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

[LARS]

dgoldenz,

First, $400,000 pa sounds totally outrageous. We had a 24 hr aid for my dad for awhile (sleep in at the assisted living facility) and it cost us about $5,000 a month. So I can't imagine what $400,000 is paying for other than hospital kinds of stays.

Second, ltc insurance only shifts the risk to the insurer for the amount of coverage obviously. Policies that I looked at a year ago were providing $500,000 to $600,000 of coverage with premiums in the $2,000 to 3,000 range (based on my poor memory).

So in the end my take was that having the ltc would give me comfort in spending down assets if I wanted to, but given NW wasn't necessary as I could easily self insure the amount of coverage being offered.

[W2R]

Quote:

Originally Posted by LARS dgoldenz, First, $400,000 pa sounds totally outrageous. We had a 24 hr aid for my dad for awhile (sleep in at the assisted living facility) and it cost us about $5,000 a month. So I can't imagine what $400,000 is paying for other than hospital kinds of stays. Second, ltc insurance only shifts the risk to the insurer for the amount of coverage obviously. Policies that I looked at a year ago were providing $500,000 to $600,000 of coverage with premiums in the $2,000 to 3,000 range (based on my poor memory). So in the end my take was that having the ltc would give me comfort in spending down assets if I wanted to, but given NW wasn't necessary as I could easily self insure the amount of coverage being offered.

Lars, dgoldenz has said in prior posts that he is a working insurance broker. So it is probably best that we bear that in mind as we read and evaluate his posts. I tend to be skeptical, too.

[dgoldenz]

Quote:

Originally Posted by LARS dgoldenz, First, $400,000 pa sounds totally outrageous. We had a 24 hr aid for my dad for awhile (sleep in at the assisted living facility) and it cost us about $5,000 a month. So I can't imagine what $400,000 is paying for other than hospital kinds of stays. Second, ltc insurance only shifts the risk to the insurer for the amount of coverage obviously. Policies that I looked at a year ago were providing $500,000 to $600,000 of coverage with premiums in the $2,000 to 3,000 range (based on my poor memory). So in the end my take was that having the ltc would give me comfort in spending down assets if I wanted to, but given NW wasn't necessary as I could easily self insure the amount of coverage being offered.

I thought the $400k sounded pretty high too (really, really high), but that is what prompted her to call us and ask about LTC insurance. She didn't want to end up with her kids in the same position. I usually hear the numbers $60-120k per year depending on the quality of the place.

$2000-3000 in premiums seems like a pretty low price for a policy with good benefits if you are in your mid-50's....I would guess somewhere more in the range of $3000-4500 for a good policy. Better benefits obviously have a higher premium (such as a $6000/month benefit instead of $4500). Keep in mind that the $500-600k in benefits you are mentioning will increase substantially over the course of time with a 5% COLA rider. In 25 years, a $6000/month benefit would be over $20,000 per month.

One of things we see today that we didn't see 40 years ago is people living to be 85, 90, 95, 100 years old. As people continue to live longer, they will continue to need longer periods of long term care. Insurance is always a personal choice, but if you have the means to self-insure, I think it is certainly something you would want to strongly consider purchasing. Even if you said the cost was $4000 per year for the coverage and lived for 25 years before using it, you'd have paid $100k into the policy....25 years from now, a single year of long term care needs could easily be $250k. Multiply that by 3 years, 5 years, etc. Sure, you can self-insure if that is what you would like to do and have nobody to leave money behind for (or don't want to leave it to anyone), but couldn't your money be used elsewhere?

[samclem]

Quote:

Originally Posted by dgoldenz . . . 3. Survivorship benefit - If premiums are paid for 10 years (some policies have an option for 7 years) and one spouse dies without any claims being made, the other spouse's policy is completely paid up and they will have coverage for life. This is incredibly important because long term care premiums are never guaranteed - they can increase at any time. With this rider, the cost of premiums could double, triple, quadruple and it would not cost a dime extra after the rider is used.

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.

[growing_older]

Quote:

The client was spending $400k per year of her own money to support the mother and spent down a lot of the assets that she thought she would have for retirement.

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.

[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]

Quote:

Originally Posted by 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.

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.

Quote:

Originally Posted by growing_older 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.

Quote:

Originally Posted by samclem 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]

Quote:

Originally Posted by 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.

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]

Quote:

Originally Posted by 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?

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]

Quote:

Originally Posted by 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?

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]

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]

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]

Quote:

Originally Posted by misanman 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]

Quote:

Originally Posted by bizlady 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]

Quote:

Originally Posted by 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.

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?