If I had to pay $250/mo for the LTC policy you described, I wouldn't. And if mine increases to that level I would seriously consider dropping it. But I consider it part of an overall health, family and estate plan. My belief is in God, not luck.
LTC Poll
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If I had to pay $250/mo for the LTC policy you described, I wouldn't. And if mine increases to that level I would seriously consider dropping it. But I consider it part of an overall health, family and estate plan. My belief is in God, not luck.
A lot of misunderstanding because of a lot of differences in policies
Many people only hear of LTCi and don't understand the many nuances and variables that play into the policies. Also, there are so many differences in what policies cover and and what they do. So if someone were to tell me that they were paying $50/month that tells me nothing because the contracts of ltc can be so different particularly when you bought your policy.
My policy is a four year one. It pays me $200+ per day, it is compounded 5% each year. The policy pays for home health care, assisted living care, nursing home care. The policy also has a spousal clause that once it has been in force for ten years and it has not been used, that the other's policy will be paid for upon the death of the other spouse. It pays for a care coordinator. It will pay for modifications to my house for things like handle bars in my bathroom. It pays local community health agencies that may come to your home. It also pays for any new stuff that may not be discovered yet. It is a very comprehensive policy. It costs all of $168/month for my wife and $186/month for me. That's for two of the same policy. it helps me to protect my assests. For every dollar that my policy pays, my assets are protected. So my $500,000 in stocks and bonds is safe from the state if I run out of other monies and need Medicaid. My wife is protected from being drained. I saw this happen to a friend who had a stroke and they ended up declaring bankruptcy. They were in the middle class category and when they no longer had money to pay on their own the had to depend on Medicaid. The government looked back and used his savings and then gave him them Medicaid. With a partnership plan, those assets would have been protected and then the Medicaid would have been provided. So in other words if your ltci policy paid out $300,000 then $300,000 of your assets would be protected if you needed care and money beyond that. This is what ltc partnership policies do. In my state, CA, the ltci partnership policies have never been raised so far. I hope this continues.
Many people only hear of LTCi and don't understand the many nuances and variables that play into the policies. Also, there are so many differences in what policies cover and and what they do. So if someone were to tell me that they were paying $50/month that tells me nothing because the contracts of ltc can be so different particularly when you bought your policy.
My policy is a four year one. It pays me $200+ per day, it is compounded 5% each year. The policy pays for home health care, assisted living care, nursing home care. The policy also has a spousal clause that once it has been in force for ten years and it has not been used, that the other's policy will be paid for upon the death of the other spouse. It pays for a care coordinator. It will pay for modifications to my house for things like handle bars in my bathroom. It pays local community health agencies that may come to your home. It also pays for any new stuff that may not be discovered yet. It is a very comprehensive policy. It costs all of $168/month for my wife and $186/month for me. That's for two of the same policy. it helps me to protect my assests. For every dollar that my policy pays, my assets are protected. So my $500,000 in stocks and bonds is safe from the state if I run out of other monies and need Medicaid. My wife is protected from being drained. I saw this happen to a friend who had a stroke and they ended up declaring bankruptcy. They were in the middle class category and when they no longer had money to pay on their own the had to depend on Medicaid. The government looked back and used his savings and then gave him them Medicaid. With a partnership plan, those assets would have been protected and then the Medicaid would have been provided. So in other words if your ltci policy paid out $300,000 then $300,000 of your assets would be protected if you needed care and money beyond that. This is what ltc partnership policies do. In my state, CA, the ltci partnership policies have never been raised so far. I hope this continues.
nvestysly
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DW and I have LTC insurance. We opted for LTC because if something happens to one of us now (near term) it would have a very detrimental affect on finances. However, we may find that 10 years from now our nest egg has grown substantially (let's hope) and we may discontinue the LTC premiums. We'll give that more consideration when the time comes.
