Long Term Care Insurance

[Castaspey]

While my post count reveals me to be a newbe here, and I may not be as skilled with the search feature as I might be, I am not finding as many threads on LTCI as I thought there might be. It is a potentially huge financial decision, and people in their 50's are at the right point in life to be considering it.


In the interest of full disclosure, DW and I each bought policies about 18 months ago. But it took me over a year to make the decision because there is really no accurate way to do the math to determine if it is a sound decision--too many assumptions need to be made, and the costs of different policies is not widely available on the web. I also know that anecdotal evidence ("It sure paid out for our Mom when Dad got the big A") is not a sound basis for deciding.


I typically try to avoid complex financial products because they have to be paying an economic return to whomever is offering them, and that means I am paying it and would therefore come out ahead without their product. So my default logic would lead me to not buy LTCI.



For me it came down to four factors. 1) It allowed me to take a very stochastic and potentially huge expense and convert it into a much more predictable expense that I could build into our financial plan. 2) I came to realize that I was not insuring my access to the care, but I was insuring my assets. 3) The ultimate beneficiaries of the decision will be our kids because the decision will impact the size of the estate (if any) that is left to them and they were pro-LTCI. 4) DW and I do not have large extended families living in the area and therefore do not have that safety net.


But there are as many right answers to the question as there are life situations and am not at all arguing that our decision to buy LTCI applies to anyone else. My hope is that it spawns some divergent ways to think through the decision.

 

[ziggy29]

My problem with LTCI is that premiums are not locked in when you purchase the policy. If you buy it at (say) 50 or 55 and it becomes unaffordable when you hit 70, you're sort of SOL.

 

[Castaspey]

That is a big issue, to be sure. That exactly the issue I was thinking about when I typed "more predictable" in my post. It is surely not 100% predictable and anyone who is considering LTCI and believes that it is the case is mistaken.

 

[RetiredAt55.5]

My problem with LTCI is that premiums are not locked in when you purchase the policy. If you buy it at (say) 50 or 55 and it becomes unaffordable when you hit 70, you're sort of SOL.

+1. That's what turned me off from them.

 

[HI Bill]

LTCI has many drawbacks, and most here, by my estimation, don't have it. Here are my quick takes and questions (this has been disussed many times before on this board):

1. If you can afford LTCI, you may not need it.
2. If you can't afford it, you may need it.
3. Premiums will go up as you age, as the average cost for LTC increases.
4. Can you afford significant premium increases?
5. How long will you be paying for insurance (mid-50s to early 80s?)
6. What's the total cost of your payments over that period?
7. How long is the waiting period (how long it takes before LTI starts paying benefits after you are in LTC)?
8. The average stay in LTC is 2 years (see other intersting stats here: https://www.morningstar.com/articles/823957/75-must-know-statistics-about-long-term-care
9. What is the annual cap on benefits?

My mom paid something like $25K in premiums over an 8 or 10-year period, and it became evident that she might not be able to keep making the premium payments. So, she stopped, having wasted $25K in premiums with no benefit. After breaking her pelvis at 81.5, she lasted just 6 weeks, and the LTC costs were about $6K. Of course, the real benefit is for those who require LTC for 3 to 10 years.

 

[nwsteve]

Our solution for the LTC conundrum was to move into a Life Care (aka Type A Contract) CCRC. Note the Life Care category is a critical element as the other types of CCRC do NOT lock in your costs. Life Care contracts provide assurance that you will not pay more for care than your entry values. At our property, one spouse can move to Asst Living and on to Skill nursing if required while the other spouse remains in their original home. Other than a small bump for additional meals required by Medicare, there is no increase from the initial fee. Non-Life Care CCRCs will still provide you an onsite assist living &/or skill nursing resource but typically at an agreed discount from market rates--10% is common in our research.
We have been in our new home about 7 months and have well pleased with our decision. No yard work, no utilities beyond cable, some housekeeping included, no home maintenance chores, lock and leave convenience, 24 hr security, etc. For those who cruise, it is pretty much like having a land based ship in terms of living style.
Since the OP, is a self acknowledged nubie, please check out the CCRC threads in the sticky portion of the Forum

 

[RobbieB]

If you get it, get a policy that pays the home and not you. I tried dealing with my Dad's LTC insurance co and unless you understand "insurancese" you will have big problems. Like they cancelled the claim and refused to pay.

Go Genworth! I sent them all manner of statements time and time again but not the right ones I guess. But I get it, take the dough and make it hard for the people to collect. When they're old and feeble too. Makes perfect business sense.

