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Old 12-13-2011, 07:21 AM   #21
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The way I see it, writing a check once a year for a couple of thousand dollars is substantially better than paying $70,000 out of pocket each year.
Sure, if that $2,000 didn't keep going up because these insurers are chronically underpricing the product.
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Old 12-13-2011, 08:28 AM   #22
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Sure, if that $2,000 didn't keep going up because these insurers are chronically underpricing the product.
What Ziggy said. Plus you may be one of the 60% who pay for decades but never use it, plus you get your hopefully long-delayed benefits in deflated dollars (unless you buy a COLA policy - even more expensive), you lose your investment opportunity on the premium amounts, plus you take the risk of duplication of benefits if the federal health policy veers toward gov't help for LTC down the road.

There is no easy or glib answer to this one - I sure don't know the best course, though for now we are self-insuring with fingers crossed. Analyze carefully and make your choices, but it is more than just "my benefits will be greater than my premiums," IMHO.
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Old 12-13-2011, 09:58 AM   #23
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I'd rather pay a couple of thousand dollars a year for my homeowner's insurance even though the odds of my having a loss are pretty slim. ...

Just my humble opinion.
Big differences though. With my homeowner's, I pay year-by-year. I'm not locked into a 10 year or more schedule where they can raise the rates within that contract period.

If HO gets too expensive, I can decide to go 'naked' (would need to pay off my mortgage though). I still got my money's worth for the years I paid for and was covered. I didn't pay now for future coverage.

It would make an interesting poll - anyone drop their HO insurance? It would make some sense for many of us, but OTOH, many of us probably carry umbrella ins, and they will require HO (or probably charge you the equiv) - so maybe it's a moot point?

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Old 12-13-2011, 10:05 AM   #24
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Big differences though. With my homeowner's, I pay year-by-year. I'm not locked into a 10 year or more schedule where they can raise the rates within that contract period.

If HO gets too expensive, I can decide to go 'naked' (would need to pay off my mortgage though). I still got my money's worth for the years I paid for and was covered. I didn't pay now for future coverage.
Another way to look at it: Homeowners insurance is like annually renewable term life insurance where you only pay for your *current* risk against current events -- if your risk increases later it will be reflected in future contracts when the risk is higher. LTCI is more like whole life(or 20- to 30-year term) where you pay more now because your risk will rise later. In essence you are "pre-paying" for some additional future risk.

The big difference is that insurers know how to reliably price life insurance and generally don't sock you with repeated rate increases for the same level of coverage in future years. And it is this difference which has convinced me to pass on LTCI, at least for now.
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Old 12-13-2011, 10:16 AM   #25
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Inflation riders aren't just a good idea, they're essential-- and worth every penny.

In late 1992 (age 58) my father was aware that his genetics weren't good-- his father was in a care facility, and Grandpa ended up spending another 10 years there with dementia. Dad purchased LTC insurance from a company that was eventually bought by John Hancock.

The policy covered $100/day up to $120K. He bought an inflation rider that boosted those limits by 5%/year for 20 years. (The 20th boost occurs in Dec 2012.) The current limit is $240/day. The care facility charges $214/day for a semi-private room in a large western city, and that number's about the middle of the pack for large cities. By my rough calculations, when the payout limit is reached the care facility's prices will just be catching up to the insurance company's payout.

Of course there are additional expenses beyond $214/day, and they're not covered by Medicare/Medigap: prescription blood pressure & pain med, dental exams, even haircuts. It's not uncommon for families to hire additional caregivers (beyond the care facility staff) for an extra hour or two of help at certain busy times of day. Physical therapy may be necessary (or at least useful) for far longer than the Medicare limits. Dad doesn't have any behavioral problems (yet), and that therapy is not inexpensive (if indeed a care facility will tolerate behavior issues). Dad's not in an Alzheimer's memory-care unit, and that's more expensive.

The premiums have been fixed at just over $600/year for nearly 20 years. Of course this is obscenely low for the benefits received, and he earned all of his premiums back in just the first two months of payout. But even if he'd been paying $4000/year he'd still be receiving 4x the benefits.

The real challenge today is figuring out if retirees have the ability to (1) save $3K-$4K/year on their own and (2) invest it to grow to pay a similar benefit. I'm guessing "No" in both cases. LTC offers not only risk-sharing but the discipline of enforced savings.

I'm hoping that by the time I'm 60 years old, the LTC insurance companies will have a handle on the expenses and be able to price their policies realistically. Even if we go with the federal program, they're still underwritten by Hancock & Met Life. Somewhere between ages 60 and 70 my spouse and I should make the decision on whether or not to buy the insurance or go without. My inclination is that by that age we'll be finishing up the process of taking risks with our excess assets and should be considering using them to buy insurance.

