Keep LTC Insurance?

[OHjosh]

I know I saw posts on this a few weeks ago but I can't find them. I have a decision coming up this June and really can't come to a conclusion.

I'm going to be 64 soon. Nest egg is $825K. SS will be $28K a year at 66 1/3. No spouse and no kids. I am intending to leave about $25K to some relatives, the rest to charity.

I have had my LTC plan for something like 15 years. It was $1,300 for most of that time. Now it goes up $100 year; currently $1,500. I tried to reprice it, even with the same company, and was told that it would be $4K in premiums now. The agent confirmed for me that the coverage limits are top notch. He encouraged me to never let it lapse.

My takeaway last postings was that if you really wanted to leave a nest egg, it might be a good expense. But if you have enough money and don't really care about legacy, let it go.

My mom paid in for three decades and got back $5.6K. She was in great health and mind until 90 and died at 95 and I seem to be taking after her.

Right now I'm leaning to letting it go. (I live on nestegg distributions until SS in an attempt to lower my tax torpedo.)

Anyone want to weigh in here?

 

[Pellice]

Here is the preceding thread:
http://www.early-retirement.org/forums/f28/ltc-policy-for-retirees-94334.html

My opinion (I am in a similar situation to yours) is that it depends on your budget and also the benefits your policy brings. If the expense reasonably fits into your budget, and it provides you with flexibility (and you said the benefits were top-notch) in using it, then keep it. The price is below that of most people's. From your account your mother had 5 years when she wasn't in great health, but I take it she did not call upon her policy much. But you can't count on duplicating her experience exactly. And maybe your policy allows for care in housekeeping and other routine care that you might appreciate at 90+

And you might be able to spend your nest egg a bit more freely having this backup.

 

[VanWinkle]

LTC Insurance is not a savings plan(don't expect a payout based on what you paid into it). You have 15 years invested in a plan that is costing 1500 per year or 125 per month. That seems like a very reasonable premium for LTC. What it pays out is paramount to whether it is worth the price, including the peace of mind it gives to you. Do you know about waiting periods and maximum payouts in this plan. The more you know about the way the insurance pays out, the easier to decide on retention of the policy.

VW

 

[savory]

This post is not to hijack the OP question but perhaps to shed some light. I am on the road and do not have the exact offer John Hancock made to me a couple of weeks ago but it is similar to the post I copied below while searching Hancock:

[COLOR=" Keep the benefits and increase the premium, keep the premium but reduce the benefits by either dropping the inflation rate and/or length of the lifetime term to 10 or less years. [/COLOR]

I expect they are not providing this policy change for my benefit. Consequently, I am also trying to consider if I should change or drop the coverage. I purchased this perhaps 20 years ago in my mid 40s. It remains fairly inexpensive for me and my wife.
I believe the premium is $1200 per year for both me and DW.

Looking forward to your thoughts.

 

[Rianne]

My mom had LTC insurance. She lived by herself, took care of herself and did not use the benefits until 3 months before her death (93). This is personal experience and should not influence your decision. We chose not to take LTC insurance. Per numerous RE calculators, the spending that's allowed far exceeds what we actually spend. We can't predict the health concerns in older age, but it seems self insurance would be good enough. Plus, understanding insurance contracts takes an attorney. I would not trust an insurance salesman to explain the benefits.

 

[38Chevy454]

I have read others say that LTC is to protect the remaining spouse. But in the case for OP, he does not have that concern. So I think it becomes a question of what level of care might the LTC policy provide, or even more consideration the quality of the care. There can be considerable differences between quality of the facility when it is primarily medicaid/medicare vs private pay. The LTC money might provide for a better facility?



All that said, me and DW are taking the chance and going with the self-insure route and do not have LTC insurance.

 

[ncbill]

How much will it pay & for how many years?

Will it pay for home care?

The future of LTC is at your own home, but IIRC many older policies only pay if you need care in a facility.

 

[easysurfer]

I'm in a similar situation as the OP, OHJosh. Each year, I've written out a check to keep the LTC coverage, but know the doubtful feeling of keep or not. Not sure what is the OP's coverage, but I'm paying about $2600 a year, in comparison $1500 sounds like a bargain.

 

[joeea]

I'm going to be 64 soon. Nest egg is $825K. SS will be $28K a year at 66 1/3. No spouse and no kids. I am intending to leave about $25K to some relatives, the rest to charity.

You haven't indicated your annual expenses, nor how much you care if you actually have anything left over for relatives and charity or not.

have had my LTC plan for something like 15 years. It was $1,300 for most of that time. Now it goes up $100 year; currently $1,500. I tried to reprice it, even with the same ctompany, and was told that it would be $4K in premiums now. The agent confirmed for me that the coverage limits are top notch. He encouraged me to never let it lapse.

Sounds like a great, inexpensive plan.

My takeaway last postings was that if you really wanted to leave a nest egg, it might be a good expense. But if you have enough money and don't really care about legacy, let it go.

As long as you are willing to become poor should you need long term care, and are willing to settle for Medicaid facilities, then the choice is entirely yours to make.

My mom paid in for three decades and got back $5.6K.

I've paid lots for my homeowners insurance over the years and have never gotten anything "back". I still intend to keep that insurance though. That's sort of the nature of insurance.

Right now I'm leaning to letting it go.

You won't be hurting anyone else no matter what decision you choose.

 

[audreyh1]

Gosh, with your low premiums I would be tempted to keep it, assuming as you have been told that it is an excellent policy. You can’t buy policies today that you could 15 years ago. It may afford you better treatment in your old age.

