Self-insuring for LTC????

[foxfirev5]

This is a great description of my mindset.

I am self-insuring.

In a sense, with a policy that only pays for four years, you too are self-insuring for any long term care situation that lasts beyond four years. Your LTC policy pays $216/day for four years, that comes to a total of $315,576 right now. It will increase, but so will my portfolio at some rate beyond inflation, I presume. If one runs FIRECalc and specifies that, say, a minimum of $500K must remain in the portfolio at all times, that half million could be used for LTC.

Exactly. I can not see how LTC insurance could be compared to term insurance or some of the other parameters suggested here. It's a rolling crap shoot at this point and everyone should probably look out for their own best interests. Buyer beware

 

[REWahoo]

I can not see how LTC insurance could be compared to term insurance...

Gearhead Jim gets the concept. Use LTCi to bridge the gap, then cancel when you reach the point you feel you can self-insure.

Some day, the premiums may become too expensive for us to stomach. But right now; if one of us goes into a home we don't want the other to be impoverished. Wait until we no longer have the health to go racing or traveling, then dropping the LTC makes more sense.

 

[imoldernu]

The best rule of thumb I've seen is from this piece from Forbes:
10 Questions To Ask Before Buying Long-Term Care Insurance - Forbes

+1

The income brackets make sense to me. For those with less than $1million in assets, a combination of home ownership and medcaid makes sense in todays legal structure.

Looking at today's insurance policies, I wouldn't buy. We began our policies in 1995 and have $100/day coverage for 3 years. Premiums (for 2) are about $2400/yr. and haven't changed in 7 years. Currently Nursing Home care in our Long term care community is about $77K. Our total current investment is about $50K. A 3 year nursing home stay would see a savings of about $100K using the policy income. So no, we wouldn't buy again, but with our current investment, it seems a reasonable bet.

BTW, our poliucy has gone through three owners, and now, along with five other original LTC policiies, has been merged and is now being administerered by a Pennsylvania Trust...(SHIP) possibly a precursor for other future mergers.
(from the site history)

The new ownership of Senior Health Insurance Company of Pennsylvania or "SHIP", an insurance company domiciled in the commonwealth of Pennsylvania, was approved on November 12, 2008, by the Commissioner of the Pennsylvania Department of Insurance.

Prior to November 12, 2008, SHIP operated as Conseco Senior Health Insurance Company. From 1997 to 2000, a number of other long term care insurance companies merged into, or were acquired by Conseco Senior Health Insurance Company.

Accordingly, SHIP will service the obligations of long term care insurance policies originally issued by the following companies:

Transport Life Insurance Company 1
American Travelers Life Insurance Company 2
United General Life Insurance Company 3
Continental Life Insurance Company 4

 

[JakeBrake]

A number of posters have stated that they fear that LTC insurance may become so expensive that they cannot afford it and they will lose their money.

So, I checked my LTC policy. My policy is complex. I won't attempt to quote it, but it does offer a variety of plans for a reduced benefit with the same or lower premium, or a paid up policy with a reduced benefit. IMHO this is somewhat better than term insurance. Whether or not this will be worth anything is unknowable. My policy also offers a partial return of premium if I die prematurely.

 

[braumeister]

My policy also offers a partial return of premium if I die prematurely.

Everyone dies prematurely.

 

[Golden sunsets]

Thanks to all who posted in reply to my query. It seems as though the group who responded for the most part come down on the side of self-insuring. At the time that we purchased the policies we were aware of the principle of self-insuring if one had assets of 2 million or greater. At the time we were on the cusp but not quite there(2008). Then of course the market went south and our TA dropped significantly. We have since recovered and then some so we now comfortably exceed the threshold. I have lingering concern however about one of us being the impoverished spouse. I think it is an irrational fear but it is there nevertheless. Add to that the fact that nursing home costs in our area are above average($7400-$10,200/mo).

I also have concerns about rising premiums, although at the time that we purchased, we were told that our policies had been designed in the "new era" after companies realized that early policies were too generous. Our premiums haven't increased in the 5 years we have owned them, but we aren't naive. They will increase. The insurer of our policies is Prudential. Last year they stopped offering LTC policies. I'm not sure if that is a good thing or a bad thing

A final point. We do want to leave a legacy to our children. Soooo.... For the time being we will continue to pay the premiums. Ironically of course we hope we will never have to cash in. Yes I too hate insurance companies.