By our standards the insurance industry has just 9-19 years to get its act together, just about the same amount of time the Federal government has left on Social Security & Medicare. It'll be interesting to see who gets to the finish line before bankruptcy.
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Old 12-13-2011, 10:23 AM   #26
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The premiums have been fixed at just over $600/year for nearly 20 years. Of course this is obscenely low for the benefits received, and he earned all of his premiums back in just the first two months of payout. But even if he'd been paying $4000/year he'd still be receiving 4x the benefits.
Sounds like he bought in when LTCI was a fairly new product and insurers didn't have a handle on pricing it properly since it's based on future investment returns and future health care/long term care inflation. And 20 years ago it's a pretty safe bet that they significantly overestimated investment returns and underestimated health care inflation over his lifetime.

I suspect mispricings like these are why so many contracts are seeing huge rate increases. Though I wonder why it seems like only some insureds are hit with them and others, even with the same insurer, seem to have huge increases every few years.
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Old 12-13-2011, 09:12 PM   #27
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...
Somewhere between ages 60 and 70 my spouse and I should make the decision on whether or not to buy the insurance or go without. My inclination is that by that age we'll be finishing up the process of taking risks with our excess assets and should be considering using them to buy insurance.
...
We bought our policies when we were in our middle 50's, I just remember that by age 65 the premiums were a lot higher, enough that we ran the numbers and decided to buy right then.

Perhaps things have changed.
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Old 12-13-2011, 09:18 PM   #28
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Another problem with those big premium increases after taking out the policy:

When I was flying for the airline and still young, I bought some medical disability insurance, which tends to be expensive for pilots. The price was very good, and it turned out the company had underpriced the product. About 15 years later, they started coming up with big premium increases every couple of years. Each time, a certain portion of the healthy guys would look at the cost and decide to drop their coverage, but the ones with pending medical issues paid the higher premiums because they knew they would likely need the policy. So the insured population kept getting higher and higher claims ratios, and the premiums kept going up even more, and...

The final premium increase that caused me to cancel, had an monthly premium that was about equal to the monthly payout I could collect.

I see the possibility of LTCI going that same way.
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Old 12-14-2011, 12:26 AM   #29
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We bought our policies when we were in our middle 50's, I just remember that by age 65 the premiums were a lot higher, enough that we ran the numbers and decided to buy right then.
Perhaps things have changed.
In about 10 years I'll plot these numbers and pick off the inflection point...

Federal LTC Plan Details and Long Term Care Insurance Cost
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Old 12-14-2011, 08:36 AM   #30
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LTCI protects the rich peoples assets. The poor don't need it. The middle class can't afford it. I'll serve insure and hope for the best.
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Old 01-24-2012, 07:10 PM   #31
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I just got my annual bill in from JH for my LTC insurance and the premium didn't change (I have a flat premium with a 5% annual increase in coverage). When I spoke with Texas DOI several months ago, the JH rate increase request was still being tossed between DOI and JH desks.

My policy is eight years old so I still think I'll be hit with an increase once DOI approves a rate change. I've got another year to prepare for it.
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Old 01-24-2012, 11:01 PM   #32
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I just got my annual bill in from JH for my LTC insurance and the premium didn't change (I have a flat premium with a 5% annual increase in coverage). When I spoke with Texas DOI several months ago, the JH rate increase request was still being tossed between DOI and JH desks.
My policy is eight years old so I still think I'll be hit with an increase once DOI approves a rate change. I've got another year to prepare for it.
The company that sold my father's policy (Time/Fortis, eventually bought by JH) to him at the end of 1992 charged him ~$350 semiannually for just over 18 years. That policy has your same inflation rider.

He recouped that during the first two months in the care facility. I haven't done the compound math on investing $350 semiannually in a diversified stock/bond portfolio for 18 years, but I bet it still wouldn't pay for three years of $214/day plus care facility inflation.

Some asset belonging to Time/Fortis made them attractive to JH. I find it hard to believe that everyone else who was paying $350 semiannually dropped out of the program in order to help JH make a profit off their premiums. In Dad's case the max payoff is over 25:1.
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Old 01-25-2012, 02:23 PM   #33
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The company that sold my father's policy (Time/Fortis, eventually bought by JH) to him at the end of 1992 charged him ~$350 semiannually for just over 18 years. That policy has your same inflation rider.

He recouped that during the first two months in the care facility. I haven't done the compound math on investing $350 semiannually in a diversified stock/bond portfolio for 18 years, but I bet it still wouldn't pay for three years of $214/day plus care facility inflation.

Some asset belonging to Time/Fortis made them attractive to JH. I find it hard to believe that everyone else who was paying $350 semiannually dropped out of the program in order to help JH make a profit off their premiums. In Dad's case the max payoff is over 25:1.
I would have to say that my mother "won" her LTC insurance bet as well. Don't recall the yearly premiums, but when she went into the nursing home, the payout was there with relatively little hassle. Unfortunately the payouts were only for two years. She was self pay from then until her death. Miraculously, she and her money came out virtually even at the end.

