LTC policy for retirees??
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Don't you feel the same way about your homeowner's insurance?
easysurfer
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I know the comparison is valid, but I feel better about homeowner's insurance. Probably because I can look around and see the stuff (furniture, home itself) that is insured.
A LTC policy feels more like an extended warranty. At least to me.
I understand. When I look at pictures of my children, I feel good about buying LTC insurance so that they aren't burdened should the need arise. I felt that way about life insurance back when folks were depending on my income.
Bestwifeever
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We don’t have LTCI and we won’t be burdening our children any more than someone who chooses to have it. Good that we can all decide what’s best for each of us.
Our HO insurance is a small fraction of LTCI and I don’t think the two are comparable in the least.
Our HO insurance is a small fraction of LTCI and I don’t think the two are comparable in the least.
Actually, it's not just children you could be burdening, but also surviving spouses, siblings, or other relatives or friends who could be your caregivers. Perhaps, I might be misjudging the capabilities or reasonableness of my LTCi carrier, but I do take comfort in the idea that my carrier will deal squarely and fairly with handling the financial aspects of LTC for us if the need arises. Thus far, I've had good dealings with the carrier on other issues, not related to providing LTC. And I'm confident that if the need arises to claim under my policy I have knowledgeable, persistent family members who would be strong advocates for fairness and reasonableness under the policy in case I can't be an advocate for myself.
Also, the fact that your HO insurance is a small fraction of your LTCi does not really advance any analysis of the situation of assessing risks and cost of protecting against potential risks posed by LTC. I will note that the risk of being infirm and disabled and in need of LTC, whether because of unforeseen illnesses, accidents, or the onslaught of old age combined with mental or physical incapacities, is probably higher than the risk of fire in your house, someone slipping and falling on your home premises, or your house being hit by a tornado or hurricane. Accordingly, it is reasonable to expect a higher premium for LTCi than homeowner's insurance.
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Bestwifeever
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Yes, the insurances are not comparable, as I said. And again, we all get to choose for ourselves.
Huston55
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Who’s your carrier & what is their reputation? What are your premiums? What’s the cap on your LTC payments & how does it compare to your expected & worst case scenario? What premium increase protection do you have? Is your benefit adjusted for inflation?
Answer these questions & we can have a discussion about how good a choice LTCi is & how it compares to home insurance.
My earlier post was meant to convey the idea that you can't really compare these different insurance products unless, at minimum, you're able to make risk assessments of the probability that the risk you're insuring against will occur, as balanced against the cost of the product.
I guess I could provide you the information you request, but unless you have have an idea about the risk of each of the events that you're trying to insure against, my information is rather meaningless. It's like telling me that because I pay an annual premium of $1440 for my homeowner's policy with Universal North America to ensure a $880K home that this is far superior to me paying an annual premium of $2004 for an inflation adjusted LTC policy with John Hancock (through Federal LTCi with US OPM) currently covering a lifetime benefit of $517K. The comparison is meaningless, but the point is that in both cases we are making risk assessments, considering costs, and in all cases making personally sensitive calculations.
But we should recognize that we have no misgivings in paying for homeowner's insurance though the risk is extremely low that we will claim for the most horrendous events we insure against under our homeowner's policies.
Huston55
Thinks s/he gets paid by the post
First, I wouldn’t presume to judge whether LTCi is right for you & your family. My point was just that the place to start is with the numbers, which I personally usually do by doing a NPV comparison of the options (in this case to buy LTCi or to self insure). There’s not enough info in your post above for me to do that (don’t know how long or how much you’ve already paid in premiums). But, you’ve answered one key question, which is “Does your LTCi cover your worst case liability?” The answer is “no” because you have $517k cap on payments. So, what you’ve actually done is “prepay” your LTC costs (if you ever use them). Now the question is one of simple math to determine whether that was a beneficial decision.
