LTC Insurance???

[Kansas Beachbum]

I'm interested in hearing everyone's thoughts on Long Term Care insurance.  We are somewhat insurance averse, but thinking this is something we need to do.  We are looking at a policy that would cover both the Mrs. KBB and I in a pooled coverage kind of scenario.  It's also kind of a coinsurance arrangement with us assuming part of the risk ourselves...we should have sufficient resources, and this helps keep premiums lower.  We're looking at ~$2,500 / year in premiums.  Ouch.  But...statistics say the chances of both of us needing care at some point is ~50%, chance of one needing care ~75%.  Of course, the nature and duration of care is unknown, and might not happen at all.  On the other hand, the policy we are looking at covers all manner of care, from in home to assisted living to full on nursing home, so probably a fairly good chance we would use it at some point.  Nursing home care is horrendously expensive...like $50K - $70K per year for full on nursing home...so thinking we need to do this.  But buying insurance is like the least fun thing you can spend that kind of money on (apologies to any insurance brokers in the group).  How I've positioned it in my head currently is, we pay similar amounts for our homeowners insurance and wouldn't dream of not doing that...and there's probably a higher likelihood we'll need the LTC insurance at some point than there is of our house burning down.  Thoughts?

[College Stash]

Keep in mind the avg nursing home stay is less than 2 yrs and that those premiums will continue to get way higher. You will also have SS helping at that point in time and who knows what changes health care might see.

[jda1984]

It depends on how old you are.  If you're 70+, then it looks like it makes sense.  If you're both 25, I'd say wait a while.  $2.5k per year really adds up and can compound like crazy with time.  Plus College Stash makes good points on duration of care and future changes in the health care system/costs.

[Ricksun]

Also pay close attention to the premium language.  Most of the policies being written now do not guarantee the premium to stay the same.  They have language to allow them to change the premium if what they're collecting does not cover the costs of outlays for the "class" of insured in which you qualify.  This is supposedly monitored through the Government, but there are numerous stories out there of premiums doubling and tripling over time.  That's my big beef with LTC insurance...  The insurance companies are essentially taking their profit, and pushing the risk back to the insured...

Rick

[Kansas Beachbum]

If we were in our 70's it would cost many multiples of $2,500 / year.  We're early 50's, excellent health.  Average stay is less than 2 years, but even a one year stay would likely cost $70K or so...as our advisor put it, a one year stay recovers a lifetime of premiums.  You can't insure against everything, but having worked this hard to build up a sizeable stache, I'd hate to see it all go down the drain in the way of long term care costs.  Anyway, first world problems...

Ricksun...the premium on this policy stays level and has an inflation rider, but this is an immature market as insurance products go, with several companies who used to write this kind of coverage falling out of the market, so it's entirely possible I guess that it could be changed at some point, probably need to revisit the fine print.  Thanks for the response.

[bogart]

I can tell you that I'm in my mid-40s and have decided against LTC for now.  I'm a much bigger fan of insurance (generally) than is MMM (perhaps a low bar), but from what I read the LTC insurance industry is not in a good place and likely faces significant instability down the road.  Of course I hope not to need access to benefits for decades (if not eternity), so long story short am not willing to buy in to policies or companies I'm not sure will be there to pay out.

[BCBiker]

$2500 compounded over 30 years at 8% is >$300,000! Don't fall for the salesperson's simple calculation that doesn't factor in compound interest.  I say 30 years because if you are relatively healthy in your 50's (non-obese, non-smoker), you can reasonably expect to live well into your 80's in good health.  To me, LTC insurance is mostly a scam, because if you really don't have any assets left, the state Medicaid will takeover the cost... And you can give assets to your spouse for their continue support.

There are other considerations... What if the premiun is no longer in the budget when you get into your late 70's and you lose all of what you have paid in over the past 20 years. I could go on and on.

On a separate not, I have seen situations in which elderly folks have been forced unneccesarily into LTC by their (less than caring) children with the excuse that they have paid these premiums for so many years.

Here is a great dicussion on the subject that is somewhat physician specific but the numbers for self-insurance may look similar for an average Mustachian: http://whitecoatinvestor.com/long-term-care-insurance/

[bogart]

 if you really don't have any assets left, the state Medicaid will takeover the cost... And you can give assets to your spouse for their continue support.

My dad's in a nursing home at Medicaid expense, and I cannot recommend the (lack of) options it makes available.  He's divorced, thank heavens, but were he not, the "community spouse" (healthy member of the couple) would not be allowed to keep more than $117,240 in assets.  And while she could keep her own income, if she relied on any of his e.g. pension (a non-issue in this case) or 401k payouts -- they would not be available (except whatever was left over after the nursing home premium was paid   -- that's around $6K per month right now, hardly something to sneeze at).

Another non-purchaser of LTC here as I already said, but not because I think Medicaid's anything approximating a reasonable alternative -- especially for a married couple.

[lakemom]

One thing I would HIGHLY recommend while making this decision is to visit several long term care facilities in your area that accept medicaid as payment in full and those that do not.  I'm at an age when many of my friends are struggling with the decision of putting a parent in a facility and the stories I hear are that there is a HUGE difference in quality of care between various facilities and that one that is even half way decent is $6,000 per month and up.   My husbands Aunt spent the last 6 months of her life in a home and it was almost 10k per month then things like haircuts and physical therapy were additional costs.  Its more than just a financial issue, its also a quality of life issue. 

[gillstone]

LTC insurance market may be restructuring in the next couple years.  The original policies pushed a decade ago have been a big cash drain for insurance companies.  They had planned that a section of insured would eventually drop policies without using them (basically free money for the company) and that when used, the beneficiary would only live a short time.

