bought into the idea, however they don't necessarily take care of their bodies.  They eat well enough but don't exercise.  They are financially fit so have no problems affording it but probably would be okay without it and paying out of their savings.  Has anyone actually done the math on it and whether it makes sense or not? 

Personally I feel like self-insurance would work fine, but I realize healthcare costs when you get older can run you dry really fast.  DW and I are both vegan, eat well and exercise regularly and I don't see any of that changing, however her Father has Dymensia, my Aunt has Althymerz, so I realize those things can take you by surprise.

Does anyone have long term care insurance for later in life (or are you planning on it), or do most self-insure? 

Monkey Uncle

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Re: Long Term Care Insurance
« Reply #1 on: November 28, 2019, 08:11:21 AM »
I chose not to purchase it.  O.k., I guess technically I'm young enough that I could change my mind and purchase it if I wanted to, but I doubt that I will.

It's been a while since I looked into it, but a couple of things turned me off.  I didn't see any options that offered level premiums.  So the premiums could keep going up and up without limit as you get older.  Also, the policies had 90 day waiting periods before the benefits kicked in.  So you would be on the hook for three months of nursing home expenses before the policy paid anything.  Many people who go into nursing homes don't last that long.

My plan is to reduce my withdrawal rate below what historical simulations say I could withdraw, and let the buffer compound over time.  By the time I reach my normal life expectancy, I should have multiple hundreds of thousands left over as insurance against longevity and/or long term care.  Or if I don't need it, it passes to my heirs.

Not sure I would really call this self-insurance, as the plan definitely has risks.  The biggest risk is if something happens years or decades before I or my wife reach normal life expectancy and we have to shell out for nursing home care before the excess money has had time to compound.  That could leave the healthy spouse drained of assets with decades of life left to go.  If that happens, the healthy spouse could sell the house and live a meager SS-funded existence.  Not ideal, but doable.

Sibley

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Re: Long Term Care Insurance
« Reply #2 on: November 28, 2019, 08:39:29 AM »
I would be concerned about the future availability. LTC insurance hasn't been around that long (as compared to life insurance for example), and it's already had some pretty severe pull backs in the benefits. That tells me that the insurance companies offering it got burned by higher costs than they predicted, and given the overall nature of LTC that could happen again.

Cranky

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Re: Long Term Care Insurance
« Reply #3 on: November 28, 2019, 09:03:48 AM »
My parents bought a LTC policy in ... the 80s maybe? And it did ultimately payout for my mom.

Prices have gone up very, very substantially since then, and benefits are limited. It really is designed more for dementia care than it is for being paralyzed for 25 years, though.

What it *can* do is cover enough of the costs of care at the end of life that the surviving spouse doesnít lose all their assets, which is the real risk IMO.

I donít know what being vegan has to do with anything.

Beach_Stache

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Re: Long Term Care Insurance
« Reply #4 on: November 28, 2019, 09:17:11 AM »
Vegan = just being pretty healthy eating overall, reduced heart/blood pressure related diseases.

Bucs4Ever

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Re: Long Term Care Insurance
« Reply #5 on: November 29, 2019, 12:40:49 PM »
I chose not to purchase it.  O.k., I guess technically I'm young enough that I could change my mind and purchase it if I wanted to, but I doubt that I will.

It's been a while since I looked into it, but a couple of things turned me off.  I didn't see any options that offered level premiums.  So the premiums could keep going up and up without limit as you get older.  Also, the policies had 90 day waiting periods before the benefits kicked in.  So you would be on the hook for three months of nursing home expenses before the policy paid anything.  Many people who go into nursing homes don't last that long.

My plan is to reduce my withdrawal rate below what historical simulations say I could withdraw, and let the buffer compound over time.  By the time I reach my normal life expectancy, I should have multiple hundreds of thousands left over as insurance against longevity and/or long term care.  Or if I don't need it, it passes to my heirs.

Not sure I would really call this self-insurance, as the plan definitely has risks.  The biggest risk is if something happens years or decades before I or my wife reach normal life expectancy and we have to shell out for nursing home care before the excess money has had time to compound.  That could leave the healthy spouse drained of assets with decades of life left to go.  If that happens, the healthy spouse could sell the house and live a meager SS-funded existence.  Not ideal, but doable.