Personally, we’ve decided against LTCi (even though we could have purchased federally supported LTCi) because it was simply a prepayment & the numbers didn’t seem to be beneficial to us. Plus, we were very dubious about the potential premium increases or other changes. The fact is that those kinds of detrimental changes have occurred to the OPM John Hancock LTC policies; not sure if it harmed you or not. And, you may suffer additional future changes.
https://www.fedweek.com/publishers-perspective/the-future-if-any-of-long-term-care-insurance/
In the end, I pretty much agree with good ole “Rich_by_the_Bay’s” view on LTCi from back in the day.
http://www.early-retirement.org/forums/f28/long-term-care-options-27087-2.html#post506074
I don't need for LTCi to pay for your worse case scenario. My worse case scenario is leaving my spouse and children scrambling around, in the immediate woes of caring for a disabled person, to figure out how to initially finance and handle LTC. We have more than enough assets to handle LTC , without the insurance, just as we have enough assets to handle total devastation of our home, and can "self-insure" that as well.
You're right that I have an escalating, inflation-adjusted cap on LTC but I wouldn't characterize the premiums I pay for that protection as pre-payment of LTC events that would sideline me disabled. I'm leveraging that premium payment to pay for some protection -- not my desire to completely protect me forever -- I could have purchased lifetime protection. But the premium I pay is such a small fractional share of my net worth or income stream -- it's a drop in the bucket to me and worth it to me to have the ability to offload some of the financial hit of LTC to someone else.
I don't agree with Rich by the Bay or Nords by the Sea on LTCi, but these are highly individualized decisions in which each of us might be afflicted by "recency bias."
I note that you appear interested in CCRCs, which I likewise will probably pursue in a few years from now, having visited several in the last few years. While the type A form of CCRCs might protect you from the entire risk of LTC and is a prepayment of LTC, it nonetheless is still fraught with the same issues you identify as troublesome with LTCi, such as annual increases in monthly maintenance payments or future changes in coverage (that skilled nursing benefit you think you have, might not always be there, especially if the CCRC becomes financially challenged like some corporate CCRC parents have been in the past). No plan offers complete protection and I don't presume to have all my bases covered, but I'm content as you and others might be in self-insuring or going into a CCRC.
bmcgonig
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+1
Willers
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I'm self-insuring because the current policies I've found don't really fit my definition of insurance. They seem more like prepaid expense plans. I buy insurance to cover tail risk.
If there was a policy that had a 3-year waiting period and then covered expenses beyond that I'd likely buy it. I'd expect the premiums of such a policy would actually be reasonable. I haven't found one yet.
If there was a policy that had a 3-year waiting period and then covered expenses beyond that I'd likely buy it. I'd expect the premiums of such a policy would actually be reasonable. I haven't found one yet.
The clear comparison was brought up in the context of the "buyer's remorse" comment earlier.
If you feel "buyer's remorse" when another year slips by, you haven't needed your LTCi benefits and your next premium is due, then it makes sense to have the same "buyer's remorse" over your homeowner's insurance when you notice that your house hasn't burned down.
I don't recall anyone ever saying that we don't all get to choose for ourselves. That's the case with LTCi, homeowner's insurance, life insurance, and virtually all insurance - you can choose to be insured, or not.
jayanu
Recycles dryer sheets
>> I understand. When I look at pictures of my children, I feel good about buying LTC insurance so that they aren't burdened should the need arise. I felt that way about life insurance back when folks were depending on my income.
I am not sure that the kids will not be burdened by your LTCi.
Typical avarage stay in a Nursing home is 3 years. In NJ a semi-private room can cost $125,000/year today. 10 years from now it will be ~$190,000. Would your LTCi pay that?
Most LTCi are for 3 years (100 days elimination due to Medicare for 65+) for $5,000/month - split between the two spouses or by one person. That is not enough and surely not enough if both need to use it simultaneously and heaven forbid if you get a chronic neurological disease like Dementia, Alzheimer of Parkin's - it can last for 8-15 years. My brother has a variant of Parkinson's (Shy-Drager Syndrome) for 12 years and it was EXTREMELY hard on the spouse with a single child 8,000 miles away. He died and she got now cancer.
