ltc & disability insurance

[frugal]

I am 33 years old and working on saving enough for early retirement. Currently have the mortgage paid off, but with two children will need to increase my savings. My husband is ten years older, a financial planner suggested we consider long term care insurance for him sooner rather than later for him. I will probably wait until he is at least 50 to seriously consider purchasing. Curious as to whether other people have purchased it or will take their chances. Disability insurance is another one I have trouble spending the money on. I realize he is most likely to use this. He works for a very small company, so no coverage there. At this point if something very serious happened i.e. stroke we would have to be prepared to sell the house and invest the money. Currently have health insurance and would not be without that. If I purchase disability insurance it involves getting a second job to pay for it as our budget is tight. Any thoughts are appreciated.

 

[thebacchus]

I am 33 and also saving for ER. We have not thought about ltc ins. yet, but we both have life & disability insurance. My wife's (disabilty) is a group plan through her employer. Mine (disability) is a private policy. Both life insurance plans are private policies. My view is that until we can afford to live off of our assets, disability insurance is great protection and should be the foundation of a financial plan. (IMHO - although I may sound a bit like an insurance salesman, which I am not.)

We do not have any children, but I still view life insurance and disability as essential needs at this point. Once we have enough assets that we could live off of the earnings, my plan is to cancel the disability. At this point it is protection for my wife & I should something happen to me disability wise.

The life insurance we may keep forever. These are variable universal life. (cash value, invested in mutual funds.) We may use the cash value of these to take the place of ltc in the future. My view is that in the short run they act as protection should one of us pass on, and in the long run they may provide the ltc coverage we need on a self insured basis. Only time will tell how it works.

My two cents: Get enough life and disability to protect yourself and your children in either instance.

Regards,

thebacchus

 

[Bob_Smith]

Curious as to whether other people have purchased it or will take their chances.  Disability insurance is another one I have trouble spending the money on.

My wife and I bought LTC insurance at age 49/48. I think it is necessary for most people. They do look very closely at your health, so it's probably best to buy it sooner rather than later. It is quite complicated, so be prepared to do your homework. I spent many hours researching, studying, and comparing.

Disability insurance is another tough one. I am fortunate to get it through my employer for free. If you become disabled and are unable to work, you can't count on SSDI - it is very tough to get and won't pay unless you are unable to do ANY job. You probably should get a policy that doesn't start paying unless you are unable to work for quite some time - the longer the waiting period you can afford, the better.

 

[sgeeeee]

If you can find it, the November 2003 issue of Consumer Reports has an article on page 20 titled, "Long Term Care Insurance". The article makes a case that this insurance is not a wise purchase for everyone. It goes through what age groups and types of people probably shouldn't make the purchase and it rates and compares some available coverage for those that should get it. The article goes through all of the fallacies in the standard arguments insurance salesmen use to get people to buy.

I was considering getting this insurance when the article came out. After reading the article, I decided it makes sense for me to wait.

Good luck.

 

[thebacchus]

"You probably should get a policy that doesn't start paying unless you are unable to work for quite some time - the longer the waiting period you can afford, the better."

The above is a good point. One way that we saved quite a bit on the premium was by setting up the policy so that it didn't pay until I am out of work for 6 months. This works for us since we have an emergency fund. Also worth noting would be "same occupation" coverage.

 

[John Galt]

No advice, but here is what I did re. insurance.

With youngsters at home, I bought term life only.
Disability coverage was only obtained if provided by
my employer, or a small amount of coverage on my own if cheap enough.
Presently we have no disability coverage (since I am not working
anyway), no life insurance, and no long term care insurance. Other than insuring the usual (home, cars etc) all we carry is our low-premium health care
and a very low premium cancer policy through
an organization I belong to. That's it.

So far so good.

John Galt

 

[Ted]

I think that practically every working adult should be covered by disability insurance, and agree that it is most affordable when it has a fairly long waiting period before it pays benefits.

Life insurance is a more complicated story. It is really only appropriate for people who have family members who are financially dependent on their earned income. In almost every case, term insurance is a much better deal than "cash value" or "universal" policies, because term insurance is "transparent" (i.e., its cost and benefits are clear and simple) and as the result there is excellent price competition between companies that issue it. It is easy to compare rates over the Internet.

In contrast, "cash value" and "universal life" insurance are a complex combination of life insurance and annuity. Concealed within this complexity are very high expenses, particularly in the form of a big commission for the salesman. A person can accomplish the same life insurance coverage and tax-deferred investment performance at much lower cost by separately purchasing term insurance and a deferred annuity -- especially from a low cost company like TIAA-CREF.

Even an annuity from a low cost company should be purchased as a tax deferred investment ONLY after a person's contributions to other retirement accounts such as 401(k) plans and Roth IRAs have been maximized.

I have a "cash value" policy with Northwestern Mutual, and it is providing a very good tax-deferred return of around 7% per year on its cash value. But to get this benefit, I had to pay a big, essentially hidden commission when I bought the policy 20 years ago, and wouldn't do it again.

 

[Allan]

I bought a large (1.4 million) life policy at age 50 because I am in business, and I use a fairly large $ amount of personal funds in my business. Depending on different variables, if I were to die, my wife would possibly be in somewhat of a cash flow bind while going thru months of disposing of our company assets. She could possibly not get market value for those assets either. Because, of this, I bought the life insurance policy, it makes her sleep better! I also decided to go with a universal life, knowing all the pitfalls you mentioned. I currently contribute 40K annually to my retirement funds, my wife does the same, and I add 50K to the cash value of the life policy, it pays 5.5%. The universal life also offers creditor protection for the cash value, which was an issue. I spent several months analyzing the numbers with the Met Life salesman, and decided to go this route, however, I did consider term plus an annuity as you suggested. After 3 years, I have no regrets.

I also purchased a long term care policy thru John Hancock on myself, it is a 10 year paid up policy-pay premiums for 10 years then it’s paid for life. I am also able to pay the premiums thru my company as a business expense, so some savings there.

Allan