LTC coverage, one real life example

[RetireeRobert]

I've been thinking about LTCI lately and wanted to ask the group when the right time to buy is.

DW and I are 49 and 44, respectively. Is that too young, meaning the reduced premiums will not make up for the longer time I'd be paying? Do I need to buy before I FIRE; does employment matter?

The "right time" to buy is beofre you get sick! Nail down that time and you will know when the optimal exact time is. Wife and I bought when I was 69 and she was 62. We bought a hybrid LTC/whole life policy, so that probably alters the "right age" question compared to standard LTC only policies.

But otherwise, for LTC only I would say probably in the fifties is good. You will get cheaper rates if you buy in the forties, but of course will have many more years to pay premiums until your likely time to use the policy benefits.

 

[marko]

A side note I've mentioned here before:
One needs to remember that should one spouse need LTC it also seriously impacts the healthy spouse and expenses. Sadly, life does not go on as usual for the healthy spouse.

I've seen this first-hand where instead of trips abroad, nice clothes, expensive meals out, a second car, boat or second home, the healthy spouse mainly spends his/her days at the NH with the sick one. As such, expenses go way down.

What that means is that as horrific as NH costs are, the costs are not in addition to your current, normal spending but very much instead of and could mitigate as much as $50K per year off the $120K NH cost.

Still a big nut to crack but for many, a bit less daunting.

 

[easysurfer]

I went ahead and bought a hybrid LTC/whole life policy a few months back.

I went the one and done, huge premium route. At least now no more "Choose to get less coverage or pony up more premium payments" thing. That was torture.

 

[RetireeRobert]

I went ahead and bought a hybrid LTC/whole life policy a few months back.

I went the one and done, huge premium route. At least now no more "Choose to get less coverage or pony up more premium payments" thing. That was torture.

Exactly! In addition, you also won't have a worry about "wasted" premiums paid year after year, since your beneficiaries will get the life insurance death benefit if you never or not totally use the LTC benefits. You know that one way or another these hybrids will pay off.

 

[Montecfo]

I am absolutely anticipating rate increases. I am very familiar with CalPERS LTCI increases, and they did not come gradually.

I figure at some point, they will offer me reduced total benefits or significant rate increase. So far I have seen from other policies on how benefits were reduced. Say, original policy is $X in total (years) benefits and the company offers $X/2, still keeping monthly/yearly benefits intact or to keep original benefits then a significant premium increase. On average, LTCI claims last for less than 2 years before someone passes. At that point, I will review the options. If I can afford the premium increase, I will keep my benefits as is.

I'm not at all critical of your strategy. But one challenge is today's RetiredHappy (and rational) and the person who needs to say Yes! to the rate increases in the distant future may very well be two different people, in effect.

I think that anyone with a LTC policy should have their loved ones/heirs involved in the annual bill paying and decisions so the policy does not get abruptly cancelled or reduced for cost saving. Genworth for example has some tools so that others can be alerted if there's a major policy change.

 

[RetiredHappy]

I'm not at all critical of your strategy. But one challenge is today's RetiredHappy (and rational) and the person who needs to say Yes! to the rate increases in the distant future may very well be two different people, in effect.

I think that anyone with a LTC policy should have their loved ones/heirs involved in the annual bill paying and decisions so the policy does not get abruptly cancelled or reduced for cost saving. Genworth for example has some tools so that others can be alerted if there's a major policy change.

This is an excellent point. We do have a good size retirement savings so cost increase can be absorbed without much issue. My spouse and I are on the same page. If he passes before me, my son is the next person on the "decision-making" chair if I am mentally unhappy to handle my affairs. I would like to think that he is also on the same page. If someone doesn't clean my butt, it would fall on his shoulders...

 

[Dash man]

I've been thinking about LTCI lately and wanted to ask the group when the right time to buy is.

DW and I are 49 and 44, respectively. Is that too young, meaning the reduced premiums will not make up for the longer time I'd be paying? Do I need to buy before I FIRE; does employment matter?

