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Old 11-21-2009, 04:50 PM   #101
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I think the requirement for whole life is less than the 1 million on each spouse after you take into consideration, future value of pensions, social security, and the whole life policies purchased, not to mention any savings that could be tapped. Rather than purchasing the $150 or $200 dollar a day coverage LTC with inflation adjustement, that may be realistically needed to cover LTC costs in the future, whole life policies along with other sources of income can be a way of reducing the necessary amount of LTC coverage. Many people (including myself) balk at LTCI because of the cost and the very real possibility that it may never be needed. In my case, If a reduced amount of LTCI can cover a potential "gap" in my ability to self insure, then it may very well be worth it.
Why is that a concern, at all? Insurance underwriting is predicated, among other things, on the very real possibility that many will never really put in claims for coverage, and the insured is always at risk that the policy may never be needed! LTCi cost is another thing, all together. The way I look at things, my cost for Term Insurance plus LTCi coverage might be cheaper than the cost for whole life insurance plus whatever cost one might have for disability insurance coverage, if you're still employed like me and use that as part of your support base for disabling events. And I might not have to touch any other assets.

I can self-insure, myself, but I think it's cheaper for me to purchase LTCi now as LTCi also covers me for a major disabling accident or event between now and retirement, and I do want to leave something left over in my estate.
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Old 11-21-2009, 10:47 PM   #102
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Originally Posted by jimnjana View Post
I think the requirement for whole life is less than the 1 million on each spouse after you take into consideration, future value of pensions, social security, and the whole life policies purchased, not to mention any savings that could be tapped. Rather than purchasing the $150 or $200 dollar a day coverage LTC with inflation adjustment, that may be realistically needed to cover LTC costs in the future, whole life policies along with other sources of income can be a way of reducing the necessary amount of LTC coverage. Many people (including myself) balk at LTCI because of the cost and the very real possibility that it may never be needed. In my case, If a reduced amount of LTCI can cover a potential "gap" in my ability to self insure, then it may very well be worth it.
This pretty much sums up my thoughts when I floated the whole life question above after reading Audrey's assessment. Thinking about partially self-funding LTC and replenishing the kitty for subsequent survivability of portfolio for spouse added a new layer of utility to my existing whole life policy.

It is indeed a numbers game, and without laying out any larger picture, a couple of relevant numbers in my case are:

Existing $350K whole life policy that cost about $1200 this year (net of policy dividends), with net premiums scheduled to decrease about $100+ per year until zero in about 10 years at age 63, after which policy will begin paying some very marginal income from returned dividends. The $350K benefit is not inflation adjusted.

Cost for me to enroll now at similar benefit levels for newly offered group LTC coverage via employer would be 1) $1560/year for 150/day, inflation adjusted coverage, with 5 year maximum (or $273750 in today's dollars) or, $1934.40 for $200/day, inflation adjusted, 5 year max = $365K benefit.

So, I'm now looking at my whole life policy in a somewhat different light.
There's an additional layer of value (equivalent to $1500-2000/year LTCi premium) that I hadn't really considered before.

Certainly everyone's situation is different. Perhaps my employer's plan is not the most competitive. But, I will be bypassing LTCi for this round and I think it makes sense to think of it this way (i.e. that the existing whole life policy lessens my need for LTCi at this point).

Spouse is another story.
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Old 11-21-2009, 11:51 PM   #103
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A health insurance company can only charge individual policyholders the same premium that they charge all other individual policyholders in their demographic group. Contrary to popular belief and what the liberal media would like you to believe, they cannot single out an individual and raise their rates for developing a medical condition. Unhealthy people pay the exact same rate as healthy people if they bought the policy while they were healthy. The same applies to long term care insurance. That is why I say it is best to buy the coverage while healthy if you are going to do it eventually. The cost to buy it after you become unhealthy is much, much higher. You then pay that higher cost year after year after year. Makes a big difference.
This is not true in all states though I do believe that it is true in most states, it is a matter of state regulation as to whether claims experience can cause rates to rise.

However, one strategy insurers do use is to discontinue a plan if the people in that plan are becoming expensive. It may offer a new plan at the same rates to those who are healthy in the group, but not offer any plan or only an expensive plan to the less healthy. So, buying it early while you are healthy may not protect you in all instances.
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Old 11-22-2009, 12:04 AM   #104
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I think the requirement for whole life is less than the 1 million on each spouse after you take into consideration, future value of pensions, social security, and the whole life policies purchased, not to mention any savings that could be tapped. Rather than purchasing the $150 or $200 dollar a day coverage LTC with inflation adjustement, that may be realistically needed to cover LTC costs in the future, whole life policies along with other sources of income can be a way of reducing the necessary amount of LTC coverage. Many people (including myself) balk at LTCI because of the cost and the very real possibility that it may never be needed. In my case, If a reduced amount of LTCI can cover a potential "gap" in my ability to self insure, then it may very well be worth it.
When you are taking into consideration the future costs of LTC, $1 million is a pretty conservative amount to be insured for. Dividends for whole life are NOT guaranteed. At the price a 45 or 50 year old would pay for that much whole life coverage, why not just buy the LTC policy and use the rest for something else? Even $500k at age 50 would be approximately $10,000 in premium per year.....for one person. Two spouses would be $20,000 per year.
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Old 11-22-2009, 10:47 AM   #105
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However, one strategy insurers do use is to discontinue a plan if the people in that plan are becoming expensive. It may offer a new plan at the same rates to those who are healthy in the group, but not offer any plan or only an expensive plan to the less healthy. So, buying it early while you are healthy may not protect you in all instances.
Yeah. They are in business to make money, not lose money.
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Old 11-22-2009, 12:17 PM   #106
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Those still considering buying LTCI should also check out the angle of going with a long exclusion period (i.e. waiting period). This is supposed to be insurance, after all, and if you can self-fund the first chunk of expenses and buy only as much daily coverage as you'd really need, the premiums can be reduced somewhat.