Instead of reducing your withdrawal rate for living expenses, why not take a portion of your withdrawal rate and buy a decent long-term care policy?

stoaX

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Re: Long Term Care Insurance
« Reply #6 on: November 29, 2019, 01:30:26 PM »
Posting to follow.  I will be considering whether to purchase LTC in the near future.  I'm leaning against it but I know I need to do more research before deciding one way or the other. 

Clark Howard's website has a lot of good, basic information on the product.

Monkey Uncle

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Re: Long Term Care Insurance
« Reply #7 on: November 29, 2019, 06:03:15 PM »
I chose not to purchase it.  O.k., I guess technically I'm young enough that I could change my mind and purchase it if I wanted to, but I doubt that I will.

It's been a while since I looked into it, but a couple of things turned me off.  I didn't see any options that offered level premiums.  So the premiums could keep going up and up without limit as you get older.  Also, the policies had 90 day waiting periods before the benefits kicked in.  So you would be on the hook for three months of nursing home expenses before the policy paid anything.  Many people who go into nursing homes don't last that long.

My plan is to reduce my withdrawal rate below what historical simulations say I could withdraw, and let the buffer compound over time.  By the time I reach my normal life expectancy, I should have multiple hundreds of thousands left over as insurance against longevity and/or long term care.  Or if I don't need it, it passes to my heirs.

Not sure I would really call this self-insurance, as the plan definitely has risks.  The biggest risk is if something happens years or decades before I or my wife reach normal life expectancy and we have to shell out for nursing home care before the excess money has had time to compound.  That could leave the healthy spouse drained of assets with decades of life left to go.  If that happens, the healthy spouse could sell the house and live a meager SS-funded existence.  Not ideal, but doable.

Instead of reducing your withdrawal rate for living expenses, why not take a portion of your withdrawal rate and buy a decent long-term care policy?

Because the premiums I would pay would be gone forever.  If I end up not needing the money I saved by reducing my withdrawal rate, that money is available to my heirs, or for other uses.

frozen

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Re: Long Term Care Insurance
« Reply #8 on: December 01, 2019, 01:50:51 PM »
Iíd like to share something that happened this year with my 76-year old momís LTC policy, which she has been paying premiums on for at least 15 years. Iím sharing this as a datapoint so people have an example of what can happen years down the line after the initial purchase.

She has a policy from CNA with lifetime coverage and an inflation protection rider. In August, CNA notified her that for 2020, her annual premium would increase by 34% to over $10K! They gave some options to lower it, by decreasing some of the coverage options, but we didnít like any of those options. Although we realize that at some point we may need to consider reducing coverage for lower premiums.

I started some research and learned that CNA no longer sells LTC! I also learned that few to no companies offer lifetime coverage anymore (which is what she has).

So you might think you are buying best in class LTC at a young age to keep the premium low, and then in 15 years when you are closer to actually needing it, you may find your insurer raises the price to make it unaffordable.

stoaX

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Re: Long Term Care Insurance
« Reply #9 on: December 02, 2019, 03:01:52 PM »
Iíd like to share something that happened this year with my 76-year old momís LTC policy, which she has been paying premiums on for at least 15 years. Iím sharing this as a datapoint so people have an example of what can happen years down the line after the initial purchase.

She has a policy from CNA with lifetime coverage and an inflation protection rider. In August, CNA notified her that for 2020, her annual premium would increase by 34% to over $10K! They gave some options to lower it, by decreasing some of the coverage options, but we didnít like any of those options. Although we realize that at some point we may need to consider reducing coverage for lower premiums.

I started some research and learned that CNA no longer sells LTC! I also learned that few to no companies offer lifetime coverage anymore (which is what she has).

So you might think you are buying best in class LTC at a young age to keep the premium low, and then in 15 years when you are closer to actually needing it, you may find your insurer raises the price to make it unaffordable.

Good point - I have a similar story.  My mother paid LTC premiums for several years to Penn Treaty only to have that company go out of the LTC business. By the time that happened my mother was uninsurable.  So it was a waste of money.