Long term care insurance

[livingalmostlarge]

Who has long term care insurance? When did you get it? What does it cost? What does sit cover? A friend ever suggests I get it today.

 

[Katsmeow]

You might find this thread with a poll that I did interesting:

http://www.early-retirement.org/forums/f28/ltc-poll-67962.html

 

[Golden sunsets]

My husband and I purchased policies 5 to 6 years ago. The cost varies greatly based on the benefits selected and age at purchase. Our policies are for 4 years of care each with a 2014 reimbursement rate of $215/day, a 5 percent annual COLA increase and a 90 day elimination. We also have a rider granting flexible use of the benefits for in home care and even the ability to take 40percent payments with no receipts required once qualified. The premium stayed the same for 6 years-about $2,800/pp per year. We were 60 when we purchased them.

Since we purchased the policies most major insurance companies have stopped selling them including our issuer. This week I received a letter from the carrier informing us that our premiums would increase by 40 percent over the next three years, starting with a15 percent increase this year. The reason for the huge increase is the insurance companies gross underestimate of the volume of claims combined with historically prolonged low interest rate environment. State insurance departments require that insurance companies reserve a high percentage of premiums to guarantee the money is available to cover claims. Companies have to justify rate increases and get approval from State's before increases are levied. My insurance agent told me that a comparable policy on the market today would cost over $6,000 per person.

 

[Chuckanut]

I would be more interested in LTC insurance if I could get a long elimination period, say 6 months, and a guarantee of a maximum premium over the years.

 

[fh2000]

My husband and I purchased policies 5 to 6 years ago. The cost varies greatly based on the benefits selected and age at purchase. Our policies are for 4 years of care each with a 2014 reimbursement rate of $215/day, a 5 percent annual COLA increase and a 90 day elimination. We also have a rider granting flexible use of the benefits for in home care and even the ability to take 40percent payments with no receipts required once qualified. The premium stayed the same for 6 years-about $2,800/pp per year. We were 60 when we purchased them.

Since we purchased the policies most major insurance companies have stopped selling them including our issuer. This week I received a letter from the carrier informing us that our premiums would increase by 40 percent over the next three years, starting with a15 percent increase this year. The reason for the huge increase is the insurance companies gross underestimate of the volume of claims combined with historically prolonged low interest rate environment. State insurance departments require that insurance companies reserve a high percentage of premiums to guarantee the money is available to cover claims. Companies have to justify rate increases and get approval from State's before increases are levied. My insurance agent told me that a comparable policy on the market today would cost over $6,000 per person.

Is the maximum payout $215 X 365 X 4 = $313,900 (using today's dollar)? Not counting COLA just to make the math simpler.

If a 60 year old purchasing today and live a long life till 90, the premium would be $6000 X 30 = $180,000.

Is this how that works? If one thinks longevity is in the genes, it might be better just self-insure. At least that is my plan for now.

 

[Mulligan]

Outside of my vehicle which is always a potential lawsuit in waiting when driving, I pay for as minimal insurance as possible. Insurance companies appear to make nice profits on taking positive outcomes on me, so I figure I would join along for the ride. It has been very successful for my whole life, hopefully the trend continues. If I paid premiums on every form of insurance needed I would never be able to retire. Betting on going to a nursing home is the last thing I want to spend my money on. Of course I am single so I can afford to take this bullheaded approach to insurance.


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[Golden sunsets]

Is the maximum payout $215 X 365 X 4 = $313,900 (using today's dollar)? Not counting COLA just to make the math simpler.

If a 60 year old purchasing today and live a long life till 90, the premium would be $6000 X 30 = $180,000.

Is this how that works? If one thinks longevity is in the genes, it might be better just self-insure. At least that is my plan for now.

You are right on the pool being $313,900 as of today. At age 90 it would be $1,228,350. And you are right that the premium over the course of 30 years would be 180,000, if there was never an increase in premiums. The question is what will the increase in the premiums be over the next 30 years. The cynical folks would guess - at the same rate as the cola. I was told that the increase I am facing is the insurance industries attempt to stabilize the plan now and not have to go back to the well constantly. I doubt that the premium will never be increased again, however I also doubt that it will increase by 5% per year. Time will tell.

Self- insuring is one avenue that we seriously considered. In the end we decided to purchase the insurance because we can afford it and did not want to confront the possibility of impoverishing a surviving spouse. We also wanted to leave a legacy to our children. It helps me to sleep at night.

 

[REWahoo]

My husband and I purchased policies 5 to 6 years ago. The cost varies greatly based on the benefits selected and age at purchase. Our policies are for 4 years of care each with a 2014 reimbursement rate of $215/day, a 5 percent annual COLA increase and a 90 day elimination. We also have a rider granting flexible use of the benefits for in home care and even the ability to take 40percent payments with no receipts required once qualified. The premium stayed the same for 6 years-about $2,800/pp per year. We were 60 when we purchased them.

Since we purchased the policies most major insurance companies have stopped selling them including our issuer. This week I received a letter from the carrier informing us that our premiums would increase by 40 percent over the next three years, starting with a15 percent increase this year. The reason for the huge increase is the insurance companies gross underestimate of the volume of claims combined with historically prolonged low interest rate environment. State insurance departments require that insurance companies reserve a high percentage of premiums to guarantee the money is available to cover claims. Companies have to justify rate increases and get approval from State's before increases are levied. My insurance agent told me that a comparable policy on the market today would cost over $6,000 per person.