I don't know policy specifics off the top of my head but I seem to recall the inflation rider, 90 day period, 5 year limit for each of us (assuming we are using it at the maximum daily rate), however, I can use hers and vice-versa - meaning one of can use it for 7 years and there will still be 3 years remaining.
I don't know policy specifics off the top of my head but I seem to recall the inflation rider, 90 day period, 5 year limit for each of us (assuming we are using it at the maximum daily rate), however, I can use hers and vice-versa - meaning one of can use it for 7 years and there will still be 3 years remaining.
jimbee
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One will get you about as far as the other.
jclarksnakes
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If someone really has significant assets they should instead consider self insuring. Reading one of your other posts it looks like your LTC insurance would only pay a maximum of around 300 thousand in todays dollars. For me a fundamental part of my lifetime LBYM mentality is that one should only buy insurance to cover losses that one cannot afford. We could afford to self pay for LTC if needed so we self insure.
As I stated my policy has a 5% compounding interest added to it each year to it. So yes, it's about $300,000 today but won't lose its value over time.
I will let you know that some people who do have say between $250,000 and $500,00 in assets could greatly benefit from LTCi. Those are the ones in the upper middle class income range that are most susceptible to needing to provide their own resources for LTC needs. Why use all of your savings and possibly leave your spouse worn out from caring for you and then destitute behind it. A partnership policy would be beneficial. Also, there are many financial planners that recommend LTCi for wealthier clients to protect their assets in case of a LTC need. Again, protecting assets by minimizing risks is the goal.
jclarksnakes
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Are you talking about 250K to 500K in total retirement assets? I do not see how a quarter to half a million in total retirement assets can generate enough income to put anyone into the upper middle class income range. If that is all they had to live on in retirement they might have to choose between eating and making the LTCi payment. If you are instead talking about a couple who have that amount in investable assets and also both have good SS then perhaps LTCi is right for them. That couple could be doing okay financially but they would still have total income way less than upper middle class range. At the risk of sounding like a broken record I will repeat that people with substantial assets should consider self insuring.
Looking at the results of the poll it looks like there are quite a few members of this forum who have elected to self insure.
If you are a millionaire, then yes you can afford to pay for your own long term care and not buy insurance.
When I say upper middle class, I mean people who have salaries or pensions that exceed $200,000 and have substantial retirement assessments. There are quite a few of these folks. They are the most at risk to have their assets taken because they could pay for it but are too wealthy to get public assistance until their assets are spent down and they are not wealthy enough to pay their own way entirely. They are caught in the middle. They can reduce their exposure with ltci.
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Katsmeow
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They are very different.
When you get auto or home insurance you are paying for this year only. If the carrier sends you notice that it is raising your premium for next year you can easily shop and go somewhere else if you are so inclined. Each year is paid for independently.
LTCI is different. You are signing up for it and are planning to keep it forever. When people sign up for LTCI they are mostly worried about lengthy periods of needing long term care in later life. Sure, they might need it tomorrow. But that isn't what most people are worried about.
If you are paying for LTCI at 50 then you have to be concerned about whether your insurer will even exist 30 years later. And, if the carrier raises your rates you may not be able to just go to some other carrier. First, you may not medically qualify. Second, those new rates might be even higher.
Also, with my house or auto it is usually fairly straightforward to determine how much coverage you need. Determining how much coverage you will need for LTC in 20 or 30 years is not so much.
Also, with house or auto insurance you can affect the premiums somewhat by increasing your deductible. You pay for the little things and the carrier pays for the big claim (house burns down, car is totalled).
LTC is totally different. The carrier pays for the shorter need for LTC (2-5 years depending on policy), but if the person is the more rare person who needs more care than that, then the LTCI runs out.
House insurance would only be similar if you were paying now to insure your house for anything that would happen in the next 30 years, you couldn't switch carriers, and if there was a fire 30 years from now, the carrier would pay the first $150,000 of loss and wouldn't cover anything beyond that even if your house was then worth $1,500,000.
