I figured I'd share a brief cautionary tale about long term care insurance (LTCI). To start, my family is well-insured. Maybe its an occupational hazard from having spent my formative professional years as a lawyer. In my mid-30's a nationwide insurance company sold Group LTCI to folks where I was working. For someone who got in early (e.g., mid-30's), the rates were attractive, particularly with a family history of needing long term care. So I decided to make a long-term play using a rough calculation of my premiums over a 50 year period, what I could make in the stock market, and what I guessed was the likelihood of needing long term care. Also, while attractive, the LTCI rates were high enough in comparison to, say, term life, that it at least appeared that the insurance company had worked through the costs and would be viable. The decision was further informed by our knowledge at the time that for those in our parent's generation, LTCI couldn't be purchased for any affordable price. Getting in young was the only way to make it affordable.
So my spouse and I bought in. Not too many years later, the company got out of the LTCI business, stopping selling new group policies. This is a common phenomenon, apparently. What followed was a letter including a material-but-not-shocking premium increase that was explained along the lines of "we need to make sure we can cover all claims on this group policy, and this is the rate we think we'll need to do it." So we swallowed that premium increase and thought nothing more of it, believing that the national insurance company had done its actuarial work and come up with the rate that was going to work. And in a shrinking LTCI market, we had done the smart thing by getting in while there was still getting to be got.
Seven years later, and quite recently, I received notice that our premiums would be going up 134%. This shift fundamentally changes the calculus of risk vs. cost vs. self-insurance. It is also apparent that there is nothing stopping any further premium increases. Spread over maybe 40 more years, its a lot of money. As a consequence, we will be cancelling the policy and self-insuring.
As part of this process, I've left a lot of money (shocking when I added it up) on the table that isn't coming back, as there was little to no risk I would need the LTCI during the relevant ~10 years. But I can't ignore the sunk cost fallacy.
I'm aware that there are those on this forum with strong anti-insurance views. I don't share them. I have health insurance, car insurance, homeowner's insurance, a modest umbrella policy, and will keep term life while I still have kids in the home. But this was a hell of a mistake and I'm hoping that others learn from my error and the money I left on the table. Where I live, and my research indicates lots of places, insurance commissioners will not stand in the way of massive rate increases for LTCI. So if you presently have it, or are considering buying it, please bear in mind my experience. There doesn't appear to be anything that prevents triple-digit group-wide premium increases.
Thanks for letting me vent! I will accept face punches for having gone down this rabbit hole in the first place . . .