And yes, the premiums keep going up and you pay and pay but when it's time to collect.

Get an attorney.

 

[Castaspey]

I did find an old poll on here that showed that the people who had decided not to buy it outnumbered those who did by about 2-to-1.


My hope it that this thread isn't so much right v wrong as it is sorting through the considerations one ought to work through, much as the list in your post.


Part of the challenge is that potential economic benefit is determined by all the little details, like the waiting period. Policies from different vendors vary in those details, greatly confounding any price comparison.

 

[timo2]

My mom paid something like $25K in premiums over an 8 or 10-year period, and it became evident that she might not be able to keep making the premium payments. So, she stopped, having wasted $25K in premiums with no benefit. After breaking her pelvis at 81.5, she lasted just 6 weeks, and the LTC costs were about $6K. Of course, the real benefit is for those who require LTC for 3 to 10 years.

Like any insurance, it is in force while you have it, so therefore is not wasted. If you have term life insurance but don't die while it is in force, it that insurance wasted? LTC insurance is not just for old age. Many people are injured in car accidents and need long term care.

It actually makes some sense to have LTC insurance when in your 60's or 70's then drop it when you are nearing your actuarial end. That is in effect what your mom did. IMO.

 

[The Cosmic Avenger]

My problem with LTCI is that premiums are not locked in when you purchase the policy. If you buy it at (say) 50 or 55 and it becomes unaffordable when you hit 70, you're sort of SOL.

Mine are. My premium never goes up, AND I pay a slightly higher premium for "inflation protection", 5% yearly benefit increase.



Of course, I signed up for it 20 years ago, they probably don't offer that now. And if I had invested that money, who knows how much more I would have now? But the fact that the features of my LTCI policy are generally not available now makes me feel like I made a wise choice.

 

[RetiredAt55.5]

Our solution for the LTC conundrum was to move into a Life Care (aka Type A Contract) CCRC. Note the Life Care category is a critical element as the other types of CCRC do NOT lock in your costs. Life Care contracts provide assurance that you will not pay more for care than your entry values. At our property, one spouse can move to Asst Living and on to Skill nursing if required while the other spouse remains in their original home. Other than a small bump for additional meals required by Medicare, there is no increase from the initial fee. Non-Life Care CCRCs will still provide you an onsite assist living &/or skill nursing resource but typically at an agreed discount from market rates--10% is common in our research.
We have been in our new home about 7 months and have well pleased with our decision. No yard work, no utilities beyond cable, some housekeeping included, no home maintenance chores, lock and leave convenience, 24 hr security, etc. For those who cruise, it is pretty much like having a land based ship in terms of living style.
Since the OP, is a self acknowledged nubie, please check out the CCRC threads in the sticky portion of the Forum

I'm not familiar with CCRC's. What type of insurance is behind these, in the case the company under estimates expenses over time and is in the red with these contracts?

 

[nwsteve]

For those looking for CCRC fundamentals, here is good place to start:
www.early-retirement.org/forums/f47/ccrc-reference-material-faqs-86124.html

 

[ziggy29]

LTCI has many drawbacks, and most here, by my estimation, don't have it. Here are my quick takes and questions (this has been disussed many times before on this board):

1. If you can afford LTCI, you may not need it.
2. If you can't afford it, you may need it.

Yes. LTCI is very much an upper middle class product. The wealthy don't need it, the pure middle class (and below) can't afford it.

 

[rk911]

That is a big issue, to be sure. That exactly the issue I was thinking about when I typed "more predictable" in my post. It is surely not 100% predictable and anyone who is considering LTCI and believes that it is the case is mistaken.

the premium on my LTCI is fixed.

 

[marko]

Yes. LTCI is very much an upper middle class product. The wealthy don't need it, the pure middle class (and below) can't afford it.

FWIW, my mom has a LTCI policy. She got talked into it 25 years ago and pays $150 a month; I'm not sure if this is considered expensive or not but the premium hasn't gone up and the $90K/yr coverage hasn't changed except for an inflation adjustment upward. At age 90 she'd still be ahead of the game should she need more than 5 months of LTC; certainly not going to cancel now!

DW and I don't have a policy on the belief that should one of us require LTC, both our lifestyles would change dramatically to the extent that we'd be merely shifting what we spend on travel, food, cars, boats etc would go to LTC.

IOW, LTC cost is not fully additive to your current lifestyle; you'd be simply substituting a lot of what you spend on healthy activities for LTC.

