LTC insurance

[medved]

What do y'all think about the merits of LTC insurance? I bought a policy in my late 40s. That is much earlier than most people buy LTC, and maybe it was a mistake. But LTC insurance is (strictly) medically underwritten, so my thinking at the time was to get this in place before my wife or I had a medical condition that precluded it. And of course the monthly premiums are lower when you buy the policy younger.

The group policy I bought was relatively low cost, as these things go, and was an "indemnity" type policy, which I think is somewhat unusual. In other words, once the insured meets the standard coverage requirement that apply to all tax qualified LTC policies (the insured requires substantially assistance with two or more ADLs, or meets the cognitive impairment standard), the benefit is paid automatically. There is no requirement to be in a facility or even to be receiving care from a licensed provider. You just show that you meet the coverage standard, and you get the monthly payment.

I could have bought lifetime coverage, but it was significantly more expensive and most people are not "on benefit" for more than a few years. So I bought a 6 year benefit.

I also could have bought an option to pay premiums only until age 65, at which time the policy becomes fully paid up, but I did not do that. So I pay premiums until I am on benefit. I may have made a mistake by not buying this option. At the time, I did not want to pay the substantially greater premium, and the "break even" point was pretty old, especially when one considers the time value of money. But I neglected to take into account the prospect of premium increases between age 65 and whenever I go on benefit. Anyway, that is the decision I made and it is not changeable.

The biggest problem I have with these policies is the prospect of premium increases. The insurance companies did a lousy job, early on, of underwriting these policies, and they can apply to the state regulators for premium increases. Many states have approved enormous increases. My state has approved more limited increases, but the future is young, as they say.

When I asked someone knowledgeable about these policies, he said he generally recommends against them, believing they are too restrictive and there's too much risk around premium increases -- so better to self insure -- but that the policy I was being offered was quite cheap and had the best terms he had seen in the market, so it would be reasonable to buy it. And that is what I did.

Just wondering what other people here think about these policies.

 

[samclem]

What do y'all think about the merits of LTC insurance? . . .

Just wondering what other people here think about these policies.

This is one of the most discussed topics on this forum, so you'll find lots of info if you run as search. That's no reason not to discuss it more, but you cn get a lot of info from what has been said already.

My sense of the general lay of the land here: Some people here have LTC policies, and a few are very happy. Most who have them are not very happy, but are gritting their teeth and paying (sometimes a lot), hoping that their rates won't go crazy(er) and that they won't get priced out of the market just when they are most likely to need a policy. Quite a few people have such distrust of the product (based on reported failures to pay promised benefits, based on a history of companies leaving the market, based on a history of huge price increases) that they don't want to buy a policy and hope to self-fund (though that would be a tough road for many of us). What many people here have asked for is real >insurance<--something that covers a catastrophe. Many want to (and can) self-fund for the first year or two of care (which is the majority of LTC cases), and want low-cost insurance that covers the cost of care beyond that. There are apparently no policies that work this way.

 

[Senator]

And of course the monthly premiums are lower when you buy the policy younger.

Just wondering what other people here think about these policies.

I am self-insuring. The premium is lower when you are younger, but it can be raised significantly. Or cancelled.

I do not think that a person signing up for LTC at 55 for the first time, would pay any more than a 40 year old after 15 years of LTC coverage.

 

[COcheesehead]

I bought a long term care rider on a whole life policy. If I don't use the cash for LTC, I can at least use it for retirement or to pass on upon our deaths. The cash grows at about 3.5% - 4% tax free which is nice as well.

 

[Teacher Terry]

I think they are a waste of $. Most people in our family lived to be very old in their own apartment with no or a few supports.

 

[Chuckanut]

What many people here have asked for is real >insurance<--something that covers a catastrophe. Many want to (and can) self-fund for the first year or two of care (which is the majority of LTC cases), and want low-cost insurance that covers the cost of care beyond that. There are apparently no policies that work this way.

BINGO!!!

I would buy one from a well rated, reliable insurance company in a New York Minute.

 

[medved]

That's an interesting idea. The typical "elimination period" (essentially, the deductible or SIR) for an LTC policy is probably something like 60 days. If it were, say, one year or two years, the policies would presumably be A LOT cheaper and serve more of a catastrophic loss purpose.