I'm not saying that buying LTCI is a bad idea. I understand fully the reasons to favor it. However, the flaws are also very real.
jclarksnakes
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Do you really think a couple with 200K in pension income is in the upper middle class? If I had a 200K pension worries about LTC costs would never even enter my mind.
Yes, they are different but insurance is insurance. And there are different product lines and risks transferred by insurance. We can focus on differences between different product lines as well as focus on similarities as well. But the basic concept of any insurance, from the insured's standpoint, is that financial risk (and some emotional pull) for some event is transferred from the insured to the insurance company. Some risks for many are not worth insuring against such as product insurance (e.g. many don't see the financial or emotional benefit of extended warranty insurance for major consumer durable goods), but all of these are generally personal decisions where I believe the emotional pull is a major factor in the decision-making process.
I'm not following your logic here. I can stop my LTCi coverage every year. So, how is this any different from having a one year homeowner's policy or a two-ten year home owner's warranty insurance. I would like to keep it "forever" at current rates, but I can stop it if rates get too high or I don't like changes in coverage. My homeowners' policies change quite frequently and some of the changes reflect increasing frequencies of risk events whether it's earthquakes, hurricanes, floods, or crime.
This is really a red-herring. Why is insurer insolvency risk a major consideration for this product? Isn't the same risk involved in any line of insurance and why is it an issue when major carriers are underwriting the policies under the background of a heavily regulated industry. I do agree that the longer you wait or deliberate on this product, the individual runs the risk of becoming medically uninsurable or facing cost prohibitive policies.
Totally different? I'm not sure it's so straightforward to determine auto or home owner's insurance. I grapple with lots of issues there, as well. With my LTCi I was able to affect coverage by adjusting risk coverage, services and inflation factors. Also, my homeowner's coverage might not cover my entire replacement value of my home if it burned down and my commercial policy for a single asset real estate entity is quite limited and unsatisfactory but it makes sense to me to insure this entity, insurance flaws and all.
Yes, the flaws are very real but I think you have too many strawmen arguments here. I don't think any of us can convince each other about whether this is the right product for anyone; at bottom, I'd take the policy warts and all because I don't like completely assuming the risk of LTC.
PawPrint53
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We have a policy for my husband, but I chose "other" for myself because I don't qualify.
I was only referring to myself, 'your mileage may vary'.
growing_older
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This has to be a very small slice of people. With a 200K pension, it's hard to see why I need to protect against a possible 200K expense by paying substantial LTC premiums. I'd much rather self insure.
The real need for insurance seems to be for truly long term care, people who might need care for a decade or two. There doesn't seem to be any policy that covers such an eventuality, although that's the real risk to your 200K people. LTC policies seem to define long term as 4 or 5 years, which may cover many possibilities but not the catastrophic ones for which I wish I could buy insurance.
Here's the thing: When a younger person (e.g. 50 or 55) takes out a LTCI policy, they are insuring against a risk that, if it occurs, is likely to come only 30 or more years in the future, it is extremely unlikely to occur in the next year. If you were just insuring for the next 12 months, the LTCI would be very, very cheap. But, you pre-pay, thorough a big chunk of your premiums, against that "way int he future" risk and the insurance company takes the money, invests it, and hopes to have enough to pay those big bills if you make a claim when you are 80 years old. If you pay for 20 years and then drop the policy (because the rates get too high, etc), then you have forfeited the many thousands of dollars of "paid ahead" benefits you already bought. This is entirely different form home or auto insurance, it's much more like whole life insurance, except there's no specific cash-value accrual with your name on it. Do people get rate increases for their whole life insurance policies? It's very common with LTCi. Insurance companies LOVE it when someone abandons a LTCi policy, because the front end loading is so high.