So it is a roll of the die. Look at the statistics and your family genetic history - though the family history does not mean much - no one had cancer in wife's family and she got colon cancer, same with my brother - but it gives a clue.
We can not get LTC (73 & 72) and if we could for $125K for lifetime rider it would cost almost $30K/year. I don't care about the life insurance that 90% will go to the heirs if I do not use it. I can do a better investment!
We chose a strong non-profit LifeCare - Continued Care Retirement Community (CCRC )
with 30 years solid financial and management with 5 stars CMS rating and 2,500 residents with loads and loads of amenities to keep us young longer. We will have independent living and IF and WHEN we need LTC - it will be right on the campus and covered for lifetime in our monthly fees. It is Willow Valley Communities in Lancaster, PS (where 10% of all CCRC in the USA ~1954) are located.
We chose total care - Type A and not Pay as you go (which will be the same as if we were not in a CCRC.
Financial calculations and financial simulations with Fidelity showed that we will be fine till we die even with 3-3.5% increase in the monthly cost and our required Medicare and Advantage (or Medigap) plan insurance.
Typically, CCRC want you to have net assets that are double than your (non-refundable one-time entrance fees and an income (SS, Pension, annuity, Dividends etc.) that is double the monthly fees.
In CCRC you do not pay the mortgage (most would not have it anyway), HOA fees, Utilities, or property tax. One should add up all the present cost and then add the market rate of lifetime LTC with the highesy=t that you can get based on your expectation as to when you might need LTC.
Also, read the statistics as to how many will need what kind of LTC! 30% may never need any. Can die in an accident, short illness - like pneumonia, or fatal heart attack!
Hence it is a roll of a die!
I am not sure that the kids will not be burdened by your LTCi.
Typical avarage stay in a Nursing home is 3 years. In NJ a semi-private room can cost $125,000/year today. 10 years from now it will be ~$190,000. Would your LTCi pay that?
Most LTCi are for 3 years (100 days elimination due to Medicare for 65+) for $5,000/month - split between the two spouses or by one person. That is not enough and surely not enough if both need to use it simultaneously and heaven forbid if you get a chronic neurological disease like Dementia, Alzheimer of Parkin's - it can last for 8-15 years. My brother has a variant of Parkinson's (Shy-Drager Syndrome) for 12 years and it was EXTREMELY hard on the spouse with a single child 8,000 miles away. He died and she got now cancer.
So it is a roll of the die. Look at the statistics and your family genetic history - though the family history does not mean much - no one had cancer in wife's family and she got colon cancer, same with my brother - but it gives a clue.
We can not get LTC (73 & 72) and if we could for $125K for lifetime rider it would cost almost $30K/year. I don't care about the life insurance that 90% will go to the heirs if I do not use it. I can do a better investment!
We chose a strong non-profit LifeCare - Continued Care Retirement Community (CCRC )
with 30 years solid financial and management with 5 stars CMS rating and 2,500 residents with loads and loads of amenities to keep us young longer. We will have independent living and IF and WHEN we need LTC - it will be right on the campus and covered for lifetime in our monthly fees. It is Willow Valley Communities in Lancaster, PS (where 10% of all CCRC in the USA ~1954) are located.
We chose total care - Type A and not Pay as you go (which will be the same as if we were not in a CCRC.
Financial calculations and financial simulations with Fidelity showed that we will be fine till we die even with 3-3.5% increase in the monthly cost and our required Medicare and Advantage (or Medigap) plan insurance.
Typically, CCRC want you to have net assets that are double than your (non-refundable one-time entrance fees and an income (SS, Pension, annuity, Dividends etc.) that is double the monthly fees.
In CCRC you do not pay the mortgage (most would not have it anyway), HOA fees, Utilities, or property tax. One should add up all the present cost and then add the market rate of lifetime LTC with the highesy=t that you can get based on your expectation as to when you might need LTC.
Also, read the statistics as to how many will need what kind of LTC! 30% may never need any. Can die in an accident, short illness - like pneumonia, or fatal heart attack!
