LTC Increase

[ziggy29]

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.

 

[Gearhead Jim]

...
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.

 

[Gearhead Jim]

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.

 

[Nords]

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

 

[ripper1]

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.

 

[East Texas]

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.

 

[Nords]

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.

 

[Koolau]

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.

 

[East Texas]

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.

 

[Chuckanut]

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.

 

[tightasadrum]

I just got my JH annual payment too. No increase. I'll hold my breath until next year, figuratively.

 

[Independent]

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.

 

[Koolau]

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.

 

[East Texas]

<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.

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.

 

[Chuckanut]

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?

 

[REWahoo]

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?

LTC insurance is a real crapshoot and the track record on premium increases is not encouraging. Some of these threads may provide you with some background information: http://www.early-retirement.org/for...ng-term-care-ltc-and-ltc-insurance-30860.html

 

[East Texas]

<snip>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?

Same with health insurance premiums. I don't know about the rest of you; but, our homeowners and auto insurance policies also go up every year.

As I said in the previous post, I would rather have insurance and not need it than need it and not have it.

 

[easysurfer]

The way I see it. To buy LTC insurance or not either makes you a fool or a genius.

The kicker is no one knows which one yet

 

[East Texas]

The way I see it. To buy LTC insurance or not either makes you a fool or a genius.

Why is it that statement is never made about any other type of insurance? I've never filed a claim against my homeowner's policy, yet I would never think of not having insurance (that premium is a lot more than my LTC premium). With the exception of 2009 I've paid out more in health insurance premiums than claims paid, yet I still carry health insurance. Same with auto insurance. I wouldn't think about not having it, yet I haven't had a claim in decades.

I just don't know why LTC garners such adverse attention.

 

[easysurfer]

Why isn't that said for other insurance? I say probably because of the large premium amounts. For example, say you pay $2K a year for 20 years for LTC but never use it. Well, that's 40K down the drain.

Of course, if you do need it, that the $40K is money well spent.

 

[Chuckanut]

With my luck I will pay for LTC care insurance and then live to the mid 90's as a spry, healthy old codger!! On my 96th birthday my girl friend will shoot me dead when she finds me in bed her her best friend! I will never collect a penny on LTC insurance. What a drag!

 

[Chuckanut]

LTC insurance is a real crapshoot and the track record on premium increases is not encouraging. Some of these threads may provide you with some background information: http://www.early-retirement.org/for...ng-term-care-ltc-and-ltc-insurance-30860.html

For some reason I thought LTC insurance was like the term life policy I purchased many years ago. The rates went up every 3 years but by a a scheduled amount. The rate increase was locked in, so I could see exactly what I would be paying 10, 20 even 30 years into the future. Of course, the benefit was also locked in.

 

[East Texas]

Why isn't that said for other insurance? I say probably because of the large premium amounts. For example, say you pay $2K a year for 20 years for LTC but never use it. Well, that's 40K down the drain.

Of course, if you do need it, that the $40K is money well spent.

I pay $2,000 a year (and rising) for my HO policy. I'm paying a bit less than that for LTC. Haven't had a claim on either policy. I just don't see the difference. Insurance is all about assuming or avoiding risk.

 

[easysurfer]

I pay $2,000 a year (and rising) for my HO policy. I'm paying a bit less than that for LTC. Haven't had a claim on either policy. I just don't see the difference. Insurance is all about assuming or avoiding risk.

Maybe it's psychological then. Perhaps one thinks the chances of having an insurable incident with a homeowner's policy is more relevant than a LTC policy because events seem more immediate. How it all plays out, whether one will file a claim or not, who knows?

 

[tightasadrum]

Maybe it's psychological then. Perhaps one thinks the chances of having an insurable incident with a homeowner's policy is more relevant than a LTC policy because events seem more immediate. How it all plays out, whether one will file a claim or not, who knows?

Let's consider HO vs LTC insurance relative risks:

HO risk is primarily that of natural disasters or fire or flooding. These could happen anytime starting today. The earlier it happens, the easier it will be to recover from, even if you have to work a little longer.
So the risk is distributed over a lifetime. Yet, HO insurance is considered essential.

LTC risk is mainly an end-of-life disaster. Your ability, or actually your spouse's ability, to recover from this type of disaster is pretty small. And the costs can be stunning.

So, if you don't have any assets anyway, you probably don't need LTC insurance. If you're assets are large, let's say, for sake of argument, over $2MM minimum in investment assets, then you can most likely self insure. But, if you are in between, LTC insurance, though expensive, may be worthwhile.

I've got LTC for DW and me. And hopefully I'm throwing that money down a rathole.

Incidentally, I pay more for HO than LTC.