It's a product with a lot of problems, which is likely why so many respondents to this poll indicate they don't have it and don't plan to buy it. Maybe the insurers will come out with some reasonably-priced catastrophic LTCi in the future, but it's apparently not available now.
youbet
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I haven't posted comments in this thread because I've already made my feelings known, to excess I'm sure, in earlier threads. Yes, catastrophic coverage is what's needed. No, it doesn't seem to be available.
IMO, there are certain circumstances where LTCi would be helpful and the best solution to the LTC problem. The wealthy and the poor don't need it. Middle-wealth folks only need it if there is a spouse or other dependent who can't be protected from impoverishment or there are commitments to heirs which need to be kept and those issues are very dependent on the state in which you reside.
We recently put MIL into a NH. She had few resources and no living spouse or other dependents. She'll be private pay for 9 months (enough to allow us to get her into a "better" home) and then her SS and Medicaid will take over.
A close buddy who I consider middle-wealth shared his plan with me. He and his DW have a net worth of $900k of which $400k is their lovely home in northern Wis. They have an income of about $50k each (SS + pensions). If one is in nursing care, they pay down to the house + a bit over $100k (Wis limit) before Medicaid kicks in. So, at the death of the NH spouse, worse case, the survivor has a bit over $100k cash, a $400k house and an income of about $65k/yr. (His/her own pension and SS + 50% of the deceased's pension.) This is hardly impoverishment. So, they've chosen no LTCi. If the NH stay was less than $400k, the survivor would have more and they will have never hit Medicaid.
In our case, we have a bit more and consider ourselves able to self insure, not leave the surviving spouse impoverished and keep our commitments to pay for the grandkids' college, have a trust for a special needs grandson, etc.
If your particular financial circumstances and the rules of the state where you live dictate that a NH stay for you would leave your DW with near zero assets and income, or if you have made some commitments to heirs you wouldn't be able to keep if you private pay for NH care, then you better look at LTCi despite the issues with the product.
Each situation is different. You have to understand the rules in the state where you live. You have to understand your ability to pay and your ability to shelter resources for the surviving spouse. You have to nail down exactly what commitments you want to make to your heirs and see if you can fund those things apriori (529b, special needs trusts, etc.) with funds not visible to Medicaid.
As samclem said, a catastophic type of policy where the insured pays the first, say, $200k or 2 years, would really fill the bill for many of us. It should be inexpensive since very few would ever collect. And it would protect middle-wealth families from spouse impoverishment. Apparently the insurance companies don't feel they'd make enough money for issuing a policy like that to be worthwhile.
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Seems like a market exists for a high deductable LTCi that is more like level term life in structure (as opposed to what is being offered, which is more like whole life). It may be that insurance regulations keep these products out of the market, or maybe 'nobody' wants to offer the choice, since that would undercut the current business. Or maybe the price would just be unafordable if you were able to buy LTCi only when you really need it. After all it is 'less rare' to need LTC than it is to total your car, isn't it? Certainly less rare to have your house burn down.
youbet
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That's what I was told by an LTC/Medicare Supplement salesman. This was an agency guy representing several insurance companies. No clue if he knew what he was talking about.
MRG
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Insurance companies exist to make profits. I would have no idea if he's correct either, but it passes a reality test.
MRG
No company, maybe new to the business, wants this untapped market to itself? Seems unlikely. These companies are always offering new twists to gain a bit of market share. But it also seems unlikely that this niche has just been overlooked. Possibilities:
- The market is just too small to make it worthwhile to develop this product
- There are regulatory problems with such a product
- The payouts would be higher than we're estimating, meaning the policy prices would be too close to existing products (with 60-90 day elimination periods) and therefore not enough differentiation to make the exercise worthwhile.
- Some company is selling these policies, but we haven't heard of 'em.
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Katsmeow
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Yes, of course, you can stop your LTCI each year, but is different from switching homeowner's coverage. Two major points of difference:
1. If you decide you want to switch to another carrier such as because your insurer raised your rates a great deal, you can probably do that with homeowner's coverage. There is not much change that the house that was insurable this year won't be insurable next year. People are different from houses. Insurability for LTCI is highly dependent upon health. The person who is insurable this year may not be able to buy LTCI at any price 10 years later when the premiums double.
