Long Term Care Insurance

[samclem]

I have never completely understood many of the complaints against long term care insurance. Premiums are not guaranteed, but I do think that competition among the companies that offer LTC helps to ensure rates will be kept down to some degree.

Policies offering inflation protection (which are the ones to buy) are heavily front-loaded with costs. If a client stays with a company for ten years (having already pre-paid for insurance he'll need decades later) he's in deep to his present company. Now, when that company decides to raise rates, what is that person to do? There's no competition at that point. And when companies depart the market (an dthey do, another problem with these policies), the clients on tbeir books are at their mercy, protected only by state insurance commissioners.

The other thing is that people often think of these policies only providing coverage in old age, but they could be utilized much earlier if someone had an accident or illness. If you know for certain that you won't need coverage until you are older, then self insuring might be a better option, but if you need coverage before you have had time to accumulate assets, then you are out of luck. To me, that is a big part of the insurance component of the product.

Sure, it could happen. But the odds are very low. The insurance companies indicate that about 2.8% of people between 18-64 need LTC, but they don't mention the odds that a person who could pass a physical would later need LTC before age 65. My guess is that most younger people in LTC are receiving it due to congenital or childhood conditions and could never have purchased commercial LTC insurance.

 

[stephenandrew]

Sure, it could happen. But the odds are very low.

I completely agree, but (from what I have seen online) the odds of a 25 year old American dying in a given year are 0.03% (1 in 3000); the odds of dying at 42 are about 1 in 750 (or .13%)---very low odds, but lots of folks from 25-42 buy life insurance to protect them from just these sorts of low probabiity events. All I was really trying to point out, was that you are getting something for your LTC premiums beyond coverage at age 88 years old. Is it worth it? I can see a rational person coming the conclusion it is not, but I am not conviced buying a LTC policy is a bad idea.

 

[chinaco]

We received our LTC premium notice for the coming year.

This is a group plan through work.

The inflation protection is offered every 3 years. It is a 5% compounded boost to the benefit amount. This is the the year the inflation protection is offered.

There are two options:

1. Take the compounded inflation boost of 5% for the payout which is a little more than 15% added to the benefit payout level at the cost of a premium increase is about 25%
2. Keep the current payout level at the old premium level.

Obviously we will take inflation protection offer.

I have no doubt the cost of this policy will increase substantially as we age. But for now it is pretty low for adults in mid 50s.

I checked AARP for a similar quote. The cost of our coverage is about 28% of their quote for a similar policy.

Our plan covers about 5 years of local NH care ( based on the daily benefit and total cap on benefits) or about double if the care is in-home (in-home can be drawn at 50% the NH benefit).

I just pray we will never need it. This is a benefit I would much rather pay for and not use... I would rather my premium contribute to the care of someone else.

 

[samclem]

We received our LTC premium notice for the coming year.
. . . (option) Take the compounded inflation boost of 5% for the payout which is a little more than 15% added to the benefit payout level at the cost of a premium increase is about 25%

Be sure to take a look ahead at what the premiums will be. When I first investigated these policies, I was intending to buy a policy with an option to increase the coverage with inflation every few years, but the premium costs get astronomical in later years. As you probably already know, the reason you are getting just a 15% increase in coverage but paying 25% more in premiums is that you are actually buying more insurance at your present age, rather than paying the rate you got when you first purchased (at a younger age). This effect really escalates as you age--can you imagine what it will cost when a person is 80 years old and wants to maintain the inflation coverage.