Hence it is a roll of a die!
jayanu
Recycles dryer sheets
>. I note that you appear interested in CCRCs, which I likewise will probably pursue in a few years from now, having visited several in the last few years. While the type A form of CCRCs might protect you from the entire risk of LTC and is a prepayment of LTC, it nonetheless is still fraught with the same issues you identify as troublesome with LTCi, such as annual increases in monthly maintenance payments or future changes in coverage (that skilled nursing benefit you think you have, might not always be there, especially if the CCRC becomes financially challenged like some corporate CCRC parents have been in the past). No plan offers complete protection and I don't presume to have all my bases covered, but I'm content as you and others might be in self-insuring or going into a CCRC.
========================================
Key thing.
Well managed non-profit CCRC with many years (20+) of existence with strong financials - Fitch Rating of A or higher and CMS 5 star rating.
I suggest going for Type-A total LifeCare, so you are covered fully as long as you live there. NO extra charge than the monthly cost.
Many make a mistake of visiting the CCRC but not their medical facility. Always stay overnight - several times - meet with the residents, use their facilities, taste the food, visit the patients in the medical care.
Any initial fees should be refundable, and the rates should be transparent right on the website. Most require pulling the teeth to get the costs - past five years, present, and future increases projection. Anything above 3-3.5% should raise a flag.
Also, check how much of your entrance fee and the monthly payment is considered the qualified tax deduction for your tax return. It may or may not make a difference based on your situation. In our case $42K of the entrance fee (one time charge) is ductible and $32k/year of the monthly fees (for us $3,500/month) is deductible.
Due Diligence is key in any long time financial commitment and healthcare!!!
Gearhead Jim
Full time employment: Posting here.
DW & I bought LTC 18 years ago when the premiums were really low. About 5 years ago, there were two large premium increases within a couple of years, we solved that problem by dropping the inflation rider and our current premiums are only about $10/month more than original.
Our current coverage, each, is $732,00 over 60 months (5 years). That comes to $12,200 per month. So far, we have each spent about $27,000 on premiums. So up until now, the "boat-load" of money we could have banked instead of paying the premiums, is equal to just over 2 months worth of benefits. In the unlikely event that we live another 18 years, we would have paid the same amount as 4 months worth of benefits.
youbet
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I agree with you on life insurance. I had it when I was younger and, because our portfolio was small, needed it to protect DW and the family. But LTC insurance is different. I can self-insure both DW and myself and we feel that gives us the most flexibility (make most care decisions ourselves instead of an insurance company or the gov't making them) and the kids won't have to fret.
Just FYI, people should be aware of a few things:
1) Home healthcare costs are now the fastest-rising segment of the "healthcare pie". Home healthcare on a per hour basis costs more than Skilled Nursing Care, in many areas.
2) Almost all LTCi policies sold in the last decade are:
a) Partnership: meaning your benefits are tax free. If you are dealing with elderly relatives who have an older LTCi plan it is critical you know whether it is a state-approved partnership plan. Otherwise, the IRS will count benefits paid as taxable income
b) Pay the same daily rate for home healthcare assistance as for Skilled Care Nursing. This used to be optional but almost all the industry changed to include home assistance in addition to SCN almost a decade ago. There still are cheap LTCi policies that do not include home assistance, however, so always ask.
c) Inflation rider is always an option. When we bought our policies it was 5%/yr. Most carriers now limit it to 3%/yr.
d) Inflation rider may be simple OR compounded. Compounded is more expensive but it is the only option for keeping up with healthcare costs.
The long period of low inflation is a historical exception. Those of us who are older can remember regular media articles detailing how every year, again, healthcare costs exceeded inflation.
3) Care at non-profit CCRCs has been shown by many studies to be superior to for-profit CCRCs. However, every year there are fewer and fewer non-profits. Why? Because the corporate for-profits are buying them up. It's cheaper than trying to develop land, get permits and community hearings, and then build from the ground up.
4) Any CCRC you look at, should also have its financial statements for you to examine. You may need a CPA to help you understand them, but this is not something to overlook A few CCRCs have closed down, but most are simply purchased (there's those for-profit corp folks again) and kept open with new management.