Thanks again for sharing.

 

[Mulligan]

Thanks to all who posted in reply to my query. It seems as though the group who responded for the most part come down on the side of self-insuring. At the time that we purchased the policies we were aware of the principle of self-insuring if one had assets of 2 million or greater. At the time we were on the cusp but not quite there(2008). Then of course the market went south and our TA dropped significantly. We have since recovered and then some so we now comfortably exceed the threshold. I have lingering concern however about one of us being the impoverished spouse. I think it is an irrational fear but it is there nevertheless. Add to that the fact that nursing home costs in our area are above average($7400-$10,200/mo).

I also have concerns about rising premiums, although at the time that we purchased, we were told that our policies had been designed in the "new era" after companies realized that early policies were too generous. Our premiums haven't increased in the 5 years we have owned them, but we aren't naive. They will increase. The insurer of our policies is Prudential. Last year they stopped offering LTC policies. I'm not sure if that is a good thing or a bad thing

A final point. We do want to leave a legacy to our children. Soooo.... For the time being we will continue to pay the premiums. Ironically of course we hope we will never have to cash in. Yes I too hate insurance companies.

Thanks again for sharing.

I can see your hesitancy to give up the policy if leaving a legacy is a priority. $7400-$10,200 a month? Wow! Well I guess you would have another option to help preserve the nest egg. If you ever health ever gets bad enough you cannot live on your own, get a friend or relative to throw you over their back and head to the airport. You can get a nice nursing home in parts of the Midwest for half that. Just make sure you say bye to everyone as you probably wouldn't get many visitors.

 

[Golden sunsets]

Ha ha. Thanks Mulligan. I should have pointed out that the range of rates is for a single occupancy room. But double occupancy rates were only 1,000 or so less per month. Unless DH or I were comatose I'd like a private room.

 

[Mulligan]

Ha ha. Thanks Mulligan. I should have pointed out that the range of rates is for a single occupancy room. But double occupancy rates were only 1,000 or so less per month. Unless DH or I were comatose I'd like a private room.

You reminded me Golden of a recent discussion I had with my elderly neighbor couple who are both in their 80s. Very much the planners. They both have already made preparations for the nursing homes they will live in if ever needed. The hilarious part is they both have chosen separate facilities not even in the same county. I guess they have spent enough time together already.

 

[cj]

You reminded me Golden of a recent discussion I had with my elderly neighbor couple who are both in their 80s. Very much the planners. They both have already made preparations for the nursing homes they will live in if ever needed. The hilarious part is they both have chosen separate facilities not even in the same county. I guess they have spent enough time together already.

LOL! There was a time when my parents were both in a rehab facility at the same time for different reasons. The social worker asked if they wanted to be in the same room, and my mom said NO!!!! She does spend most of her waking hours taking care of my mostly-immobile dad. He seems to go into the hospital once or twice a year for various surgeries and problems. Mom refers to these hospital visits as her "vacation".

As far as LTC, we have had various friends and "advisers" suggest that we get it, but I have zero confidence in an insurance company being in business and able to pay out if I need them in 25-30 years, not to mention the probability of constantly increasing premiums. JMHO

 

[Mulligan]

LOL! There was a time when my parents were both in a rehab facility at the same time for different reasons. The social worker asked if they wanted to be in the same room, and my mom said NO!!!! She does spend most of her waking hours taking care of my mostly-immobile dad. He seems to go into the hospital once or twice a year for various surgeries and problems. Mom refers to these hospital visits as her "vacation".

As far as LTC, we have had various friends and "advisers" suggest that we get it, but I have zero confidence in an insurance company being in business and able to pay out if I need them in 25-30 years, not to mention the probability of constantly increasing premiums. JMHO

Hilarious, CJ. Mom must not get much quality "alone time" if she can only get it in a rehab facility.

 

[gindie]

I guess they have spent enough time together already.

I think that's certainly the case with this couple! Woman threatens to kill husband of 71 years, says it's her 'right | www.wpxi.com

Sorry for the OT.