 

[samclem]

That's an interesting idea. The typical "elimination period" (essentially, the deductible or SIR) for an LTC policy is probably something like 60 days. If it were, say, one year or two years, the policies would presumably be A LOT cheaper and serve more of a catastrophic loss purpose.

Typically 90 day elimination period.
The ideal policy for DW and I would be: A 2 year elimination period, shared benefits, inflation-protected, and qualifies for the state "LTC partnership programs", issued by a top-quality company. If you find something like that, let us know!

 

[mickeyd]

Often asked Q here.


Not a fan of LTCi. Save your money and invest it into a diversified stock index fund like Total Stock Market. LTC is something that can easily be self-insured for most people who post here. It's a risk worth taking, IMHO.

 

[samclem]

Save your money and invest it into a diversified stock index fund like Total Stock Market. LTC is something that can easily be self-insured for most people who post here.

If a couple has about $300K in savings that they can keep "fenced off" and allowed to grow, without dipping into that money >until the first of the pair dies,< then they can probably self-insure. That amount (plus about $1000/mo from SS, roughly assumed to be "their" part of the SS check) will cover 5 years of LTC in most of the country today ($200/day), and (at least now) at 5 years the person in LTC could go on Medicaid (if everything they owned together was put into a trust). After that first person dies, the second one would cover LTC out of savings, then go on Medicaid. But if a couple can't afford to fence off about $300K of their savings and still have a satisfactory quality of life in retirement, I don't know if self-insuring would be practical. I suspect many of us >say< we're self-insuring, but we're really hoping our plans aren't tested. And most of us will be fine, but that's not the same as really being covered. Regardless, keeping $300K+ on hand "just in case" and unavailable for fun/living isn't a very efficient answer. But right now, maybe it's the best available.

 

[COcheesehead]

I just remember watching how fast my Dad's money went once he was put into a home. That why I chose to pursue some type of coverage. Witnessed the need first hand.

 

[braumeister]

will cover 5 years of LTC in most of the country today ($200/day), and (at least now)

While I completely agree with you in principle, I think your numbers may be a bit dated.

During my mother's last months, the total cost was edging up closer to $300/day, and that was four years ago. This was in southern Ohio, a relatively low COL area.

 

[REWahoo]

I just remember watching how fast my Dad's money went once he was put into a home. That why I chose to pursue some type of coverage. Witnessed the need first hand.

DW and I witnessed the same need... X 4.

Both of DW's parents spent their final years in nursing homes as did both my parents. My MIL almost three years, my FIL seven months, my mom slightly over two years and my dad nine months (they shared a room until he died).

We have LTCi policies.

 

[medved]

The option of going on Medicaid isn't very attractive; it limits one's options -- and may limit them even more in the future. And whatever the per diem prices for excellent care are these days, I think it is reasonable to assume that they will increase significantly in the future. My policy's benefit level inflates 5% per year regardless of the actual rate of inflation. Still, I could see good arguments for self insuring. The problem is it is very hard to know how much money one would need to fence off in order to adequately self-insure.

 

[savory]

I am in the same position. The good news is the policy is fairly inexpensive. Having said that, I have been paying for many years. It is John Hancock through my company. I have elected to continue the premium but like you, I am not sure it is the right thing.

As for Medicaid, I ended up getting my father on Medicaid so my mother would have enough money if she needed it. Which she did.

I know I am in a better position than my folks were. But, this extra protection does give some piece of mind.

 

[Newventurer]

My mother's late husband bought her a policy in 2001 and the premium for the year that she actually entered the assisted living facility, upon his death was $1410 (so conservatively they paid in $21,150). Her policy pays $3000 per month, and her rent is $3800. There is no maximum payout on her policy and to date the LTC company has paid out $42,000 on her behalf. The cost of her care, likely next step in a memory care unit, will continue to increase from here on out and we feel very lucky to have this policy in place. Her husband died in a automobile wreck, and I don't know if he also had the coverage on himself, but clearly he didn't use it if he did. Crapshoot, but nice when you have it and need it.

 

[Big_Hitter]

I just applied for a chronic care rider on my whole life policy.

I can use 90% of the death benefit for chronic care.