DW and I are both 65 and we bought a group LTC policy through my employer when we were 46. When DW was 48 she had ovarian and uterine cancer. She beat the cancer and we are still paying the premiums for our policies. The only price increases were for inflation increases until last year when there was a general price increase.
Our policy includes coverage for assisted living and home care. This year it cost us $6,283 for both policies and ~$600/day coverage with a lifetime max of a little over $1 million each. Home care benefit is about half that daily amount each.
We couldn’t qualify for the insurance today or for the past 17 years. We’re glad we bought early.

 

[ProGolferWannabe]

It surely makes more sense than reducing benefits or increasing premiums over the life of a policy IMO. I would like to see a 3rd option for policy owners when it becomes time for an existing policy to be, ummm, updated.

My wife and I have a policy issued by Genworth…..I believe we purchased it about 20 years ago. About 7 years ago, Genworth started increasing our premiums to maintain the same level of coverage; they also offered changes to the policy (elimination of inflation protection, increased elimination period, etc.) to mitigate some of the cost increase. For several years, we just bit the bullet and absorbed the premium increase….after 3 or 4 years of this, our premium costs had doubled. This past year we finally decided to increase the elimination period in favor of keeping our premiums unchanged. We just got our annual bill a week or so ago, and for the first time in 5 or 6 years we were not hit with a premium increase or a reduction in benefits. We now own what I would describe as a very high deductible LTC policy. It will prevent us from catastrophic financial loss in the event we need care for multiple years, but we are on the hook for what will likely be very high 5 figures or low 6 figures of out of pocket expenses now. I’m not unhappy with how things worked out, but had I known what was going to happen back when I bought the policy, I likely would have self insured. I think the chances are pretty remote either of us will need LTC for a period of time longer than our elimination period. I’m pretty risk averse though, so figure I’ll keep the policy.

 

[REWahoo]

PGW, what is your new elimination period?

 

[ProGolferWannabe]

PGW, what is your new elimination period?

Oh sorry, I’m an idiot…I failed to mention that, which was sort of the point of the post. Duh. We have a one year elimination period. We were originally at 3 months when we bought the policy.

 

[RetiredHappy]

I've been thinking about LTCI lately and wanted to ask the group when the right time to buy is.

DW and I are 49 and 44, respectively. Is that too young, meaning the reduced premiums will not make up for the longer time I'd be paying? Do I need to buy before I FIRE; does employment matter?

I think buying a LTCI younger is preferable as you are still insurable, i.e. before you get a medical condition which would deem you ineligible and it is cheaper.

Here are the details of my policy:
I bought my LTCI at the age of 46. It was for $200 per day, with a 3% compound inflation rider. It covered a lifetime of $360K and also has a 3% compound inflation rider. It has a 90-day waiting period It cost me $97 a month, at about $1.1K a year. I am 58, still paying $97 a month, which meant that I have paid about $13K into LTCI. My coverage is now $8555 a month, and lifetime benefits of $514K. If I need care right now, after 3 months of out of pocket costs, I would recoup what I have paid in premiums with just 2 months of care/claims.

 

[Dash man]

We’ve had more experience with nursing homes and assisted living than we care for. Parent #1 went into memory care/assisted living about eight years ago and just passed in full nursing care for the last year. She left this earth with about $30,000 left.
Parent #2 went into assisted living five years ago and is in her fourth year in a nursing home on Medicaid.
Parent #3 will be in an assisted living facility very soon, hopefully by the end of the month. His combined pension and social security may cover half the cost, so we’ll be on the hook for the rest.
People often talk about nursing home coverage, but assisted living is also expensive and not all policies cover that cost. Time in assisted living is typically longer than a nursing home too.

 

[ProGolferWannabe]

I think buying a LTCI younger is preferable as you are still insurable, i.e. before you get a medical condition which would deem you ineligible and it is cheaper.