Having spent a lot of time dealing with nursing homes over the past 3 years, I've seen it firsthand where the healthy spouse's life (and non-core expenses) also comes to a screeching halt. With your spouse in a NH, you're just not going to be jetting off to Spain for a month, golfing/boating/skiing, going out to expensive dinners and you don't need that second car or second home anymore either.

 

[Golden sunsets]

We bought policies in 2008 at age 60 and 62. The premiums have gone up and I'm sure will again. Premiums total roughly $8,000 currently for 2 policies at present worth $425,000 of care per person with an inflation rider of 5% annually. We can afford the premiums and will keep them. We probably don't need the policies (could self insure), so the statement that those that can afford them don't need them is apt. Having those policies though let's me SWAN.

My DM is 94, has dementia and resides in a memory care facility. She does not have LTCI and may outlive her money. Maybe not, but it's possible. She no longer comprehends her financial situation, but if she did she would be horrified to think that she might need to rely upon me or worse in her mind, Medicaid to cover her costs.

 

[REWahoo]

We bought policies in 2008 at age 60 and 62. The premiums have gone up and I'm sure will again. Premiums total roughly $8,000 currently for 2 policies at present worth $425,000 of care per person with an inflation rider of 5% annually. We can afford the premiums and will keep them.

Similar story here.

We bought policies in 2000 at age 52 and 53. The premiums have gone up (doubled) and I'm sure will increase again. Premiums total roughly $2,300 currently for 2 policies currently worth $290,000 of care per person with an inflation rider of 5% annually. We can afford the premiums and will probably keep them unless future premium increases become cost prohibitive.

Both my parents and DW's parents spent time in a care facility, two of them were there for almost three years. Should the same sad fate befall either of us I'm hoping LTCI will avoid placing our children in a situation where they have to spend a significant portion of any inheritance they may have coming on warehousing us.

 

[pb4uski]

Yes. LTCI is very much an upper middle class product. The wealthy don't need it, the pure middle class (and below) can't afford it.

Our LTCI is that we spend about 2/3 of what FIRECalc says that we can spend and about $100k is in HSAs.

I looked at LTCI over the years and the value proposition never seemed to make sense.

 

[donheff]

DW and I bought into the Federal LTC program when it opened up. The structure changed significantly about ten years in and our premiums went up and benefits decreased somewhat. We are sticking with it primarily because we trust the negotiators at OPM will be able to protect our interests as well as anyone can so we will probably get a decent value as these things go.

I like the CCRC concept but they are no panacea. DW's father had a disastrous experience at a highly regarded CCRC. He moved into the memory unit due to Alzheimer's and tossed some chairs around (in a reasonable response to provocation in our opinion). The outfit demanded that he be transferred to a hospital psych unit for evaluation before returning to the memory unit. Once at the hospital the CCRC simply refused to clear him for return. We eventually had to move him to a nursing home that had excellent Alzheimer's facilities. In retrospect, our conclusion was that staff at CCRCs (at least for profit outfits) can be ruthless. I would place more trust in a well regarded religious based community.

 

[Red Badger]

FWIW, my mom has a LTCI policy. She got talked into it 25 years ago and pays $150 a month; I'm not sure if this is considered expensive or not but the premium hasn't gone up and the $90K/yr coverage hasn't changed except for an inflation adjustment upward. At age 90 she'd still be ahead of the game should she need more than 5 months of LTC; certainly not going to cancel now!

DW and I don't have a policy on the belief that should one of us require LTC, both our lifestyles would change dramatically to the extent that we'd be merely shifting what we spend on travel, food, cars, boats etc would go to LTC.

IOW, LTC cost is not fully additive to your current lifestyle; you'd be simply substituting a lot of what you spend on healthy activities for LTC.

Having spent a lot of time dealing with nursing homes over the past 3 years, I've seen it firsthand where the healthy spouse's life (and non-core expenses) also comes to a screeching halt. With your spouse in a NH, you're just not going to be jetting off to Spain for a month, golfing/boating/skiing, going out to expensive dinners and you don't need that second car or second home anymore either.

+1. For us, pensions and SS cover all the basics and then some. Our egg is just for fun stuff now, and LTC if needed later.

I also read the book "Being Mortal." It contains very sobering details of life in memory care, irrespective of the quality of care. The book is about modern, largely western death, the dying process (via today's medical approach), and the journey involved. A short book that happened to be one of the most difficult reads in memory.