I haven't seen the premium increase yet....

 

[VFK57]

The average cost of monthly LTC in US is $6,235 or annually $74820 x average stay (you / DW) is about 4 years = $299,280. Then calculate your premiums vs this amount. Both premiums and daily care cost will rise but hard to predict how much. Make the decision what better fit your needs.

 

[REWahoo]

... average stay (you / DW) is about 4 years...

Looks to me like the average is far less than 4 years. Few make it to three.

 

[VFK57]

Looks to me like the average is far less than 4 years. Few make it to three.

Then the needed amount is much lower

 

[samclem]

Averages might be useful in figuring what insurance might cost, but have almost no relevance to how much a person/couple needs to have on hand to self insure.

On average I don't run over pedestrians. I still have liability insurance.

 

[Big_Hitter]

most nursing home stays are short, but if you have a long one.....

 

[mathjak107]

we took a nys partnership plan . we really did not care about the 3 years nursing home coverage or the 6 years assisted living or homecare .

we wanted it for the perks after the insurance runs out . we have 100% total asset protection with no look backs , trust's needed or asset shifting .

we have no income restrictions on the stay at home spouse which is very important .

as long as the private home we are in will accept Medicaid assignment after the insurance runs out Medicaid picks up the tab .

most private homes we spoke to said no problem if you were a paying patient for 3 years .


that is a sweet deal .

for a small percentage of the gains on our assets we can have great protection for those assets .

my dad spent 6 years in a nursing home which left his wife impoverished . so this is an important area of concern for us.

insurers were having trouble pricing policy's because statistics showed low usage but it turns out the numbers were very skewed and based on a generation ago . there is a whole lot more spending on ltc issues going on than insurers realized .

the biggest 2 issues were in 1999 Medicaid slashed the skilled nursing facility budget in half . instead of snf being used in many cases kind of half way house facility's were used and they did not count as snf usage .

folks today live longer , have 2x the number of potential people growing older and are less likely to dump long term care needs on family's .

i can tell you with my dad there was no way anyone of us could have taken care of him in our home .

usually by the time snf is needed it is well beyond family .

how it typically plays out is a family member gets hurt trying to move 200 lbs of limp flesh if they are moving someone paralyzed from a stroke and they are both in trouble or the person becomes violent with memory issues and someone gets hurt ...

the best way to bust up a family is have one sibling step up to the plate and take in a parent who needs care . odds are the other siblings step back and the battles begin .

usually the person providing the care takes a monetary hit , a career hit , a social hit and maybe even loses a job .

if you have a spouse odds are you can kiss that marriage good bye once the spouse starts on why do we have to do it and sacrifice so much and your brothers and sisters do nothing .


one of the worst things parents can do to their kids is drop their long term care burden on their children .

so today , those who buy policy's tend to use those policy's and that blew insurer's estimates out of the water .

so keep in mind if they are having trouble because usage is far more frequent and more costly then they thought how does that leave you ?

 

[athena53]

How it typically plays out is a family member gets hurt trying to move 200 lbs of limp flesh if they are moving someone paralyzed from a stroke and they are both in trouble or the person becomes violent with memory issues and someone gets hurt ...

I agree. I picked DH up more times than I could count but he weighed less than I did (was wasting away from leukemia) and I was in decent physical condition. The last few weeks he couldn't move independently without a huge risk of falling- I had to get him from the bed to the wheel chair or commode, etc. At least he stayed sweet and mellow to the end. We were both grateful that the nightmare scenario you described- one partner's assets drained due the cost of the other's care for Alzheimer's- never happened.

One of the worst things parents can do to their kids is drop their long term care burden on their children.

This. When I'm older I'll find a good assisted living or continuing care facility near DS and DDIL but I will not expect them to take on 100% of my care.

The "ring fence" estimate posted earlier is a good way to look at funding your own LTC. In my case, I'll get $3,500/month from SS if I wait till age 70 and income form my investments (and principal if necessary) will make up the rest.

 

[Teacher Terry]

I totally agree that it is not fair to expect kids to physically care for parents on a f.t. basis for the long term. The three of us took turns flying in to help my Mom after a surgery etc but not permanently. I provided respite care for my DAd so my Mom could take a yearly vacation.