It was at about that time that DW and I purchased our LTC policies (with longer payout period). The premium didn't seem all that bad. Now, of course, after significant rate increases, yearly premium time is somewhat of a shock. If I thought the premium would hold, I suppose I could adjust. I'm just not certain they are finished jacking up the premiums. Now that we are "old", it would seem more likely we would need these policies sooner, so that's one more reason to hang on to them. All 4 of our parents had health issues that put them into nursing care - 3 died there. Makes one wonder.
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Old 01-25-2012, 03:31 PM   #34
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I have lifetime coverage while some of the newer policies are limited to three or five years. The nice thing about my policy, and the one Nord's dad had, was once you start collecting benefits under the policy the coverage still increases at 5% a year even though you are no longer paying premiums.

I feel about LTC the same as I do about any other insurance (auto, home, etc). I'd rather have it and not need it than need it and not have it.
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Old 01-26-2012, 07:54 PM   #35
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Can anybody recommend a good source for evaluating LTC Insurance companies? I am concerned about getting one that will not be around or will find a way to renege on their commitments.
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Old 01-26-2012, 08:07 PM   #36
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I just got my JH annual payment too. No increase. I'll hold my breath until next year, figuratively.
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Old 01-26-2012, 08:31 PM   #37
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I agree with that. It was easy to find a homeowners policy with the features I wanted. And there were a number of companies with well published records of good customer service and records of paying legitimate claims. I'm having a bit of trouble with LTCI. I can't find a policy that does what I want: A long waiting period (say 2 years) with corresponding low premiums (due to the small probability of ever using the policy).
I'd like that format, too. As you would expect, insurers prefer more predictable claims patterns, and moderate elim periods and fixed benefit periods are more predictable.

If you call your insurance dept, you may find that they wouldn't approve a form with a 2 year wait. For example, the Wisconsin max is 365 days. http://oci.wi.gov/pub_list/pi-047.pdf I read somewhere that the max in FL is 180 days.
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Old 01-26-2012, 09:33 PM   #38
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Sounds like he bought in when LTCI was a fairly new product and insurers didn't have a handle on pricing it properly since it's based on future investment returns and future health care/long term care inflation. And 20 years ago it's a pretty safe bet that they significantly overestimated investment returns and underestimated health care inflation over his lifetime.

I suspect mispricings like these are why so many contracts are seeing huge rate increases. Though I wonder why it seems like only some insureds are hit with them and others, even with the same insurer, seem to have huge increases every few years.
ziggy, one point I would argue with you: While it's true that LTCI cos. didn't know exactly what future health care/long term care inflation would be, they had already built the EXACT inflation (for them) into each and every policy - 5% in most cases, but in any case, specified to the 3rd decimal point. According to agents I've spoken with and other sources I've read, here is what they miscalculated: They assumed a lot more folks would keep their policies for 8, 10, or 12 years and THEN lapse them. Almost all those premiums (say, from about age 50 to age 65) were just gravy. Not too many folks in that age group ever make claims. BUT, the expected lapses DIDN'T happen. So, they re-priced their new policies and raised rates on old policies with two factors in mind. 1) at the higher prices, more old-policy folks would lapse, 2) those policies still in force would be priced appropriately for the LTCI cos. to make money.

So, my big question would be: After 15 or more years of offering these policies, have they finally figured out lapse rates and will they stop raising premiums? If so, I'll probably hang on since I've already "paid my dues". Stated early, I figure I'm a good candidate to collect, eventually. But if premiums go too high, it will cause me to rethink. It may also be true that State Ins. commissions will get tired of the LTCI companies coming back time after time with the same old sob story. At that point, I'm sure most companies will stop offering these policies - but those with policies will be grandfathered in, I would expect (assuming payment of premiums, of course). As always, YMMV.
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Old 01-27-2012, 07:21 AM   #39
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<snip>They assumed a lot more folks would keep their policies for 8, 10, or 12 years and THEN lapse them. Almost all those premiums (say, from about age 50 to age 65) were just gravy. Not too many folks in that age group ever make claims. BUT, the expected lapses DIDN'T happen.
I heard the same thing.

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So, they re-priced their new policies and raised rates on old policies with two factors in mind. 1) at the higher prices, more old-policy folks would lapse, 2) those policies still in force would be priced appropriately for the LTCI cos. to make money.
I also heard that with the notice to increase premiums is an option to reduce benefits in order to keep the premiums lower. In my case I would probably get an offer to keep my premium close to what I now pay if I give up my lifetime coverage for a five-year policy. The premium increase would have to be pretty dramatic for me to even consider making that change and I probably still wouldn't do it.
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Old 01-27-2012, 08:13 AM   #40
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I thought one of the advantages of buying LTC insurance in one's 50's or even 40's was the expecation that they could not raise the premiums much since one was paying in for some many years. I guess I was wrong. What is the point of buying the insurance if the company raises the premiums so high that one drops the coverage as one approaches the age where one needs it What am I missing?
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