How much do you need in Net Worth to not need Long Term Care Insurance…

[Alan]

$400k/year for long term care has to be a scare tactic insurance salesmen use to sell LTC policies.

This link gives a much more accurate estimate by state of the cost of care.

Here in Baton Rouge a very good friend's mother had a stroke and needed to go into a well respected assisted living home, costing $35k/year.

 

[dgoldenz]

$400k/year for long term care has to be a scare tactic insurance salesmen use to sell LTC policies.

This link gives a much more accurate estimate by state of the cost of care.

Here in Baton Rouge a very good friend's mother had a stroke and needed to go into a well respected assisted living home, costing $35k/year.

It's not a scare tactic - I'm not here to sell someone a LTC policy, just relaying my opinion. I even mentioned right after that that I usually hear the numbers $60-120k per year from most people. A policy with an unlimited benefit would be incredibly expensive.

What kind of crazy gold plated policy would pay this kind of benefit? It must have a princely premium. Probably enough to pay a reasonable care facility for many years.

I am very interested in the analysis that could help me decide if I need that kind of insurance or not.

It is an extreme and probably in the 99.99th percentile of what people pay. You won't find a policy with a $35k per month benefit, it would have to be unlimited at that point, and you might as well chop off your arm and a leg to get that. Most people choose a $3000, 4500, or 6000 per month benefit with the COLA rider.

So, when the LTCI companies are training their salespeople, how do they suggest that they sell this rider? I mean, I understand the importance of extracting every nickel from the client, but how do you simultaneously convince them of the need to pay extra to get the premiums "stabilized" after one spouse dies without bringing "undue attention" to the fact that these same rates can be jacked up repeatedly in the decades before the first spouse dies? Seems that bringing this whole "escalating premiums" issue to the table might just convince the prospective customers not to buy LTCI at all.

LTCI is a product not ready for prime time. People want their premiums to stay the same if they buy the inflation coverage. The insurance companies (the ones with the big ad budgets and skyscrapers) are supposed to be in the business of assessing and spreading risks--that's exactly what people are paying for when they buy insurance. Customers shouldn't get a premium hike when the insurance companies guess wrong concerning the cost of care--we sure don't get a rebate on our life insurance if they "guess wrong" and we live longer than the model called for.

I understand from your other posts that you're not very fond of insurance agents. To answer your question, the cost is $0 with Genworth, it's a part of the policy. Other LTC companies do not even offer this benefit, which is why I said it's important to find a company that does. LTC is like medical insurance - the premiums are never guaranteed because the only limit to what a company can pay out is the lifetime maximum benefit. A life insurance company knows that the maximum it can pay out is the amount of the coverage. You're either dead or you're not dead, there is no in-between. A disability policy pays a fixed amount per month that is determined at the beginning of the contract. A LTC policy has an ever-increasing benefit. Going by your logic, health insurance premiums should also stay exactly the same forever. That would be working out really well for the insurance companies right now if the premiums today were the same as they were 20 years ago just because the companies "guessed wrong" on the cost of care.

If there was a LTC company selling a policy with premiums guaranteed for life, it would be incredibly expensive. In 30+ years of selling long term care insurance, John Hancock and Genworth (two of the biggest LTC companies) have only had one rate increase (~12%) on existing policy holders for about half of their block of business. The mutual companies (Northwest Mutual, Mass Mutual, etc) are much newer to long term care and boast about their strong financials, but generally cost 40-90% more per year than the same exact policy from Genworth or John Hancock. Essentially, a rate increase is already built into the policy, and they can still increase the premiums anyway.

Any agent worth a salt will bring to their client's attention that premiums can increase on long term care policies. Every single LTC application has a signature page that clearly states premiums are not guaranteed and can be increased at any time. It is against the best interest of the company to raise premiums on their policyholders or they risk a loss of new and existing business.

 

[LARS]

dgoldenz,

What do you think is the sweet spot in terms of age to purchase a ltc policy? Purchase early you pay premiums for a long time; wait too long and the premiums are too high or the policy isn't even available.

Curious your thoughts.

 

[dgoldenz]

dgoldenz,

What do you think is the sweet spot in terms of age to purchase a ltc policy? Purchase early you pay premiums for a long time; wait too long and the premiums are too high or the policy isn't even available.

Curious your thoughts.

