Long Term Care Options

[GLM]

We have been looking into options in long term care insurance. This is a major expense and has long term implications. Now that I am past the initial research the more I learn the more questions I have . Searching the web I still cannot find unbiased feed back on this one :

One Option our Estate lawyer is describing is purchased by lump sum. It is, as I understand it, an annuity in an insurance product. It pays for an amount of LTC or if unused provides a death benefit. Part of me just thinks this sounds like the whole life insurance vs term life insurance debate. (As they know our assets I am a bit skeptical of even their soft sell )

Not yet 50 years old - we may opt to self insure (if the portfolio behaves ) - no health issues at this time .

Interested in how you weigh the need for such coverage and if so how the board feels such coverage is best structured .

 

[Rich_by_the_Bay]

GLM,

This is one of the most widely discussed issues on the forum. Do a search for LTC or long term care and you'll have plenty of reading material. You should find it pretty helpful in realizing that most of us are pretty confused about the best strategy.

 

[GLM]

Yes , I did a search here too using" LTC" and "lump sum " did not find anything that addressed a policy that has LTC coverage with an life insurance component. (Just typing LTC I gave up looking after page 4 ) Do not want to resurrect the whole debate I was just thinking this might be a new product ? As I am new to looking at specific policies perhaps not....

 

[brewer12345]

This is a product that came out a few years ago, I believe debuted by John Hancock. It is generally expensive (even by the standards of universal/whole life) and provides limited LTC benefits. I would skip it.

Either self insure or buy actual LTC from a financially strong company. I favor the former.

 

[d]

Either self insure or buy actual LTC from a financially strong company. I favor the former.

ditto

 

[tkp]

Hi,

I am a (semi-retired) financial advisor.....And even being in the business, I normally say "self-insure" if you can afford it.

LTC insurance is WAY complicated and (fairly) WAY expensive to boot! Avoid it if you can.

Hope this helps.

 

[Rich_by_the_Bay]

Another strategy for consideration if you're insurable: buy a level term life policy for 20 years with a death benefit comparable to a typical nursing home stay, say $250k (one for each member of a couple).

If you live long enough to self-insure for LTC, drop the policy at that time. Otherwise use your nest egg to pay for LTC and replete after death (typically 2-4 years after NH admission). Family can own the policies (with you and spouse as beneficiaries, kids as contingent beneficiaries) if you want a layer of protection should you become unable to manage your financial affairs.

 

[chinaco]

Another strategy for consideration if you're insurable: buy a level term life policy for 20 years with a death benefit comparable to a typical nursing home stay, say $250k (one for each member of a couple).

If you live long enough to self-insure for LTC, drop the policy at that time. Otherwise use your nest egg to pay for LTC and replete after death (typically 2-4 years after NH admission). Family can own the policies (with you and spouse as beneficiaries, kids as contingent beneficiaries) if you want a layer of protection should you become unable to manage your financial affairs.

Not a bad idea Rich! Have you run any projection scenarios with premiums and potential costs?


Brew-man... What do you think about this type of approach?

 

[Nords]

Another strategy for consideration if you're insurable: buy a level term life policy for 20 years with a death benefit comparable to a typical nursing home stay, say $250k (one for each member of a couple).

A big advantage of this system is that level term life policies are pretty well priced and understood.

20 years from now we'll look back on LTC policies and realize that the policies priced to make a profit for the insurance companies cost far more than people are willing to pay, while the "affordable" LTC policies all cost way too much in payouts and drove their insurers to insolvency. Either way the customer loses.

 

[wheel9]

With my luck, I would need LTCI in the 21st year of my 20 year term

That is why we bought it. We view it more of asset protection for the surviving spouse, as a long stay in nursing or home care could leave little resources. When I looked into policies, I found those policies from group plans to be more expensive than individual policies. For example, the CalPERS insurance carrier must take all comers, and therefore has a spread rate. If when you get quotes, you and your spouse are a good risk, then you can get lower rates. You would be subsidizing the bad risks in a group policy. If on the other had you are not eligible for the preferred rates, than group plans work well.

As others have said, if you are not well off, no need. If you are very wealthy, self-insurance works. For the rest of us, I think some level of coverage is a good idea, and I hope it never gets used.

 

[GLM]

Thank you all . I like your idea too Rich . ( I too however am wondering if I would need LTC at year 21). We will probably end up with some sort of comprimise partial coverage . Needing bigger nest egg to totally self insure just moves ER out.


Everyone is sort of reinforcing my skepticism. Like investing in securites I don't fully comprehend, the complexities of LTC coverage makes it seem like something I want to avoid. Fortunately I don't need to do anything right now. With the "Boom" in elderly population arriving in the comming decades I hope the picture gets clearer as the date approaches.

 

[Rich_by_the_Bay]

Thank you all . I like your idea too Rich . ( I too however am wondering if I would need LTC at year 21). just moves ER out.