It is up to your state laws to specify what rights residents have in dealing with new management - and frankly, you will find that almost all CCRCs bind residents to arbitration-only. Be very sure you know what rights you have and what you don't. And DON'T depend on anyone else's experiences somewhere else to guide you. The only thing that matters is the specific agreement you signed with your CCRC.
5) If you are a couple, you should ask up-front what the CCRC policy is on handling a spouse who becomes disabled; e.g., needs SCN. There is no regulation; the CCRC can set whatever policy they wish, and they can change it without your consent, whenever they wish.
You need to know how the facility will handle it if one spouse needs to move to SCN but the other spouse does not. If the still-active spouse wants to move to smaller quarters (let's say, the spouse is now in Memory Care so won't be coming back to the Asst Lvg unit), will the facility adjust the monthly rent? You might be surprised how many will NOT change the rent amount!
Anyway, hth some folks.
1) Home healthcare costs are now the fastest-rising segment of the "healthcare pie". Home healthcare on a per hour basis costs more than Skilled Nursing Care, in many areas.
2) Almost all LTCi policies sold in the last decade are:
a) Partnership: meaning your benefits are tax free. If you are dealing with elderly relatives who have an older LTCi plan it is critical you know whether it is a state-approved partnership plan. Otherwise, the IRS will count benefits paid as taxable income
b) Pay the same daily rate for home healthcare assistance as for Skilled Care Nursing. This used to be optional but almost all the industry changed to include home assistance in addition to SCN almost a decade ago. There still are cheap LTCi policies that do not include home assistance, however, so always ask.
c) Inflation rider is always an option. When we bought our policies it was 5%/yr. Most carriers now limit it to 3%/yr.
d) Inflation rider may be simple OR compounded. Compounded is more expensive but it is the only option for keeping up with healthcare costs.
The long period of low inflation is a historical exception. Those of us who are older can remember regular media articles detailing how every year, again, healthcare costs exceeded inflation.
3) Care at non-profit CCRCs has been shown by many studies to be superior to for-profit CCRCs. However, every year there are fewer and fewer non-profits. Why? Because the corporate for-profits are buying them up. It's cheaper than trying to develop land, get permits and community hearings, and then build from the ground up.
4) Any CCRC you look at, should also have its financial statements for you to examine. You may need a CPA to help you understand them, but this is not something to overlook A few CCRCs have closed down, but most are simply purchased (there's those for-profit corp folks again) and kept open with new management.
It is up to your state laws to specify what rights residents have in dealing with new management - and frankly, you will find that almost all CCRCs bind residents to arbitration-only. Be very sure you know what rights you have and what you don't. And DON'T depend on anyone else's experiences somewhere else to guide you. The only thing that matters is the specific agreement you signed with your CCRC.
5) If you are a couple, you should ask up-front what the CCRC policy is on handling a spouse who becomes disabled; e.g., needs SCN. There is no regulation; the CCRC can set whatever policy they wish, and they can change it without your consent, whenever they wish.
You need to know how the facility will handle it if one spouse needs to move to SCN but the other spouse does not. If the still-active spouse wants to move to smaller quarters (let's say, the spouse is now in Memory Care so won't be coming back to the Asst Lvg unit), will the facility adjust the monthly rent? You might be surprised how many will NOT change the rent amount!
Anyway, hth some folks.
audreyh1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I think if you can set aside $1m today’s dollars apart from what you are using to fund your living expenses, you have enough enough to self insure for LTC including CCRC buy in. The spouse has the remaining funds to draw down.
Probably not that high even - $600K pretty good for covering LTC for one or CCRC buy in. The other spouse has the rest of the portfolio to draw down.
Probably not that high even - $600K pretty good for covering LTC for one or CCRC buy in. The other spouse has the rest of the portfolio to draw down.
Independent
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One problem with talking about LTCi is that it isn't easy to get sample premiums. If I'm buying term insurance or an SPIA or a mutual fund, I can get information on the internet. I don't know of a good LTCi site.