Instead, people held onto them and used LTC for years rather than months.  Whoops

This is a tough question, it depends on your current health and habits, what you can reasonably expect in terms of genetic conditions, and how big your nest egg is. 

If you are in good health, have parents and grandparents who seem(ed) to be invincible well into old-age, and have a good stash you may not need it. 

[NV Teacher]

I bought a LTC policy last year.  It costs me $720 a year.  I watched my uncle decline in health after an accident and eventually need care.  Because they had LTC insurance he was able to be at a nice place for his last year of life.   In contrast my aunt had to go to the local care center that accepted Medicare.  It was terrible.  Truthfully I hope I die before needing any kind of care but just in case I'm glad I have the policy.

[Pennsylvanian]

I have read several threads about this and have never seen anyone mention a 10 pay policy (maybe they aren't offered anymore?). I thought you could still get one from Genworth through AARP. Basically you pay 10 years of premiums and your policy is funded and good for 3 years of care after a 90 day waiting period. It also includes home care. We bought it as a couple so got a 20% discount if I recall, and can use each other's benefits if one doesn't need them. There is also a cash payout option if you get something unquestionably terminal with less than a year diagnosis. And it is severable if we ever split up. Premiums are guaranteed for 5 years and can not exceed a 50% increase for the second 5 years. We pay under $3k per year combined (in first 5 yr premium period).

People think you can just go on Medicaid, but you would have to leave a spouse nearly destitute (117k plus a home, no matter age or health?) and if you don't have some kind of private insurance you can't get into the better facilities. Once you are in, if your benefits and assets run out, they will take Medicaid and keep you there, but they won't admit someone with only Medicaid as payment. I'm willing to gamble that one of us will need care, and I want it to be the best we can plan for now. Also, if you have a LTC policy and your state participates in the LTC insurance partnership, you get to keep the amount that your policy pays in additional protected assets for your spouse. That's a pretty big deal when you add up several potential years of care. Even if only one of us needs care for 4-6 months, the policy will have paid for itself and protected thousands more in assets (PA participates in that partnership).

Count me in.

[Dicey]

The other point I haven't seen mentioned is that LTC does not foot the whole bill and there are very specific poilcy limits. My MIL lives with us. She has Alzheimer's and is excellent health otherwise. Her LTC policy is only good for three years, which is typical. The battle is to keep her here with us as long as we can so her assets are sufficient to last the rest of her life. If we burn through the LTC money now and she lives for ten more years, then what? She is far from penniless, but again, trying to preserve her capital for a probable long haul makes none of these decisions easy or obvious. LTC, should you chose to buy it, is at most only a partial solution. Because of this experience, DH and I are pursuing other investment options, primarily self-insurance. It's all a crapshoot, IMHO.

[Pennsylvanian]

The other point I haven't seen mentioned is that LTC does not foot the whole bill and there are very specific poilcy limits. My MIL lives with us. She has Alzheimer's and is excellent health otherwise. Her LTC policy is only good for three years, which is typical. The battle is to keep her here with us as long as we can so her assets are sufficient to last the rest of her life. If we burn through the LTC money now and she lives for ten more years, then what? She is far from penniless, but again, trying to preserve her capital for a probable long haul makes none of these decisions easy or obvious. LTC, should you chose to buy it, is at most only a partial solution. Because of this experience, DH and I are pursuing other investment options, primarily self-insurance. It's all a crapshoot, IMHO.

You may want to do some research, because once she is admitted to a private facility, if she uses her three years and exhausts her assets, they will likely then take Medicaid for her care. This is not widely known, but the private pay policies are a gateway to better end care overall if you exceed your policy period. PA May be different than other states. Since most LTC facilities operate on Medicare funds ultimately, patients with 3 years of private payment are desirable. Clearly, the ideal is to maintain family support, familiarity and home comfort, but there are limits to what non-professionals can accomplish with home care. I have a family member with dementia, and wish you the best. The next steps I am talking about are ones I have been researching. Laws vary by state, so find out about yours and use all available assistance. It's what we all pay into for our general welfare.

[Dicey]

Thanks, PA, but she has loads of assets. She also has a daughter who is schizophrenic. We are trying to get my MIL through her life without depleting her considerable assets. (She's FI and never worked outside the home, so she didn't exactly Retire Early, but close enough.) We are working on the assumption that we will need some of her estate to look after her daughter, DH's sister. Since we don't know what that will look like, we can't just check her into a swanky joint for the next dozen years without a care for her estate, or there will be nothing left for his sister. As for us, being FI means we don't have to worry about making her money last so we can inherit some, as we've got that covered. All of this underscores my earlier point. It's complicated and there are no easy answers, so good planning is essential. Buying an LTC policy is only a step in the process, it's not a complete answer, nor is it the only way.

[Pennsylvanian]

Clearly there are extenuating circumstances with a multigenerational care situation that isn't addressed. I have a parent with dementia and am researching and working toward a best workable home solution. Life is hard, love and compassion are complicated.

[former player]

Are you really paying $2,500 per annum in home insurance?

I'd look very carefully at the terms.  For instance, you can be old and frail without having any specific illness or disability.  This can mean that in old age you are spending more on cleaning, gardening, handyman help etc. before a policy kicks in.  If that sort of spending is not covered by the policy (eg because it is limited to personal care), you need to make allowances for this extra spend in your budget.  Going by my family, you could have a couple of decades of needing that sort of extra support in old age before any LTC policy would kick in, and then it would kick in for a relatively short period of time.

Also consider that by the time you need the policy, you may not be capable of ensuring that you get what you have paid for, so make sure that you have family, friends or professional advisers who know about the policy and can ensure it pays out on your behalf.