Here are the details of my policy:
I bought my LTCI at the age of 46. It was for $200 per day, with a 3% compound inflation rider. It covered a lifetime of $360K and also has a 3% compound inflation rider. It has a 90-day waiting period It cost me $97 a month, at about $1.1K a year. I am 58, still paying $97 a month, which meant that I have paid about $13K into LTCI. My coverage is now $8555 a month, and lifetime benefits of $514K. If I need care right now, after 3 months of out of pocket costs, I would recoup what I have paid in premiums with just 2 months of care/claims.

You have a really good policy (compared to mine). I looked up my specifics after seeing your details.

I got my LTC policy when I was 43 (ish)….I am 59 now. Wife is 58. Our Original Lifetime Max (figures cover both of us) was $525,600. We have 5% compound inflation protection, so our current lifetime max is $1,040,652. Our elimination period is 365 days for each of us. Our annual premium is $3087. Your elimination period is very attractive.

 

[RetiredHappy]

You have a really good policy (compared to mine). I looked up my specifics after seeing your details.

I got my LTC policy when I was 43 (ish)….I am 59 now. Wife is 58. Our Original Lifetime Max (figures cover both of us) was $525,600. We have 5% compound inflation protection, so our current lifetime max is $1,040,652. Our elimination period is 365 days for each of us. Our annual premium is $3087. Your elimination period is very attractive.

I did not even realize that they sold 365 days elimination period back then. Mine was a good deal because it was a (AARP) group rate. The agent said group rates were always a much better deal/price compared to individual plans. I did not qualify age-wise for AARP then but my husband did, and hence we bought AARP membership so that I could buy the plan.

 

[ProGolferWannabe]

I did not even realize that they sold 365 days elimination period back then. Mine was a good deal because it was a (AARP) group rate. The agent said group rates were always a much better deal/price compared to individual plans. I did not qualify age-wise for AARP then but my husband did, and hence we bought AARP membership so that I could buy the plan.

It originally was 90 days, but over the course of time I elected to change it to 365 to mitigate the premium increases that Genworth was assessing. My policy premiums would probably be north of $4000/year had I elected the keep the elimination at 90 days. Like I said, you have a super policy.

 

[ejman]

Exactly! In fact, I would like to have the option of a LONGER elimination period (and commensurately lower premiums) to make LTCI more like "insurance," and less like prepaying LTC expenses: https://www.kitces.com/blog/can-inc...ination-period-make-coverage-appealing-again/

Would love to have a 3 year elimination period which I can cover from my assets and then have the Insurance pay 100%. I'm still amazed that no insurance company offers anything remotely resembling that. From what I've read 3 years is about the maximum stay in a nursing home for the vast majority of patients. Would love to hear from an insurance expert as to why that is not offered.

 

[zippy2020]

>>Badger said, "If I am sad, depressed, and unhappy then I would just as soon call it a day than spend the rest of my life miserably marking time">>

I would remind people that very few states have assisted suicide laws. And should you begin to develop dementia, did you know that it can be difficult, if not impossible, for an afflicted patient to legally choose assisted suicide? In CA no one else is allowed to choose it for you, no matter what your wishes are/were and no matter whether there is a Healthcare Power of Attorney filled out or not.

CalPERS is currently settling a lawsuit and offering all policyholders a buyout. We got our (separate) LTCi policies in our late 40's. Roughly each of us has invested $42K over the policy period.

So many people want to "die at home." As examples posted have pointed out, dying at home is a much more expensive affair than being in a facility. Also, for certain conditions you will NOT be allowed to die at home. If you need extensive medical care - not an aide, but an actual nurse or nurse practitioner - or certain types of medical equipment 24/7, you don't have a choice....facility care is the only alternative.

Facility care in our area is extremely expensive (but yes, 24/7 homecare is even more so, with our high labor costs). We picked out the Skilled Nursing Care facility that is our preferred choice, several years ago. They are a relative "bargain" at just under $10K/month. A nearby chain facility is rated almost as highly, but as a for-profit charges a much heftier $15K/month.

Fortunately no kids, so no concerns about leaving an estate. But the facility care for one of us - and genetically/medically it is VERY likely to happen - would quickly exhaust our total assets at today's prices, let alone future inflated prices some 5-15 yrs from now.