Example: For DW and I, we could buy 3 year coverage on each of us (with shared benefits, so either one can use the benefits of the other=6 years of benefits for the "first to go"), $150/day, inflation at CPI compounded, with a 90 exclusion period for a total annual premium of $2246 ($187/month)

If I went with the same coverage period and daily benefit but increase the waiting period to 360 days, the annual premium would be $1540 ($128/month). That's nearly $60/month less expensive=30%.

The "bare bones" method would be to go with just 2 years of coverage each (=4 years for "first to go"), self insure for one year. At that point the 5 year Medicaid lookback would be satisfied, the assets of the "outside the wire" spouse would be protected, and the unlucky "first to go" would receive Medicaid benefits for NH care. While I can't compute the costs for this coverage with the info I've got, I don't think it would save much in premiums. As you decrease the length of the coverage periods the cost of the "shared benefit" rider increases somewhat (since it's more likely to be used).

Again, we're not worried about covering the second spouse to go to the "home," as a monthly pension +SS benefits + accelerated drawdown of portfolio + $$ from the sale of the home if necessary should cover a lot of care.
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Old 11-22-2009, 11:26 PM   #107
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However, one strategy insurers do use is to discontinue a plan if the people in that plan are becoming expensive. It may offer a new plan at the same rates to those who are healthy in the group, but not offer any plan or only an expensive plan to the less healthy. So, buying it early while you are healthy may not protect you in all instances.
I have read about health insurers having something called a "book" of policy holders and that at some point they close it. Then, as the policy holders in the group, age, die off, drop out, you end up with the smaller group of not so healthy people and they raise the rates for just that group. I know for sure that cannot be done with the federal LTC and I am pretty sure it also can't be done with private policies - it's raises for either all or none.
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Old 11-22-2009, 11:36 PM   #108
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Those still considering buying LTCI should also check out the angle of going with a long exclusion period (i.e. waiting period). This is supposed to be insurance, after all, and if you can self-fund the first chunk of expenses and buy only as much daily coverage as you'd really need, the premiums can be reduced somewhat.
Excellent point samclem. In fact, I was just going to post a question concerning the concept of buying LTCI with a long exclusion period when I read you post. Your point that "this is supposed to be insurance" is right on.

DW and I want insurance for what would be for us a LTC catastrophy. We're not looking for day one coverage that picks up every penny of expense. We're comfortable self-insuring for 5 years (combined for both of us) but would like protection to keep our estate from declining to zero if one or both of us needs LTC for many years.

Statistically I understand it's unlikely we'll need more than 5 years combined coverage, but in the event we wind up consuming 10 - 15 - 20 combined years, we'd like coverage for that. A 3, 4, or 5 year exclusion period would be OK, especially if that makes it very affordable.

Does anyone know if long exclusion period followed by many years of coverage is available? That is, "catastrophic coverage." Or, any suggestions on how to spec coverage to keep premiums low yet provide protection against losing your whole portfolio if one or both of you spend many years needing care?
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Old 11-23-2009, 06:53 AM   #109
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Why is that a concern, at all? Insurance underwriting is predicated, among other things, on the very real possibility that many will never really put in claims for coverage, and the insured is always at risk that the policy may never be needed! LTCi cost is another thing, all together. The way I look at things, my cost for Term Insurance plus LTCi coverage might be cheaper than the cost for whole life insurance plus whatever cost one might have for disability insurance coverage, if you're still employed like me and use that as part of your support base for disabling events. And I might not have to touch any other assets.

I can self-insure, myself, but I think it's cheaper for me to purchase LTCi now as LTCi also covers me for a major disabling accident or event between now and retirement, and I do want to leave something left over in my estate.

My wife has already been turned down for LTCI by the Fed Program. Based on my preexisting conditions, I don't think I have much of a chance for insurance either. But, we plan on applying for LTCI, just haven't decided on amount and when. My posts have been trying to explain that we do not need "Full" LTCI coverage. One of the reasons why is the role I think our whole life insurance policies can play.
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Old 11-23-2009, 07:39 AM   #110
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Seems to me that most preexisting conditions should be welcomed by LTCI companies. Likewise smoking, heavy drinking, driving fast, etc. Tendencies that would turn the insured into people who probably wouldn't spend a lot of time in a facility. The same tendencies that would make you a poor risk for Life Insurance.
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Old 12-07-2009, 12:33 PM   #111
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I'm late to this thread because up until yesterday this type of insurance was not at the top of my list of concerns.