I stared a thread a few years ago about our LTC premium experience. Here is the most recent update - a 50% premium increase for the year: http://www.early-retirement.org/forums/f28/ltc-insurance-premium-surprise-49854-4.html#post1407573

 

[martyp]

I've had CalPERS LTC insurance for about 10 years. They recently raised their rates substantially as has been discussed on other LTC Threads. I decided to continue with them and recently chose a policy that pays out $850,450 over 10 years. Quarterly premiums are $289.70 which is about half of what I was paying before. I am still relatively young at 58 years old and it seems like the thing to do to protect my DW. Similar to buying term life insurance when we were young to protect the house mortgage. The LTC premium will probably continue to rise but now I'm starting at a lower number so I can still afford it. There is no more inflation adjustment so I will have to cover the gap myself.

 

[Golden sunsets]

I stared a thread a few years ago about our LTC premium experience. Here is the most recent update - a 50% premium increase for the year: http://www.early-retirement.org/forums/f28/ltc-insurance-premium-surprise-49854-4.html#post1407573

Wow-big percentage increase but low premium. May I ask what your daily reimbursement rate and number of years of payment is for that premium-as well as your age? It seemslike a very low premium.

One concern that I have is, now that our insurer no longer sells LTC at all, we will be in a shrinking pool. How will that fact affect our premiums going forward?

As another anecdote, my insurance guy and his wife have their policies with UNUM and their premiums increased by 80 percent this year!!!

 

[Golden sunsets]

I stared a thread a few years ago about our LTC premium experience. Here is the most recent update - a 50% premium increase for the year: http://www.early-retirement.org/forums/f28/ltc-insurance-premium-surprise-49854-4.html#post1407573

One other question for you REWahoo. Your premium was guaranteed to stay the same for the first ten years, but is the policy you purchased a level premium type or the type that is designed to increase as you age, as described in one of the strings in your earlier posts on the subject?

 

[REWahoo]

... is the policy you purchased a level premium type or the type that is designed to increase as you age...

I'll let you be the judge. Here is the wording for the policy regarding premiums:

Guaranteed Renewable for Life/Premiums Subject to Change

Your policy will remain in effect during Your lifetime until the Maximum Lifetime Benefit has been paid, as long a each premium is paid on time. We cannot cancel or refuse to renew Your policy. We cannot change Your policy without Your consent. However, We may change the premium rates. Any change will apply to all policies in the same class as Yours in the state where the policy was issued.

 

[Ready]

I'll let you be the judge. Here is the wording for the policy regarding premiums:

​

I don't follow how that guarantee is of much value, if any. While they can't cancel your policy, they can raise the rates to any amount of their choosing, which in my mind is effectively the same as having the right to cancel. And even if increases require State approval, if costs rise substantially, the states will approve the increases. This is why I have never found LTC to be practical.

 

[REWahoo]

I don't follow how that guarantee is of much value, if any.

The only guarantee I thought had substantial value was the initial 10 year guarantee of premium.

In every insurance purchase, you pays your money and you takes your chances. As I pointed out in the post linked above, the insurance continues to be worth keeping for now even after the big increase which amounts to an increase of 3% compounded annually over the 14 years we've had the policies. The new annual premium is still only $875, a real bargain when I see what others are paying for similar policies.

And as I also posted, our decision to keep the policies may change should the rates continue to climb or if our net worth stays healthy as we get older and we feel we can self-insure. Similar to dropping collision and comprehensive on an older vehicle...

 

[Ready]

The only guarantee I thought had substantial value was the initial 10 year guarantee of premium.

In every insurance purchase, you pays your money and you takes your chances. As I pointed out in the post linked above, the insurance continues to be worth keeping for now even after the big increase which amounts to an increase of 3% compounded annually over the 14 years we've had the policies. The new annual premium is still only $875, a real bargain when I see what others are paying for similar policies.

And as I also posted, our decision to keep the policies may change should the rates continue to climb or if our net worth stays healthy as we get older and we feel we can self-insure. Similar to dropping collision and comprehensive on an older vehicle...

If rates go up and you decide to cancel, do you get any of your premiums back given that you filed no claims? Or is it all lost?

 

[meierlde]

If rates go up and you decide to cancel, do you get any of your premiums back given that you filed no claims? Or is it all lost?

That depends on the company, when Metlife raised my rates, the offered a LTC policy that would pay the amount of premiums paid to that time if one canceled. This I think was a good deal, sort of the equivalent of converting a whole life policy to a paid up one with lesser values if one were to stop paying the premiums. The insurance company still has both the time value of the money, as well as the chance you may not need the insurance, so its a good deal for them also.

 

[Bestwifeever]

The OP is young and has small children with one income supporting the household. Probably more important to have really good disability insurance on the wage earner rather than long-term care insurance at this point (the family may have it, but I don't think disability insurance is called out as a budget item in her other threads).

 

[REWahoo]

The OP is young and has small children with one income supporting the household. Probably more important to have really good disability insurance on the wage earner rather than long-term care insurance at this point...

Very true. Far more likely a wage earner will become disabled than need long term care.