I would say purchase it while you are healthy. Far too many people put off buying insurance, whether it be life/health/LTC/disability and then start having health problems they never had before, which only complicates the process. As you mentioned, it may not be available later if you are very unhealthy (ex: heart attack). We had somebody last week that we did a LTC polilcy on who we had talked to last year about it and they put it off. They were diagnosed with diabetes a few months ago and are now ready to purchase the policy, but it will be much more expensive because of the condition. Can't tell you how often that happens with life insurance....

 

[youbet]

So what might the premium be for a policy that would pay up to $400k/yr and have the attributes you mention for a 60 yr old couple in fair health?

 

[dgoldenz]

So what might the premium be for a policy that would pay up to $400k/yr and have the attributes you mention for a 60 yr old couple in fair health?

I don't think any carriers write unlimited daily/monthly benefits on individual policies, though you can get an unlimited benefit period (vs. a 3-year, 5-year, etc). I am not familiar with the group LTC market. Even if they did, you wouldn't want to write the check. A "cadillac" LTC policy with the best benefits available would run $10-12k per year from Genworth or John Hancock for someone early 60's in decent health. A more realistic quote for your average policy would be $3-6k per year depending on benefits and health.

 

[traineeinvestor]

US$400,000 pa!! For that kind of money, I could keep two aged parents in their own home with 24 hour nursing/helper care and have significant change left over (at least in Hong Kong I could).

Was there specialised medical care needed over and above what most people need?

 

[dgoldenz]

US$400,000 pa!! For that kind of money, I could keep two aged parents in their own home with 24 hour nursing/helper care and have significant change left over (at least in Hong Kong I could).

Was there specialised medical care needed over and above what most people need?

I would imagine the level of care was pretty intense for that kind of money, and probably in a "best of the best" facility too. I don't know where the $400k number came from, but she said over the course of two years she had spent $800k of her own money on care for her mother, who was about 85 years old.

 

[beowulf]

Federal employees who purchased LTC incurance through the government received a nasty surprise this year - when the contract was recompeted, the new carrier boosted premiums for most policy holders 20 to 25%. This program was sold to employees with an implied promise that premiums would never increase - thus the anger.

We did not go that route - at 55, and in excellent health at the time, we went the private route and bought 6 years of coverage for each of us with inflation protection and several other riders for about $2,600 annually for both of us (total amount). A friend who was 62 at the time and not in great health bought at the same time, same coverage and paid $6K a year just for himself. We were told very bluntly that premiums could increase.

Our decision was based on the desire to not be a burden on our kids and leave them some decent inheritance (ie - not run out of money on the day we die ). Also, home care is a very important feature we wanted. In my case, it's probably wasted money as the men in my family seem to have an expiration date of 70 stamped on their foreheads. My wife, however, comes from a line of very long lived women - one aunt just died at 92, another is in a nursing home at 96 and has been there for 5 years. Plus, as someone else mentioned, one bad fall on the ice or some other injury could incapacitate you well before your dotage.

Some of our friends think we are nuts for getting it, others have followed the same route. I look at it like any other insurance. We pay about $1,200 a year for car insurance and another $600 for homeowners - and have never put in a claim in 40 years (yes, we have had car accidnets, but they were always the other person's fault ). Lucky?? Yeah, probably, but the potential cost of going naked (even if we could get away with it) could destroy us with one accident or fire.

If we croak without ever having to had to use LTC, I would still consider it worthwhile coverage. If we were worth $5 or 10M, maybe not, but that's not the situation.

BTW, I have no association with the insurance industry other than to pay them premiums .

 

[misanman]

Life Insurance with LTC Feature

A friend of mine (retired insurance guy) recommended that we consider a life insurance policy that has a LTC feature, rather than a regular LTC policy. He suggested two companies that offer these, but I have not checked them out. My understanding is that you can use the insurance value to pay for LTC, or, if LTC is not required, the payout is upon death.

Has anyone looked into this approach?

Advantage would be that there should always be a payout, either to heirs upon death or to pay for long term care.

 

[bizlady]

What (if any) assets are protected from LTC?

Interesting and scary discussion.

For a married couple, if one needs LTC for a number of years, I know the house is protected, but what about other assets such as IRA or 401k held by the spouse not needing the care? Could one spouse with high LTC expenses wipe out the other so to speak??

 

[rescueme]

When we were formulating our documents with our elder law attorney last year, this was a point of discussion.