Course, 20 year term was just an example -- choose your interval. But recall that 20 years from FIRE at, say, age 75 or 80, your jeopardy is greatly reduced due to life expectancy, and your nest egg will probably by then be big enough to self-insure. Meantime, you will have enjoyed 20 years of peace of mind (or financial protection if you have to use it).

 

[Alan]

I decided to self insure. I have an automatic payment ($200/month) set up into a Vanguard Wellington fund (65/35 mix) so I don't have to mess with it. I'm 52, the account currently stands at $11K and I hope that a) I'll never need it and it can pass to our children, or b) if we do need it that it will be sufficient for out needs.

All types of insurance are a gamble one way or another and I don't think there is a single right answer when it comes to LTC

 

[chinaco]

I wonder if this idea may be a good supplemental approach for LTC policies where "Health Care Inflation" Outstrips ones LTC policy (the daily cap) over time.

Part of the problem is projecting (and dealing) with inflation. Life and LTC contracts can span 30, 40, 50 years. Just when you need it... it is worth very little.

At any rate, the idea bears a look.

 

[brewer12345]

Brew-man... What do you think about this type of approach?

Its fine as a partial hedge, but there is no guarantee that the amount of insurance would actually be enough to cover your LTC costs. I think that it is likely to be something of a wash anyway, since hanging onto the premiums and sticking them in a diversified portfolio may well beat the life policy payout in aggregate.

But if you have estate tax games to play o r other tax/legal strategies taht buying life insurance to hedge LTC costs would benefit, it moght be worth investigating. This is something I would do with the aid of an estate attaorney, though.

 

[FinanceDude]

There's only a couple LTC companies that are strong enough and have committed to being a player in the LTC market. NML, Metlife, and John Hancock are the only ones I trust. Genworth isn't a sstrong as it used to be..........

My feeling is anyone with over $3 million can self-insure, anyone under can buy a policy if it gives them peace of mind and they can afford it. A client of mine recently got joint LTC with a $200 a day benefit, indexed for inflation for $2200 a year, they are age 62 and 58. Sounds like a lot of money, but assisted living is around $3500-$4000 a month where I live, and nursing home is $5000-$7000 a month................

I guess another way would be to set up a dedicated "health care account"...........

 

[youbet]

There's only a couple LTC companies that are strong enough and have committed to being a player in the LTC market. NML, Metlife, and John Hancock are the only ones I trust. Genworth isn't a sstrong as it used to be..........

My feeling is anyone with over $3 million can self-insure, anyone under can buy a policy if it gives them peace of mind and they can afford it. A client of mine recently got joint LTC with a $200 a day benefit, indexed for inflation for $2200 a year, they are age 62 and 58. Sounds like a lot of money, but assisted living is around $3500-$4000 a month where I live, and nursing home is $5000-$7000 a month................

I guess another way would be to set up a dedicated "health care account"...........

Is the $3,000,000 for a single or a couple?

Will LTC insurance pay for assisted living. I thought that the events for payout for most policies mean nursing home care, not assisted living. Or perhaps this is something you can option into (and pay for) the policy?

 

[d]

I decided to self insure. I have an automatic payment ($200/month) set up into a Vanguard Wellington fund (65/35 mix) so I don't have to mess with it.

i have done something similar. more than several years ago i seriously considered LTC ins, and decided instead to invest (in a dedicated account) an amount equal to what the premium would have been. as it happened, the premium per month was approximately what the area NH cost/day was ... so i now uses the latter.

 

[FinanceDude]

Is the $3,000,000 for a single or a couple?

Will LTC insurance pay for assisted living. I thought that the events for payout for most policies mean nursing home care, not assisted living. Or perhaps this is something you can option into (and pay for) the policy?

I was referring to a couple for the $3 million. Most LTC will tell folks that number is really $4 million or higher.............

In the "old days", it HAD to be nursing home only. However, I have seen policies today that will cover assisted living. Most people mistakenly think of LTC as a "nursing home policy", which is incorrect. Truth is, most of us would want to be at home rather than a nursing home or assited living. Therefore, the "benefits per day" formula is frequently used.

A lot of folks will but a $150-$200 benefit per day for home care. The services are for those who need help but can do certain things themselves. If you would need a 24 hour nurse to be there, the $200 a day won't go very far.

Fact is, most folks aren't so sick they are going to be in the nursing home for a long period of time. In my case, I'm going to buy a daily benefit, and supplement my care with a seperate account I will begin funding at age 50.

FYI, most LTC is sold to folks aged 52-63 in the US..............

 

[youbet]

Fact is, most folks aren't so sick they are going to be in the nursing home for a long period of time. In my case, I'm going to buy a daily benefit, and supplement my care with a seperate account I will begin funding at age 50.

