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Interesting twist on LTC coverage
Old 09-28-2015, 09:01 AM   #1
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Interesting twist on LTC coverage

A friend recently e-mailed me with questions about a product offered by his financial advisor. (Insert sound of alarm bells ringing here.)

He's 60, so LTC would be prohibitively expensive now. The advisor said there's a single-payment life insurance policy that also offers partial payouts if you enter LTC- 2% of the face amount of the policy per month. If he pays it by transferring assets from his IRA it's a tax-free rollover. He's overweight and may have other health issues I don't know about so he won't get preferred health insurance rates. I looked up some single-premium rates and estimated that he might be paying about $200K for $1 million coverage. It was an interesting exercise. Here's what I told him:

1. Don't buy more life insurance than you need just to get the LTC rider. He has one daughter who just started college; his wife is also employed, so I think his life insurance needs will decrease with age.

2. Accumulated at 6% over 20 years, that $200K would grow to $642K and it would be available for other things besides LTC.

3. He needs to ask who gets to decide if he needs LTC. I mentioned the unhappy example of financial guru Jim Cramer's legal battle after an unnamed LTC insurer declared that his 90-year old father who'd suffered a debilitating stroke wasn't disabled enough for LTC. Cramer fought them and won but legal bills ate up most of the award.

4. He needs to ask how much his "advisor" is making from this transaction.

Anything I missed? He's meeting with the advisor next week and I suspect it will be a no go. My friend was already uneasy about handing over a big chunk of his invested assets.
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Old 09-28-2015, 09:34 AM   #2
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Old 09-29-2015, 05:07 AM   #3
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Originally Posted by athena53 View Post
A friend recently e-mailed me with questions about a product offered by his financial advisor. (Insert sound of alarm bells ringing here.)

He's 60, so LTC would be prohibitively expensive now. The advisor said there's a single-payment life insurance policy that also offers partial payouts if you enter LTC- 2% of the face amount of the policy per month. If he pays it by transferring assets from his IRA it's a tax-free rollover. He's overweight and may have other health issues I don't know about so he won't get preferred health insurance rates. I looked up some single-premium rates and estimated that he might be paying about $200K for $1 million coverage. It was an interesting exercise. Here's what I told him:

1. Don't buy more life insurance than you need just to get the LTC rider. He has one daughter who just started college; his wife is also employed, so I think his life insurance needs will decrease with age.

2. Accumulated at 6% over 20 years, that $200K would grow to $642K and it would be available for other things besides LTC.

3. He needs to ask who gets to decide if he needs LTC. I mentioned the unhappy example of financial guru Jim Cramer's legal battle after an unnamed LTC insurer declared that his 90-year old father who'd suffered a debilitating stroke wasn't disabled enough for LTC. Cramer fought them and won but legal bills ate up most of the award.

4. He needs to ask how much his "advisor" is making from this transaction.

Anything I missed? He's meeting with the advisor next week and I suspect it will be a no go. My friend was already uneasy about handing over a big chunk of his invested assets.

that is a linked benefit policy and they are quite popular .

but the problem is that they are not inflation adjusted at all. what seems like reasonable coverage now may fall way short later .

like being pregnant there is no such thing as being a little bit covered if you are counting on the policy to pay the bills and give you time to preserve assets ..

you either can afford to pay them or you need medicaid , in which case having a little bit of insurance did not really help preserve assets .
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Old 09-29-2015, 04:53 PM   #4
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I can't find it now, but Nords wrote a series of posts a couple of years ago about the difficulties he had getting the insurance company with his father's LTC policy to pay up. It was a nightmare.
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Old 09-29-2015, 05:05 PM   #5
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I can't find it now, but Nords wrote a series of posts a couple of years ago about the difficulties he had getting the insurance company with his father's LTC policy to pay up. It was a nightmare.
I think it was this thread Geriatric financial management & asset allocations
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Old 09-29-2015, 07:05 PM   #6
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I noticed with our policy unlike all the older policy's the language is very precise and clear as far as what is covered and when.
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Old 09-30-2015, 06:56 PM   #7
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Yup, that's it. Thanks.
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Old 10-03-2015, 10:56 AM   #8
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Thanks. Here's my most recent blog post, with links to the earlier posts:
Why I Won't Buy Long-Term Care Insurance - Military Guide

The (surviving) LTC insurance companies are using their latest statistics to offer v2.0 of LTC policies, but the claims and payment processes are still very hard on the caregivers/families of the insured. I've decided that no amount of money is worth asking my spouse or daughter to go through the bureaucratic hassle.

Recent studies (linked from that post above) indicate that most people need less long-term care than previously believed. It's not the utter financial disaster that the insurance companies claim it is. That's why the latest round of policies are linked to life insurance or other programs-- in the hopes that the insurance companies can still profit even while insuring more risks across a bigger pool.

In my case, the financial long-term care solution is turning over my military pension and my Social Security deposits to a care facility. (My spouse has her own pension and won't need mine.) We also have other assets set aside to pay the bills.
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Old 10-03-2015, 11:06 AM   #9
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Thanks. Here's my most recent blog post, with links to the earlier posts:
Why I Won't Buy Long-Term Care Insurance - Military Guide
Thanks. I'll bookmark this one, it's sure to come up again. I found your thread on caring for your dad helpful when I started caring for my mother.

One of the more subtle points most folks miss when it comes to getting care is just how important it is to have an effective advocate, and how much of a difference that makes. The LTC policy, and the care itself, is only as good as the advocate is effective.
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Old 10-03-2015, 11:22 AM   #10
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Thanks. I'll bookmark this one, it's sure to come up again. I found your thread on caring for your dad helpful when I started caring for my mother.

One of the more subtle points most folks miss when it comes to getting care is just how important it is to have an effective advocate, and how much of a difference that makes. The LTC policy, and the care itself, is only as good as the advocate is effective.
+1000 Exactly! When my mother needed to collect on her LTC policy in her 90's, she wrote and called and called and John Hancock wouldn't give her a cent. She was 100% in possession of her mental faculties and extremely intelligent and savvy, but they just figured they could blow off her claim. My brother then tried, and had little luck until he got my hotshot NYC lawyer nephew involved. He had to get utterly brutal with them before they paid up.

I am not buying an LTC policy that won't pay on claims without an effective advocate enlisting a high powered legal staff to ram those claims down their throats. YMMV
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Old 10-03-2015, 11:51 AM   #11
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Thanks. I'll bookmark this one, it's sure to come up again. I found your thread on caring for your dad helpful when I started caring for my mother.

One of the more subtle points most folks miss when it comes to getting care is just how important it is to have an effective advocate, and how much of a difference that makes. The LTC policy, and the care itself, is only as good as the advocate is effective.
Agree 100% with this thanks to you, Nords.
When my husband had to get guardianship of his parents I had your descriptions of the process you went through with your dad. And when MIL recently entered a memory care unit, again, I drew upon your posts for useful information.

Many many thanks for sharing your experience.
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Old 10-03-2015, 12:08 PM   #12
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All of the foot-dragging on claims reminds me a lot of what happened in the long term disability market 10 years or so ago. It got bad enough that a market leader was the target of a joint investigation by three different state insurance regulators (something I don't believe has ever happened before). It did not go well for that insurer. I could easily see that sort of thing happen with LTC insurance.
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