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considering a hybrid LTC policy
Old 09-12-2020, 02:25 PM   #1
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considering a hybrid LTC policy

Hello. I've only posted a bit here, so I hope I'm doing this right. My interest in long-term care is pretty specific, so I'll lay this out and see what people think. I already have some LTC insurance, and I may be buying more shortly.

First, here are my main concerns:

1. I don't want to go to a nursing home. I want to remain at home. This is very important to me. (A couple of previous posters have alluded to "quality of life" being a factor in their decisions.)

2. If I move out of the country, I'd like to still be covered. (The odds are about 70-30 that I'll remain in the US, but I'm not sure.)

3. I don't want to be worried about paying for my insurance as I get older. (I'm 64 now.)

4. If possible, I'd prefer to have an indemnity policy rather than a reimbursement policy.

I started my quest around 2008, when I bought a 10-pay from John Hancock. I paid $10,000 a year (ouch) for ten years, and now I'm fully paid up for the rest of my life. The policy is unlimited in terms of time, and compounds 5 percent annually. As of 2020, the payout would be $300/day. And the broker who sold this to me specifically chose Hancock because it would cover me internationally.

I felt pretty good about this. But because I really, really wanted to be totally covered, and never have to think about a nursing home, I bought a secondary policy two years later from Genworth. Genworth does NOT cover international, so there'd be no payout at all if I left the US, but it was the only company still left who were offering an unlimited ten-pay, and the window on that was about to close. So I took it, at 5 percent annual compounding. As of 2020, it would give me $140/day. I've still got one or two more payments on this, and then I'll be through.

I felt pretty pleased with myself for years. Then... I did some math.

I'd read a lot of general information online, things like, "It's cheaper to be cared for at home than in a facility," "The average cost of care is X" -- things meant to be helpful that misled me. Because home care is only cheaper if you need it for a few hours a day. Turns out if you need 24/7, or anything approaching that, it's way more expensive.

Currently, hourly home-care costs in the state where I live can vary from $20-30. Someone I knew was paying $30/hour, so I used that to calculate. That's $720 a day. My insurance -- both policies together -- would cover $440/day (about 14 hours). That left a gap of $280/day, or $8680/month, or $102,200/year. Shocked, I emailed my arithmetic to the broker who'd sold me the Genworth policy -- was there something here I'd misunderstood?

Nope, she wrote back, that was completely accurate.

Also, both Genworth and JH require trained home care workers -- you can't just hire the person down the street who might be cheaper. Also, if you plan on living in a more rural area, as I do, home care workers are actually more expensive because there are fewer.

And both my policies are reimbursement-only. That means those trained health-care workers are required to fill out forms and those forms must be submitted in order for reimbursement to take place, and sometimes this can be a nightmare.

An indemnity policy, on the other hand, works like this: you meet the threshold of needing care, they hand you the money. Use it however you want. Hire anyone you choose. Buy extra groceries. They're not interested in micro-managing you. Too bad I hadn't bought one of those...

And when I read the fine print on the John Hancock? If I move out of the US, it only pays 75 percent for four years, then stops.

This was a shock of cold water. All those years I'd felt securely over-insured... no.

What to do? I considered buying an annuity to help close part of that gap, as an annuity would pay out anywhere in the world and continue for my lifetime, and my health would be irrelevant. But they seem to cost a great deal and pay out fairly little. (Please correct me if this is wrong.)

Now I'm looking at a hybrid life insurance/LTC from Nationwide. It's a one-pay, so the price can never be raised. It's an indemnity policy. It will cover international at a 50 percent monthly payout. And the broker says that if I meet the criteria of care, I'll get the payout regardless of whether I'm getting hourly care from the other policies or not. And if I change my mind at any point, I can get my premium money back, which is pretty significant. (But only the premium money -- that is, if I demand my money back in ten years, I'll get what I put in ten years ago, which means there's an opportunity cost in terms of what I might have made investing that money.) There's also a death benefit, but that's not important to me.

The broker sent me two breakdowns, for a $100,000 payment and a $150,000 payment. Each has a 3 percent simple inflation adjustment per year.

For a $150,000 premium, you get $5,797/month, for a total pool of $278,287 paid out over four years. The broker tells me this amount can grow over the years.

For $100,000, it's $3865/month, for a pool of $185,525 (again, this can grow).

Of course, it's always possible any of these three companies could go out of business. In which case I'd be glad of the other two. And even all three together won't entirely cover 24/7 care at home (and certainly not if I leave the US) -- but I don't expect that, as long as the remaining gap can be paid out from my savings without bankrupting me.

At this point, I know more about some of the finer points of LTC than the last agent I spoke to did, but I'm not that financially literate on the whole. I know little about wise investing, and have made most of my nest egg from my job. I'll be retiring from that job in 2021. I know some posters here would do fantastic things in terms of investing $150,000, but I don't have great confidence I would, so perhaps it makes the most sense for me to take the Nationwide policy.

Thoughts?
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Old 09-12-2020, 02:56 PM   #2
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Here’s a thread discussion from a couple of months ago you might find useful https://www.early-retirement.org/for...ies-86199.html
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my apologies
Old 09-12-2020, 02:57 PM   #3
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my apologies

I was sure I was in the LTC thread, but I see this is #1 of a new thread. Apparently I am an idiot. If there are any mods who watch over newbies, could you help? Should I try to repost this in the right place?
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Old 09-12-2020, 03:00 PM   #4
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Quote:
Originally Posted by Among_Primates View Post
I was sure I was in the LTC thread, but I see this is #1 of a new thread. Apparently I am an idiot. If there are any mods who watch over newbies, could you help? Should I try to repost this in the right place?
You’re fine. This is a question specific to your needs, so a separate, dedicated thread is more likely to get helpful responses. Read your PMs.
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Old 09-12-2020, 04:01 PM   #5
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This thread has an interesting discussion on LTC options, and the second post has some links you might find useful https://www.early-retirement.org/for...ml#post1693231
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