I have said this before and I'll say it again. Insurance is not to ELIMINATE all your fiscal risk. It is there to REDUCE your risk potential. If your home burns down, I hate to tell you this but as many in CA have discovered, that homeowners policy you have ain't paying 100% for everything you lost, either.

You need Depends? Or a bathrobe and slippers? Neither LTCi, Medicare, or Medicaid is going to pay for them, sorry.

 

[Dtail]

Are you referring to a Medicaid trust that was funded back in 2018, so the 5-year "look-back" on asset transfers expires in 2023?

Yes.

 

[Dtail]

As another example for my mom's policy, which is not being utilized currently.
She is 88 years old
Daily Benefit - $350
Elimination Period - 180 days
Maximum Benefit - 3 years
Premium - $8,195 yearly with no rate increase through 2027

 

[RetiredHappy]

It originally was 90 days, but over the course of time I elected to change it to 365 to mitigate the premium increases that Genworth was assessing. My policy premiums would probably be north of $4000/year had I elected the keep the elimination at 90 days. Like I said, you have a super policy.

It certainly looks like I have a great policy and it is also Genworth. No increase todate and we are about the same age, I turn 59 later this year.

 

[Montecfo]

My spouse and I are on the same page. If he passes before me, my son is the next person on the "decision-making" chair if I am mentally unhappy to handle my affairs. I would like to think that he is also on the same page. If someone doesn't clean my butt, it would fall on his shoulders...

...and thats the umm...bottom line.

 

[CRLLS]

This is an excellent point. We do have a good size retirement savings so cost increase can be absorbed without much issue. My spouse and I are on the same page. If he passes before me, my son is the next person on the "decision-making" chair if I am mentally unhappy to handle my affairs. I would like to think that he is also on the same page. If someone doesn't clean my butt, it would fall on his shoulders...

I get the sentiment and agree. One would hope that you and you spouse actually talked to your son about your wishes and his willingness to follow them s you can count on him to do so. Perhaps write a letter(s) to him to remind him at the appropriate time if necessary.

 

[RetiredHappy]

I get the sentiment and agree. One would hope that you and you spouse actually talked to your son about your wishes and his willingness to follow them s you can count on him to do so. Perhaps write a letter(s) to him to remind him at the appropriate time if necessary.

Good suggestion. He knows I have LTCI but he does not know the details. Right now I have a sealed letter to him for after I pass away and he has it in his file cabinet. I should prepare another letter for when I no longer can make my own decisions.

 

[Out-to-Lunch]

Would love to have a 3 year elimination period which I can cover from my assets and then have the Insurance pay 100%. I'm still amazed that no insurance company offers anything remotely resembling that. From what I've read 3 years is about the maximum stay in a nursing home for the vast majority of patients. Would love to hear from an insurance expert as to why that is not offered.

I am no expert, but the article that I quoted stated that shorter elimination periods are (generally speaking) mandated by the state in which they are offered. They appear to be something that was meant to protect the consumer, but actually hurts.

From the article: https://www.kitces.com/blog/can-increasing-the-long-term-care-insurance-elimination-period-make-coverage-appealing-again/

The problem is that, in an effort to “protect” consumers, most states actually require all long-term care insurance sold in the state to have an elimination period of no more than 365 days, a remnant of laws passed several decades ago when long-term care insurance was cheap enough that ultra-long elimination periods were never anticipated as being likely/necessary. Yet as long-term care insurance has evolved, these state laws today are requiring elimination periods so “low” that it is rendering long-term care insurance unaffordable for many, which limits the pool of participants, forces industry consolidation, and potentially amplifies the challenges.

 

[Chuckanut]

DW and I are 49 and 44, respectively. Is that too young, meaning the reduced premiums will not make up for the longer time I'd be paying? Do I need to buy before I FIRE; does employment matter?

The problem I have is that you can pay the lower premiums for 20+ years and then the insurance company starts raising them higher and higher as you get into your 70's. Then what do you do?

As the odds increase of needing the insurance, the price can get significantly more expensive. Getting the insurance early does not guarantee significantly cheaper premiums for as long as you live.