Incredible increase in LTC policy premium

[bubblehead]

Any insurance is expensive, unless you need it.

A friend's parents were retired and living frugally in their life-long small home. A tornado came along and destroyed the home, fortunately they were visiting neighbors at the time.

It turns out they had cancelled their homeowners insurance because it was "too expensive".

I moved away shortly after, and lost track of them. But they certainly did not have the money to rebuild and I'm not sure they had enough money to rent.

We can't insure against every possibl problem; but need to look at both the probability of an event happening and what the consequences would be if it does happen. Look at the insurance cost, and choose wisely.

troweprice gave me a free morningstar premium enrollment-i had never been there-and i ran across this. might be pertinent


Long-Term Care: Denial Is Not One of the Choices

 

[martyp]

My wife proposed another way to think about the new options offered by CalPERS. She pointed out that we have inflation adjusted pensions with the Univ. of CA. which is money that could be used toward the daily long term care costs. The CalPERS benefit could then be used to just make up the difference. For me, Option 5 provides for a lump sum benefit of say $800k (10 yrs at $222/day current $). The benefit isn't limited to 10 yrs of payouts. It is limited to the $800k.

If I was in a long term care facility at $6000/month then I would only need to use $6660 - $5000 (pension) = $1660/month of the CalPERS benefit which would would last 40 yrs (not just 10 yrs). Since the average stay in a facility is 3-6 yrs, this option would give more than enough coverage even considering actual local costs for long term care and future inflation factors.

Does this sound right?

 

[ejman]

I'm leaning to the 10 year option as well.

 

[timo2]

My wife proposed another way to think about the new options offered by CalPERS. She pointed out that we have inflation adjusted pensions with the Univ. of CA. which is money that could be used toward the daily long term care costs. The CalPERS benefit could then be used to just make up the difference. For me, Option 5 provides for a lump sum benefit of say $800k (10 yrs at $222/day current $). The benefit isn't limited to 10 yrs of payouts. It is limited to the $800k.

If I was in a long term care facility at $6000/month then I would only need to use $6660 - $5000 (pension) = $1660/month of the CalPERS benefit which would would last 40 yrs (not just 10 yrs). Since the average stay in a facility is 3-6 yrs, this option would give more than enough coverage even considering actual local costs for long term care and future inflation factors.

Does this sound right?

Sounds like a reasonable plan.

 

[ejman]

Good, bad or indifferent I decided to go with the 10 year non inflation adjusted option. What I liked about this option is that in 3 years I can increase coverage ( for more premium of course) if the inflation winds at that time are blowing in that direction. If instead we are doing a Japan like dance no need for it.

 

[samclem]

What I liked about this option is that in 3 years I can increase coverage ( for more premium of course) if the inflation winds at that time are blowing in that direction.

Do look carefully at those rate increases--they can be astounding. I was tempted to do as you did, but it wasn't made clear to me at first that the ongoing "adjustments" are really the purchase of brand-new LTC coverage on the now-older person. Older people pay much higher premiums, especially since the insurance company has guaranteed to sell it to you and they have to price-in the fact that you'll have ongoing better knowledge of your health issues. The folks more likely to need LTCi (early-stage Alzheimer's, general frailty, etc) will definitely keep buying the increases, so that adverse selection is already baked into the price. As I got older the additional coverage needed to keep pace with inflation went out of sight.

 

[ejman]

Do look carefully at those rate increases--they can be astounding. I was tempted to do as you did, but it wasn't made clear to me at first that the ongoing "adjustments" are really the purchase of brand-new LTC coverage on the now-older person. Older people pay much higher premiums, especially since the insurance company has guaranteed to sell it to you and they have to price-in the fact that you'll have ongoing better knowledge of your health issues. The folks more likely to need LTCi (early-stage Alzheimer's, general frailty, etc) will definitely keep buying the increases, so that adverse selection is already baked into the price. As I got older the additional coverage needed to keep pace with inflation went out of sight.

Fair enough. If the increases just get too high I'll just do what I've been tempted to do all along with this flawed product- drop it. Or alternatively retain the original coverage until the amount of it becomes irrelevant due to inflation.