While he would not say if we should get LTC, he did offer that with his large base of elderly folks, a residual estate value of $2-3M would cover most - if not all situations that he had seen over the years.

I'm not saying if his suggestion is correct (in all occurances), but based upon his experience and history in other folk's situation, we followed his guidence (hey, we were paying for it, anyway )...

 

[dgoldenz]

A friend of mine (retired insurance guy) recommended that we consider a life insurance policy that has a LTC feature, rather than a regular LTC policy. He suggested two companies that offer these, but I have not checked them out. My understanding is that you can use the insurance value to pay for LTC, or, if LTC is not required, the payout is upon death.

Has anyone looked into this approach?

Advantage would be that there should always be a payout, either to heirs upon death or to pay for long term care.

The problem with this approach is since you don't know how long you'll live, you would have to buy a permanent policy guaranteed for life with a very large face amount.....I would say $750k-1 million at a minimum, and more realistically, $1.5-3 million because of the increase in cost of LTC as time goes on. LTC riders do not necessarily let you take out the entire value of the life insurance to pay for the LTC. It may be capped at a percentage of the death benefit, such as 25%, 50%, etc. and could be based off a daily or monthly maximum benefit as well. A policy of that size guaranteed forever could be incredibly expensive and cost much more than an LTC policy depending on your age and health. As an example, a 60 year old male buying a $1 million policy guaranteed for life in "standard" (normal life expectancy) health would pay around $18,000-20,000 per year for the life insurance. Any use of the LTC rider just reduces the death benefit by that amount.

 

[dgoldenz]

Interesting and scary discussion.

For a married couple, if one needs LTC for a number of years, I know the house is protected, but what about other assets such as IRA or 401k held by the spouse not needing the care? Could one spouse with high LTC expenses wipe out the other so to speak??

State laws vary, but yes, you could wipe out the assets of the couple and leave the surviving spouse with little money if you had some major LTC expenses and did not have a lot of assets. Every state has different "spousal impoverishment" laws as to what the spouse can keep before getting Medicaid benefits to pay for the LTC. Long term care insurance now has what is called a partnership program in many states where instead of having to spend down all of your assets to qualify for Medicaid-paid LTC, you are now allowed to shield a portion of the assets based on the LTC insurance policy you buy if you exhaust the benefits of the LTC policy. This is an easier way of shielding assets than hiring an elder law attorney to find loopholes for asset-shielding before Medicaid kicks in and puts less burden on the states because instead of having to pay everyone's LTC expenses on Medicaid, more people may be willing to invest in a LTC insurance policy instead.

 

[Alan]

dgoldenz,

What do you think is the sweet spot in terms of age to purchase a ltc policy? Purchase early you pay premiums for a long time; wait too long and the premiums are too high or the policy isn't even available.

Curious your thoughts.

What I would be concerned about is that the premiums go up when you develop conditions that make you more likely to need LTC. The Health Insurance companies certainly do this, so the sick pay a whole lot more in premiums than the healthy.

If you paid for LTC insurance from age 55 to 65 and then developed diabetes or some other chronic illness, what is there to stop the insurance company from charging you the same rate as a 65 year old with diabetes starting LTC insurance for the first time?

 

[dgoldenz]

What I would be concerned about is that the premiums go up when you develop conditions that make you more likely to need LTC. The Health Insurance companies certainly do this, so the sick pay a whole lot more in premiums than the healthy.

If you paid for LTC insurance from age 55 to 65 and then developed diabetes or some other chronic illness, what is there to stop the insurance company from charging you the same rate as a 65 year old with diabetes starting LTC insurance for the first time?

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.

 

[Alan]

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.

I disagree.

I personally know 2 people where this happened after a heart attack and after lower back surgery. Both men in their 50's with individual policies and both saw their policies ramped up to the point they had to go uninsured.

I also heard a small business owner being interviewed where his insurance premiums for his employees dropped dramatically when an older employee with lots of health problems retired. He said he then essentially broke the law when interviewing new candidates by considering young healthy folks.

 

[dgoldenz]

I disagree.

I personally know 2 people where this happened after a heart attack and after lower back surgery. Both men in their 50's with individual policies and both saw their policies ramped up to the point they had to go uninsured.

I also heard a small business owner being interviewed where his insurance premiums for his employees dropped dramatically when an older employee with lots of health problems retired. He said he then essentially broke the law when interviewing new candidates by considering young healthy folks.