 

[SJ1_]

LTCI has many drawbacks, and most here, by my estimation, don't have it. Here are my quick takes and questions (this has been disussed many times before on this board):

1. If you can afford LTCI, you may not need it.
2. If you can't afford it, you may need it.
3. Premiums will go up as you age, as the average cost for LTC increases.
4. Can you afford significant premium increases?
5. How long will you be paying for insurance (mid-50s to early 80s?)
6. What's the total cost of your payments over that period?
7. How long is the waiting period (how long it takes before LTI starts paying benefits after you are in LTC)?
8. The average stay in LTC is 2 years (see other intersting stats here: https://www.morningstar.com/articles/823957/75-must-know-statistics-about-long-term-care
9. What is the annual cap on benefits?

My mom paid something like $25K in premiums over an 8 or 10-year period, and it became evident that she might not be able to keep making the premium payments. So, she stopped, having wasted $25K in premiums with no benefit. After breaking her pelvis at 81.5, she lasted just 6 weeks, and the LTC costs were about $6K. Of course, the real benefit is for those who require LTC for 3 to 10 years.

After paying for insurance for years the insurance co. my decide not to pay you.

jim cramers "if you have that insurance or your loved ones do, be prepared for them to try to screw you. I hope they won't. But many will try. I know that now."
https://www.thestreet.com/investing...r-last-day-together-was-our-best-one-12963316

 

[REWahoo]

After paying for insurance for years the insurance co. my decide not to pay you.

jim cramers "if you have that insurance or your loved ones do, be prepared for them to try to screw you. I hope they won't. But many will try. I know that now."
https://www.thestreet.com/investing...r-last-day-together-was-our-best-one-12963316

There's an app for that: https://www.claims.org/

 

[Spock]

Dad has a LTC that he bought in 1998 in his late 60's.
The policy has a simple % increase (not compounding) but in the years since 1998 his daily max benefit has doubled. His premiums have gone up but at $450/month for $6000/mo payout in a facility its well worth it as he is getting dementia and really should have adult supervision now with a family history that he's expected to live another 10 years or so.



There are challenges in his policy. He can't get the lower level care like home health services until he qualifies as "chronically ill" which by the policy definition would already have him in a facility. Also the 90day (of service!) elimination period if applied to 2 days of home health services per week would take 45 weeks to hit 90 days of service.



The ins co may make collections difficult. But the facility will be an ally with a vested interest in helping with the claims.

Its a big relief he has the policy (and that he hasn't canceled it to "save money"). Given the other things he wastes his $ on, the monthly premium is cheap.

Going forward its a much tougher choice regarding getting our own LTCIs... "they don't make'em like that any more". But at the same time dementia is hereditary so I'm staring at that future for myself plus other potential things like strokes, etc.



Living my whole life squeezing every penny out of a $20 bill its sicking to forecast shoveling 8K/month to a nursing home and leaving my spouse eating cat food.


My wife and I are a long way from being Fat FIREs that can afford to self-insure for LTC. One probe I did had a 50K upfront pre-paid life insurance with LTC riders... I don't have 50K laying around that I can sink into pre-paid insurance policies.



We're also a long way from qualifying for Medicaid. Living my whole life squeezing every penny out of a $20 bill its sicking to forecast shoveling 8K/month to a nursing home and leaving my spouse eating cat food.

 

[misanman]

Genworth Sale

Genworth has been a big supplier of LTCI in the past. What do people think about the possible sell out to Oceanwide?

https://www.wsj.com/articles/china-oceanwide-to-buy-genworth-financial-for-2-7-billion-1477263521

Genworth Financial GNW -1.27% Inc., a dominant carrier in U.S. long-term-care insurance, agreed to sell itself to a Chinese investment firm as persistent low interest rates and rising costs hobble its business.

The Chinese investment firm, China Oceanwide Holdings 715 -0.80% Group Co., will pay about $2.7 billion for Genworth.

 

[Spock]

Genworth has been a big supplier of LTCI in the past. What do people think about the possible sell out to Oceanwide?

https://www.wsj.com/articles/china-oceanwide-to-buy-genworth-financial-for-2-7-billion-1477263521

I'd say Genworth policy holders will be screwed at some point and who ever signed off on the sale as "no unresolved national security concerns" was either bought and paid for or (more likely) Genworth was so close to collapse that the sale to China couldn't make the situation any worse.

"China Oceanwide spans real estate, energy and finance. It was founded in 1985 by Lu, who is a Communist Party secretary, as well as a member of the standing committee of the 12th Chinese People’s Political Consultative Conference, according to the company’s website." One phone call from Xi Jinping at an opportune time in geopolitics and poof one of the largest LTC insurance companies in the US nursing home claims are going unpaid.