 

[Amethyst]

I sometimes hear men say this (including Mr. A. who doesn't even own a gun). I always wonder at what point, before total dementia, that somebody would "know" all hope is lost, it's time to pull the trigger, and would still be able to do so. Gruesome line of thinking!

Amethyst

. Me I am self insuring with Smith&Wesson.

 

[marko]

If one of us has to go into LTC, I would consider selling our house, renting a small apartment, and using the equity to pay for the LTC.

I would suggest finding an attorney/accountant that specializes in "elder law" first.

 

[obgyn65]

To the OP: I agree with the recommendations from the article provided below.

Good luck with your decision.

The best rule of thumb I've seen is from this piece from Forbes:
10 Questions To Ask Before Buying Long-Term Care Insurance - Forbes

 

[googily]

Having watched my father take care of my mother at home over the past few years with a type of non-Alzheimer's dementia that has required much non-skilled care (more like babysitting for a lot of time) , I do have a little input about the psychology of LTCI.

My father (almost 80, and not really the care-giving type) could definitely have afforded to self-insure, but he got an LTC policy a few years ago very much like the one the OP described. Looking back, as Mom got harder to handle but not impossible, I wonder how much longer he would have delayed getting help if he had had to pay for it himself. Of course, he has been paying for the insurance, but I think we all know how much it feels like "our" money when it is purely out of pocket.

Even with the insurance, my brother and I had trouble convincing him to look for home health care assistance, and then to extend the hours (still under the daily cap). I can only imagine the battle if it had been without LTCI. I also think he would have been expecting me to drop everything, leave my full-time job, etc, to help with the care. Um, no.

My mother will never be in a nursing home (the only time in her life she will save Dad any money, lol), but the assistance he has gotten to this point that his insurance has paid for has probably done as much to preserve his health as hers. And has preserved my sanity too.

None of this has anything to do with the financial value of LTCI, but just a few things to ponder. Long term care doesn't always purely mean "nursing home."

 

[REWahoo]

...the psychology of LTCI.

A good point. Discussions of LTCI predominately focus on the financial aspect of the insurance but there are other issues that need to be considered. Googily gives a great example of why,at least for his parents, the benefits of LTCI went beyond financial considerations.

 

[googily]

... And, as I think about it, I also wonder: if Dad hadn't had LTC and would have gone insane trying to care for Mom himself, would she have ended up in a nursing home after all? LTCi allowed him to really think about getting home health aides and come up with a solution that has allowed her to stay at home (and she is now on hospice, so she'll remain there).

 

[potto0213]

Does a deferred annuity make sense as an alternative to LTCi? It seems to me that this would provide a means to fund assisted and/or long term care while still making the income stream available for other uses if not needed for LTC.

 

[samclem]

Does a deferred annuity make sense as an alternative to LTCi? It seems to me that this would provide a means to fund assisted and/or long term care while still making the income stream available for other uses if not needed for LTC.

It's not a very good fit.
1) You'd have to know when you are going to need the LTC. Some folks need care early, and LTCi covers that.
2) The monthly checks would have to be big ($7000+ right now, and getting higher each year) to pay the LTC costs. That requires a very big annuity premium. Big annuity premium = happy annuity salesman but a lot of front-end cost.
3) If you are needing this care, you >probably< won't be around as long as your healthier peers. So, you'd receive those annuity checks for a shorter time period than the actuarial average--just the opposite of what we'd want as annuity customers.

For those of us worried about impoverishing a spouse, some people recommend just buying "first-to-die" joint life insurance to refill the retirement investments when the first spouse dies. It's not a perfect fit, either (the spouse in LTC can hang on for a loooong time, depleting all the saved funds before the life insurance pays off. And life insurance rates for old people are high.) But at least life insurance is a stable product with premiums that aren't escalating, there's no ambiguity about whether the payout is due, the companies have a good track record of paying off, and at least somebody will get a check.