2. In part because of above, insurers price LTCI differently from homeowner's coverage. When you buy homeowner's insurance the price covers what the insurer thinks is the risk that you will have a loss that year. Neither you nor the insurer is obligated beyond that time. The insurer can, in fact, usually decline to renew you. With LTCI, it is different. So, the insurer prices based not so much on the risk you will need LTC that year but based upon the idea that you will (unless you drop coverage) be a customer for many years and may need care at any point from then to decades hence. So, the insurer charges based upon this model which is very different than how coverage is priced for homeowner's insurance.
Insurer insolvency is a risk because you may not need the coverage for many years. The carrier that is in great financial condition when you first obtain coverage may have gone broke by the time you make a claim 25 years later. With homeowner's coverage it is different because you are really only looking at that year. You can easily change carriers later on.
With LTCI if the carrier goes broke after you have been paying for 20 years, you may not be able to obtain coverage at all or the premiums may be too high. That is, take 2 people who are both 70. One bought a policy at age 45 and is now 70. The other's carrier went broke and the person is insurable but is now a new customer. That second person's premium is much higher than the first person because the first person's carrier has been collecting premiums for 25 years so charging less at age 70. The second person has been paying for 25 years but to the new company that second person is a new customer and pays a high premium. And, it isn't that the second person waited or deliberated. It is that the carrier went broke.
I'm not trying to convince you or anyone else that LTCI isn't the right product. I'm merely trying to point out that there there are issues with it that are not really the same as with homeowner's or auto insurance. I don't quarrel at all with you choosing to take LTCI despite its flaws. I am personally undecided on the issue. I just believe that in many ways it is not at all comparable to other forms of insurance. This is, in fact, why I think so many LTCI carriers have left the market. Those carriers have difficulty pricing it as well.
MRG
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You are correct, whenever its noticed there is a void it will be filled. Until then we have what is available. If someone knows of a 'silver bullet' I'm all ears.
When insurance company's realize selling 1000 policies at a lower rate than 500 policies at a slightly higher rate, and their leaving money on the table things change.
My experience is that insurance companies study the P/L side of new products for a long time before they are announced. The nature of LTC is problematic to study and figure out what their profit will be.
MRG
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Katsmeow
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This is reasonably close to what I have in mind. We have a bit higher net worth and our house is not quite that large a part of it. We don't have pensions, but relatively high SS. Since DH is almost 7 years older than I am, it is most likely that I end up the survivor and if I wait to 70 to take my SS, it is estimated to be about $40k/yr so I think that I would probably end up OK with the house and the little over $100k cash.
The problem, of course, is that this is based upon the current regulations. It is entirely possible that one looks at this and thinks it is reasonable and would be OK (it happens I think it is). The problem, of course, is that this could actually be happening 10 or 20 years from now and who knows what the regulations will be then. Maybe the house exemption will go down or the cash exemption will go away, etc. Maybe if your SS or other income is above $X, then you don't get the cash exemption. It is that uncertainty that is worrisome.
Regarding Medicaid qualification: There may be additional options available for preserving assets (e.g. by buying an annuity, or by using the assets to purchase a term life insurance policy with the "well" spouse as beneficiary, etc). Definitely consult an authoritative source and remember that rules vary from state to state.
+1. I'd rather not "bet" on the rules staying constant, because I doubt they will over the longer term.
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Katsmeow
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Totally agree. This is an area where you really need an elder care attorney in your state.
And, that's the thing. Many of the people on this thread who haven'tbought LTCI certainly understand the reasons in favor of buying and understand that there is a lack of uncertainty about the future. It is just that the existing policies have such issues, that they aren't at all sure that buying a policy will serve to give the protection wanted.
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