Yesterday, DH brings home an offer from employer (through UNUM) of LTC insurance, which must be decided upon this week ("before the rates go up"). This has caused a flurry of concern where there once was none. Meh.

After reading this very useful thread I've come up with a (perhaps completely hairbrained) thought regarding myself and DH:

IF Medicaid covers each of us once our funds are depleted,

and IF we don't want to leave any money for heirs / children ('cause we ain't got none),

and IF each spouse is exposed to financial catastrophy if the other goes into care,

and IF we're most likely to need this in our 80s -- a long time from now,

and finally, IF we just got married recently (in our 50s) and keep our money mostly seperately anyway,

THEN... mightn't the best idea be to divorce and live in sin for the next 30 years? That way, if one is incapacitated and the other still whole and able to function, visit the other, take him/her out for trips, whatever, both would be better off.

I understand that this is heretical in some places and I appreciate that, but the largest fear, by far, seems to be what the need for LTC will do to the spousal unit, vs being out on the street, in a depressing home, etc. etc.

An alternative thought was to plan to move to Mexico, Thailand, etc. in an emergency, where care is so much less expensive. Not something I'd want to do now, but if one is in a nursing home does it matter WHERE that home is?

I'm trying to change the discussion with DH from simply "should we or shouldn't we?" to "what ELSE might we do instead?
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Old 12-07-2009, 12:44 PM   #112
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THEN... mightn't the best idea be to divorce and live in sin for the next 30 years? That way, if one is incapacitated and the other still whole and able to function, visit the other, take him/her out for trips, whatever, both would be better off.
Funny you should mention the idea of "strategic divorce". I've never thought of it in the context of LTC. However, I have joked with my wife if the Government means tests SS, we should get divorced and one spouse gets all the assets and the other collects SS! Full disclosure: she looks at me like I'm a little nuts when I suggest it.

As to your question, I would not want to rely on Medicaid for LTC and the facilities/care it would most likely mean. To my mind, LTC insurance is money well spent IF you cannot self insure.
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Old 12-07-2009, 12:54 PM   #113
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Interesting idea! I wouldn't think of that as a reason to divorce or to remain single, though. There are so many other issues and reasons for one's choices that are involved in a decision like that.
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Old 12-07-2009, 01:07 PM   #114
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Interesting idea! I wouldn't think of that as a reason to divorce or to remain single, though. There are so many other issues and reasons for one's choices that are involved in a decision like that.
You can be honest... the idea is a bit "out there"!
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Old 12-07-2009, 01:08 PM   #115
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You can be honest... the idea is a bit "out there"!
Hey, that would describe many of the posts on this board, including my own. We are an intelligent and highly creative bunch, here.
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Old 12-07-2009, 01:13 PM   #116
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THEN... mightn't the best idea be to divorce and live in sin for the next 30 years?

An alternative thought was to plan to move to Mexico, Thailand, etc.
Another alternative is for you to divorce and for him to move to Mexico, Thailand, etc.

Hey, just trying to be creative...
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Old 12-07-2009, 01:20 PM   #117
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Hey, that would describe many of the posts on this board, including my own. We are an intelligent and highly creative bunch, here.
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Another alternative is for you to divorce and for him to move to Mexico, Thailand, etc.

Hey, just trying to be creative...
That's creative, all right.... I'll leave it at that!
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Old 12-07-2009, 01:30 PM   #118
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In many states, Medicaid coverage requires a 5-year look-back, so be sure you divorce and get debilitated at least 5 years apart.

I can vouch for the lack of amenities in Medicaid-predominant nursing home, though many are otherwise quite acceptable if spartan.

I'll let the lawyer types advise of whether this could be considered a fraudulent act intended to spoof the Medicaid system.

But thanks for sharing that romantic fantasy .
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Old 12-07-2009, 02:18 PM   #119
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As creative and as "out there" as the idea of a "strategic divorce" may be, it was presented in none other than the New York Times a while back, which is where I got the idea:

http://www.nytimes.com/2009/08/30/op...30kristof.html

I take no position on the socio-economic or interpersonal issues as a whole -- just wondering what the smart thing is for myself and DH in this environment. I know of people who've gotten married because one was unable to get healthcare... this is simply the alternative.

Romantic? No Rich, it's not -- it's unbearably sad if you think about it. But how much sadder would I be to have DH eating catfood in his 80s because I became ill and drew down every dollar we'd spent our two lives earning? Or if we spent thousands of dollars on a LTC policy that might not pay when the time came, even if it was still in business?

Dang, I wish I made the rules...
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Old 12-07-2009, 02:31 PM   #120
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Caroline,

As you know, only hindsight will be twenty-twenty on this kind of decision. I think the best you can do is determine the impact of LTC insurance on your expense/income and decide if you can live with the results: if so, purchase insurance. If outlays place a real strain on your day-to-day lifestyle then I would probably roll the dice and hope for the best. But that's just me...
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