You are leaving out a few things:

-The heart attack and lower back surgery has nothing to do with their premium increases. The premiums were ramped up because everyone in their demographic block of business had a rate increase. The people you know cannot have their premiums increased 50%, 100%, 200%, 400%, etc without all policyholders having their policies increased by the same amount. This is the law, there is no getting around it.

-Small group insurance is a different market than individual health. Part of the problem with small group health insurance is that the premiums are in fact tied directly to the average age, health, and claims experience of ONLY that group. A 15-person group of 25 year old employees would pay a lot less than a 15-person group of 60 year old employees who have all had heart attacks. In the small group market, carriers are free to jack up rates as high as necessary based on claims experience. This is why the Republicans have proposed to allow small businesses to create/join associations that can provide a group health policy for everyone that is a member, rather than continuing this practice.

This is getting a little off topic from the OP though, so I'll just leave the health insurance stuff alone at that. There's a thread in another section where that can be addressed in further detail.

 

[Alan]

You are leaving out a few things:

-The heart attack and lower back surgery has nothing to do with their premium increases. The premiums were ramped up because everyone in their demographic block of business had a rate increase. The people you know cannot have their premiums increased 50%, 100%, 200%, 400%, etc without all policyholders having their policies increased by the same amount. This is the law, there is no getting around it.

-Small group insurance is a different market than individual health. Part of the problem with small group health insurance is that the premiums are in fact tied directly to the average age, health, and claims experience of ONLY that group. A 15-person group of 25 year old employees would pay a lot less than a 15-person group of 60 year old employees who have all had heart attacks. In the small group market, carriers are free to jack up rates as high as necessary based on claims experience. This is why the Republicans have proposed to allow small businesses to create/join associations that can provide a group health policy for everyone that is a member, rather than continuing this practice.

This is getting a little off topic from the OP though, so I'll just leave the health insurance stuff alone at that. There's a thread in another section where that can be addressed in further detail.

The fact that health insurance rates have sky-rocketed and that the sicker you are the more you pay is why I don't trust the insurance companies from doing the same thing with LTC insurance. When looking into LTC insurance a few years ago I was talking to a friend at work who had bought LTC insurance at age 50 for him and his wife and their premiums were "fixed" for the 1st 10 years. Lo and behold, 4 years later he received a letter telling him that the premiums for him and his wife were being increased by 15% and this was possible because the State law had been changed to allow this.

This was why we decided to self insure but I realize that people who are much older, with no LTC bucket of money invested, are in a much more difficult situation.

 

[dgoldenz]

The fact that health insurance rates have sky-rocketed and that the sicker you are the more you pay is why I don't trust the insurance companies from doing the same thing with LTC insurance. When looking into LTC insurance a few years ago I was talking to a friend at work who had bought LTC insurance at age 50 for him and his wife and their premiums were "fixed" for the 1st 10 years. Lo and behold, 4 years later he received a letter telling him that the premiums for him and his wife were being increased by 15% and this was possible because the State law had been changed to allow this.

This was why we decided to self insure but I realize that people who are much older, with no LTC bucket of money invested, are in a much more difficult situation.

Health insurance, on average, results in frequent claims, so the premiums are frequently adjusted to reflect the increased cost of those claims. There are also a lot more moving parts to health insurance than LTC.

If his premiums were fixed for 10 years, I can guess what company that was with, but I am sure in the application he had to sign a page stating he is aware that the cost of coverage could increase after the guaranteed period. There is nothing wrong with wanting to self-insure if that is your prerogative and everyone is entitled to their own opinion. I'm not here to sell you an LTC policy and convince you as to why you need it....just making comments based on the questions asked so far. Hopefully what I've written so far is helpful in at least getting a better understanding on the things that lie beneath the surface.

 

[Alan]

I'm not here to sell you an LTC policy and convince you as to why you need it....just making comments based on the questions asked so far. Hopefully what I've written so far is helpful in at least getting a better understanding on the things that lie beneath the surface.

Point taken. I just wanted to state my experience and why I made the decision at age 50 to start making my own arrangements. Many people on this forum don't believe SS is going to be there for them when they need it and start to plan for that event. Affordable LTC insurance 10, 20, 30 years from now is in a similar category of uncertainty IMO.