 

[Dawg52]

I've always been an in between kind of guy. By that I mean I self insure a portion of my needs. For health insurance, I have a policy with $10k deductibles. For LTC, I have a policy through my former employer that is basically a supplemental policy. Right now if I were to use it, it would pay for the majority of my needs. Twenty years from now, it won't come close. The plan only had a limited number of years with a cola rider which will be running out in a few years. But the policy is very cheap so I'm fine with it. As I said, I look at it as a supplemental policy.

My policy has not had one increase in the 11+ years I have owned it. Who knows, 5 years from now it may be out the roof. If that happens, I might drop it. And if I do, I won't feel as though it was a bad deal due to the low cost and the plan did bridge a gap as Rewahoo pointed out.

Many ways to look at it.

 

[Katsmeow]

It's not a very good fit.
1) You'd have to know when you are going to need the LTC. Some folks need care early, and LTCi covers that.
2) The monthly checks would have to be big ($7000+ right now, and getting higher each year) to pay the LTC costs. That requires a very big annuity premium. Big annuity premium = happy annuity salesman but a lot of front-end cost.
3) If you are needing this care, you >probably< won't be around as long as your healthier peers. So, you'd receive those annuity checks for a shorter time period than the actuarial average--just the opposite of what we'd want as annuity customers.

The deferred annuity isn't a perfect fit and I don't like having to buy it now. Still, I think some of those issues could be handled.

For example, you don't necessarily need a check big enough to pay the entire cost of LTC. It just has to be big enough to pay the cost of LTC that wouldn't be covered by the person's SS check and any pension.

Can deferred annuities be joint like immediate annuities? If so, that would take care of point 1. That is, if the person who needed LTC needed it earlier, it could be paid for by portfolio and then the survivor would get payment later from the annuity.

OTOH, I wonder if an immediate annuity might not work better. That is wait until one spouse needs care, then buy an immediate joint life annuity. It probably wouldn't be enough to cover the entire cost of LTC but might help some.

 

[Katsmeow]

I have really been struggling on the LTC issue.

We fall within that range of people who have enough that we could preserve something by buying insurance but not necessarily enough to really self-insure (closer to 1 million than to 2 million in net worth).

DH's mother spent 8 years in a nursing home and so we know it could happen.

We didn't buy it when younger (I'm 59 and he is 65) so even if we qualify (I think we would), it would be expensive.

The thing is that the product has so much wrong with it. I am worried that we would sacrifice to pay premiums and then would not be able to afford it 10 years from now and would have to drop it. Yes, we would have had the benefit of it for the 10 years but at that point - having no LTCI - I would wish that I had set aside the premium cost for the 10 years instead. And of course, if premium are substantial and keep going up it could get to a point where more than 10% of our spending was just on LTCI premiums which would affect quality of life. And, if we then had to drop the coverage because it became too expensive well that would cut very closely. And, if coverage is kept in place I worry about the carrier going under and about the policy of the carrier trying to get out of paying.

On the other hand, I have run numbers and we could manage if one of us (probably DH since he is older) was in a nursing home for 3 years. We live in one of the less expensive states for LTC. What scares me though is the possibility (unlikely but it could happen as with DH's own mother) is DH being in a nursing home for 8 years. That would impoverish me. The amount of money that a spouse can keep for the other spouse to be eligible for Medicaid is not that much. In this state, it currently appears to be $115,920 + home equity up to a specified amount. That isn't much when you consider that all I would have as a survivor would be SS plus those assets. And, of course, the law could easily change in the future. Maybe 10 years from now I wouldn't even get that amount.

 

[Animorph]

One of the things that had me self insuring was the pricing of LTCi. It's clear that you are building some "equity" with your early payments. Payments are roughly constant, without predetermined age related steps, for a lifetime policy. Not something you'd want to start paying for at 40 and then bail out of because of price increases when you reach 65.

That said, the insurance companies should have a pool of money for a given set of LTC policies. If lots of people in that pool drop out, the remaining insured may not see rising premiums. Sort of like SPIA mortality credits.

 

[FIYes]

Katsmeow, you have stated my concerns exactly. I too worry about one of us becoming an impoverished spouse if the other went into a nursing home. I also am concerned about paying Ltc premiums for years and then being unable to keep up with ever increasing premiums just at the time one of us may start to need Ltc. For now I am looking at "walling off" an amount each year for Ltc instead of paying premiums.