The best I've been able to find is the Federal Employee program. Of course, it's not available to the rest of us, and I assume regular individual plans are more expensive. But, it's better than nothing if I'm just starting to think about this. https://www.ltcfeds.com/ltcWeb/do/assessing_your_needs/ratecalcOut?ctoken=RkuMsUt2
For example, a 90 day waiting period, 3 year benefit period, $150/day, with 4% compound inflation rider will cost a 60 year old $163.86/month or $1,966/year.
The maximum benefit at issue is 3 x 365 x $150 = $164,250. That benefit goes up at 4% per year.
If I either die or need care at 85, my premiums will have totaled about $50,000, or accumulated to $86,600 at 4% interest.
The original benefit will have grown to $421,000.
Here's a side fact: LTCi is subject to minimum loss ratio requirements. That is, the insurer certifies that it expects to pay at least X% of the total premiums in benefits. (the calculation uses present value divided by present value, based on pricing assumptions). I believe X = 60 in most states. Companies that have gotten premium increases approved have convinced insurance departments that actual experience turned out worse than pricing assumptions.
The best I've been able to find is the Federal Employee program. Of course, it's not available to the rest of us, and I assume regular individual plans are more expensive. But, it's better than nothing if I'm just starting to think about this. https://www.ltcfeds.com/ltcWeb/do/assessing_your_needs/ratecalcOut?ctoken=RkuMsUt2
For example, a 90 day waiting period, 3 year benefit period, $150/day, with 4% compound inflation rider will cost a 60 year old $163.86/month or $1,966/year.
The maximum benefit at issue is 3 x 365 x $150 = $164,250. That benefit goes up at 4% per year.
If I either die or need care at 85, my premiums will have totaled about $50,000, or accumulated to $86,600 at 4% interest.
The original benefit will have grown to $421,000.
Here's a side fact: LTCi is subject to minimum loss ratio requirements. That is, the insurer certifies that it expects to pay at least X% of the total premiums in benefits. (the calculation uses present value divided by present value, based on pricing assumptions). I believe X = 60 in most states. Companies that have gotten premium increases approved have convinced insurance departments that actual experience turned out worse than pricing assumptions.
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You make some good points about the due diligence that one should do when evaluating CCRCs. However, I might add that no amount of due diligence will ensure that occupancy levels won't adversely change in the future; that the medical facility that appeared to be 5 Star quality and exceptional becomes a dive in the future when you need it or has limited capacity (and I have encountered this with a luxury level CCRC that consigns overflow patients/residents to another skilled nursing facility) that cannot meet the needs of a growing infirm population; that the food quality won't deteriorate because food staff is always looking for a better place to work; or that the plant facilities become obsolete with age. I don't mean to sound like a naysayer about CCRCs, but I'm convinced that only luxury/resort type levels of CCRCs, with strong financial bones and residents who can also augment the financial standing of the CCRC, are the only type of CCRCs that provide real peace and comfort in handling Life Cycle care for the long haul. Everything else is really marked by greater uncertainty.
Initial entrance fees, up to a point, are refundable. But let's say you have a Type A entrance fee of $450K, with a monthly maintenance fee for a husband and wife couple of $5K. After 18 months in many CCRCs that entrance fee is typically history and non-refundable.
I'm more inclined to look at hybrid type B or C Life Cycle CCRCs, with equity ownership in residential units, as these plans would dovetail with my LTCi in case I needed asssited living or skilled nursing care, but still these entrance fees in the type B or C places I have seen are 10 percent of the price of the units you buy, which result in entrance fees ranging from $180K to $40K -- with monthly maintenance fees of $5K plus.
Why do you need such a policy, when you have Medicaid to cover tail risk if you've run thru all your assets? I don't advocate total reliance on Medicaid as an approach or strategy to manage LTC, but I do think it makes better sense to me to use all your assets (or have an LTCi policy) that covers the first 5 years of LTC in the best facility one could afford; after 5 years of LTC, you'll likely not care what type of facility is caring for you.
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youbet
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Medicaid doesn’t cover the risk of impoverishing your spouse.
audreyh1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
This is very very true.
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