 

[Independent]

Assuming you and DW are in mid-fifties and in good health. How much net worth would you need today to feel comfortable you can self insure Assisted Living/ Nursing Home. The need for assisted living, of course, may or may not happen and could be anywhere from 25 to 35 years from now.

Question is assuming no pension and you are not concerned with leaving an estate. Have my own views, but don’t want to influence others thoughts.

Lots of tangents in this thread, I'm going back to the original post.

Have you thought about running FireCalc?

Use one of the "average cost" links (here's MetLife's http://www.metlife.com/assets/cao/m...arket-survey-nursing-home-assisted-living.pdf) to estimate how much you would want so that you can pay for your own LTC. Put that number in as a lump sum estate target in FireCalc. Fill in all the other info, and run it. If you are happy with the result, you have "enough" to self insure.

If you like, you can then get a couple quotes for LTCi policies that would provide the same amount of money. Then run FireCalc again without the estate target, but with the additional annual spending for the LTCi premium. Compare.

 

[ChrisC]

Federal employees who purchased LTC incurance through the government received a nasty surprise this year - when the contract was recompeted, the new carrier boosted premiums for most policy holders 20 to 25%. This program was sold to employees with an implied promise that premiums would never increase - thus the anger.

I think as Federal employees study the changes in the LTC program they might be as pleasantly surprised as I was when weighing these changes. First of all, there isn't a new carrier for the program; the program was jointly underwritten initially by Metlife and John Hancock; when the 7 year contract was re-competed, John Hancock was the sole insurance company standing. I'm in the age bracket where my premiums could go up 25 percent, which after 7 years of flat line premiums I don't find daunting or draconian. And I never assumed my premiums would never go up with the policy -- although I was under the impression that they would not go up during the contract cycle, which did occur.

With the new contract, I have the option of keeping my current policy coverage with the 25 percent increase in premiums, a policy which has a 5% automatic compund inflation adjustment. I also have three other options, one of which would lower my premiums, increase my coverage for some things like home care, and downgrade my automatic compound inflation protection to 4%. (Since I've had this policy, with the 5% inflation protection, my daily benefit protection and maximum lifetime benefit amount has increased significantly.) I anticipate that we might be in a serious deflationary period for a long time, perhaps like Japan where their Central Bank kept zero rates for nearly a decade, so the 5% inflation protection does not strike me as real appealing these days and improved medical technologies might result in lower medical costs down the road.

Anyway, I'm thinking for now that this is a good policy for us and we intend to keep it.

 

[samclem]

- The two things I like about the Federal LTC program:
-- I think OPM will go to bat for policyholders if the carrier tries to perpetrate an outrage (unwarranted premium increases, reductions in promised benefits, problems with claims, etc)
-- No sales pressure or fees--the info is very clear and on the web site.
- The things I didn't like:
-- No ability to buy shared coverage with DW and I. This type of coverage seems a good way to increase the odds of usingthe coverage we pay for.
-- The rates aren't super for a person in good health.

Other things to consider:
- The possible health care reform abrew in DC could affect this issue, and it might pay to wait to see how things shake out. For example, the House bill includes an optional LTC insurance component.
- Medicaid is an option. Yes, it's not a great option, but it is there. As the law is written now, a couple's assets can be transferred so that an individual qualifies for LTC coverage under Medicaid after the 5 year lookback provision. So, if a couple can pay the bill for private LTC coverage for 5 years, they'd pay no more. No, the care won't be top notch. It will probably be depressing. But the partner on the outside will still have enough assets to maintain an independent life. There was a time when I would have been philosophically opposed to moving assets in this way to qualify for Medicaid, but I'm past that now--if the law is written to allow it, then a couple should do it. The tax rates to support all the present and future government entitlements are going to be staggering. If we don't take legitimate advantage of every one of these programs we can qualify for it isn't "being virtuous," it is "being a chump."

 

[jdw_fire]

Medicaid is an option. Yes, it's not a great option, but it is there. As the law is written now, a couple's assets can be transferred so that an individual qualifies for LTC coverage under Medicaid after the 5 year lookback provision. So, if a couple can pay the bill for private LTC coverage for 5 years, they'd pay no more. No, the care won't be top notch. It will probably be depressing.

my understanding is that alot of places, once you are in, wont kick you out when you run out of money and have to go on medicaid, so maybe the care wont be all that bad after all.