The policies I looked at, a while back, called for you to not be able to perform certain normal living functions (eating, bathing, dressing, can't remember exactly) before they would pay. Not being able to do these things looked like you'd wind up in a NH. If they've lightened up the requirements, that would be a good thing......

I also include the possibility of paying for help in my financial plans, although I do not fund a separate account as you do. I seem to be able to improve my returns on the money by keeping it within my one portfolio approach.......more flexibility, etc.

 

[Gearhead Jim]

It's interesting that people who would never self-insure a $425k house, will consider self-insuring a potential $425k LTC liability.

Our house insurance and our LTC insurance are both about that amount, and we pay almost exactly the same premium per year, except that we pay two premiums on the LTC. Of course, we'd also be paying two house premiums if we owned a second home.

It would be interesting to see some data about the odds of needing either full or partial coverage for either the house or the LTC. And at what time, which can make the LTC self-insurance more viable if you are confident you won't need it for many years. If only we knew...

 

[d]

It's interesting that people who would never self-insure a $425k house, will consider self-insuring a potential $425k LTC liability

it is interesting, but they are too disimilar to equate. there's no mortgage-holder to require the LTC insurance; the potential HO loss is current while the LTC is largely a future event; the fire/casualty business is well known and financially sound while the LTC business has an uncertain future; one generally can prepare to self-insure LTC, but for HO, the funds are likely tied-up in a mortgage payment ... etc. etc. etc. that said, and there's more that could be said, if i could find LTC coverage for the same premium as my HO, with similar $ coverage, i wouldn't hesitate to buy it.

 

[chinaco]

Is the $3,000,000 for a single or a couple?

Will LTC insurance pay for assisted living. I thought that the events for payout for most policies mean nursing home care, not assisted living. Or perhaps this is something you can option into (and pay for) the policy?

We have LTC. Bought it through DW group plan that was offered. I will have to check if ours cover assisted living... not sure. I do remember that it covers home health care and NH. It has an indexing component to it for inflation. I will find the policy and check. Since it cover HH, I would assume it would cover assisted living... seems very similar.

 

[ChrisC]

it is interesting, but they are too disimilar to equate. there's no mortgage-holder to require the LTC insurance; the potential HO loss is current while the LTC is largely a future event; the fire/casualty business is well known and financially sound while the LTC business has an uncertain future; one generally can prepare to self-insure LTC, but for HO, the funds are likely tied-up in a mortgage payment ... etc. etc. etc. that said, and there's more that could be said, if i could find LTC coverage for the same premium as my HO, with similar $ coverage, i wouldn't hesitate to buy it.

It is both interesting and more similar than you give credit. If you've paid off your mortgage, you will still likely buy HO insurance; I'm unaware of any owner of residential real estate who wouldn't insure his primary residence, even after the mortgage has been paid. I pay for HO insurance and don't have a primary mortgage; just a small HELOC where the lender doesn't require coverage. Most of us wouldn't self-insure our cars, either, regardless of whether state law requires insurance coverage. The major difference, of course, is that insurance coverage for homeowner's and auto just doesn't cover damage to our property, but third party liability coverage.

LTC doesn't just cover damage done to our bodies as we get older. It covers situations where middle age or even younger people become disabled and in need of assisted-living from horrific accidents or medical problems; I've seen several co-workers and friends become paraplegics or in a vegetative state after accidents or major surgery; one friend of mine went in for hip-replacement surgery and has never been the same, just now remarkably coming out of a vegetative state.

BTW, my LTC policy is much cheaper than the combined cost of our HO and Auto policies. And I'm confident that MetLife and John Hancock, the insurers, will be around for a while.

 

[Rich_by_the_Bay]

BTW, my LTC policy is much cheaper than the combined cost of our HO and Auto policies. And I'm confident that MetLife and John Hancock, the insurers, will be around for a while.

ChrisC, I am glad for you that your LTC insurance brings you peace of mind. It may well prove to be the right decision for you.

But it is a marginal call for many. There is no guarantee that the premiums won't increase dramatically or unaffordably as the terrain changes (decades worth) and you may later find it unaffordable or unwise, in which case your hard-earned premiums all those years are for nothing. Even if you do use the policy, the odds say it will be in your 70s or 80s (though tragic younger cases do arise rarely). Or its limits of coverage may leave you widely exposed given the escalating costs. Or, the entire health system may be revised in the next 10-30 years and your premiums may have gone to something that is at least partially covered by a Medicare-like program. Or John Hancock and other major carriers may run into trouble or drop out of the LTC business. And would-be premiums invested for 20 or more years are not trivial.

Bottom line is that it is a very chaotic and unpredictable situation. I don't claim to know what will unfold, but choosing to skip LTC insurance is an understandable decision for many. Only time will tell. Glad your decision is comfortable for you. I have deferred buying LTC insurance myself but will keep an open mind.