 

[OHjosh]

I am living easy on $40K before taxes, with vacations and with $4K payoff of LOC now $21K.

Major aspects of policy (up)dated 2011: There is a 90 day elimination period. Daily max is $100, lifetime max is $146K. Both amounts increase 5% each year. Home care is 50% daily max amount.

 

[youbet]

In your situation, your decision won’t matter much either way. You’ll likely have most of your current nest egg if and when you need care so you can self-insure. Your policy is cheap but the benefits are low (as compared to your net worth). Do whatever makes you feel best about your situation.

 

[Sunset]

OP - I'd keep it, it is cheap.

OP - you didn't ask but it looks like you could take out $50,700 and remain in the 12% tax bracket, which would help you discharge the debt faster, and save on interest costs.

 

[Mdlerth]

Keeping an open mind

I've paid lots for my homeowners insurance over the years and have never gotten anything "back". I still intend to keep that insurance though. That's sort of the nature of insurance.

Are these two insurances really comparable? I'm not sure they are, although I would welcome someone else's perspective.

My own belief is that different types of insurance are apples and oranges because, while all insurance is risk-based, risk can go up or down (or stay the same).

If you drive your car for 20 years without ever having a collision, the insurer will determine you are good driver, a low risk, and your year-21 auto premiums will trend lower.

If you own a house for 20 years without it ever burning down, the insurer will probably conclude your risk of fire is stable and your year-21 homeowner premium will stay about the same.

If you buy LTC insurance at age 55, the insurer will anticipate you are at relatively low risk of requiring long term care so your premiums will be low. After 20 years of not entering long term care, however, you'll be 75 and at higher risk of needing it, so your premiums are likely to be high and trending even higher.

As long as you are willing to become poor should you need long term care, and are willing to settle for Medicaid facilities, then the choice is entirely yours to make.

Surely there is more to it than this. Having a LTC policy doesn't guarantee you won't end up poor anyway. Even under the most optimum scenario, it only covers part of LTC costs, it doesn't start immediately, and it only lasts for a limited time.

 

[Chuckanut]

I have to agree with the others that if it is a good plan I would keep it.

If I could buy the plan you describe for myself at the price you have mentioned, I would.

Alas, for me the LTC problems are to expensive and don't provide enough protection.

 

[easysurfer]

Took a look at my LTC Plan coverage today.

Started about 12 years ago and have forked over about $24, 400 total in premiums.

Policy has a 90 day elimination period, benefit period of 3 years.

LTC benefit amount started at $6000/month. Policy limit $216,000.

But I added compounded 5% inflation so now the numbers (If I'm calculating correctly, think I did) is LTC benefit amount started at $10,262/month. Policy limit $369,433.

I have this internal debate about should I keep or let go and go to a hybrid type in the future. I fall in to the category of one for the folks who just may not get over the thought of plunking in a lot in premiums over the years and the possibility of getting nothing in return. Which is a common unpopular aspect of traditional LTC plans.

 

[big-papa]

My mom had LTC insurance. She lived by herself, took care of herself and did not use the benefits until 3 months before her death (93). This is personal experience and should not influence your decision. We chose not to take LTC insurance. Per numerous RE calculators, the spending that's allowed far exceeds what we actually spend. We can't predict the health concerns in older age, but it seems self insurance would be good enough. Plus, understanding insurance contracts takes an attorney. I would not trust an insurance salesman to explain the benefits.

Another personal experience here. Father-in-law dropped his and his wife's LTC insurance about 5 years before she was diagnosed with Alzheimers. She ended up spending about 10 years in a nursing home before she passed away. So they had to go the Medicaid route to pay for it, along with all of the limitations that implies with regards to lookback, and getting an attorney in elder law to get things in place. After she passed, he ended up having to sell many/most of his possessions to stay afloat even though he had SS and a state pension. Had he kept the plan in place, I'm certain that the financial strain would have been greatly reduced.

That experience is what led us to ultimately purchase plans. Mine is a little skimpier than my wife's, but now we have clear family history on her side including her Mom, her Mom's twin sister, her Mom's brother and her Mom's aunt. We did have a rate increase a few years ago and after careful consideration, we reduced my coverage slightly and kept my wife's as is, due to family history.

Of course, everybody's situation is different...

 

[Chuckanut]

I fall in to the category of one for the folks who just may not get over the thought of plunking in a lot in premiums over the years and the possibility of getting nothing in return. Which is a common unpopular aspect of traditional LTC plans.

So, let me get this straight. Since you have bought an LTC policy you want to get seriously ill and be confined to a nursing home for many, many months so you will get some of your money back?

OK, not really a fair question. But, your reward for not getting your LTC money back is (hopefully) a life of reasonably good health. If I knew that paying LTC premiums, would guarantee a life of good health for as long as I continue the premiums, I would sign up in a New York minute.

IMHO, the unpopular aspect of current LTC insurance is that when one considers the amount of the premiums paid, the waiting period, the chances that I will use it for much over 2 years and the total top limit, it's not that great a deal for me and mine.

FWIW, my LTC plan has three parts - Save the LTC payments and keep them invested in the Total Stock Market, take SS at 70, buy an additional 5 years of service on my pension. All give me an increased income I could use to offset some of the LTC costs if I need it, or if I don't need much LTC, I can spend the money on wine, women and song, and then waste anything left over .

 

[REWahoo]

I fall in to the category of one for the folks who just may not get over the thought of plunking in a lot in premiums over the years and the possibility of getting nothing in return.

Curious: do you feel the same about the "lack of return" from life insurance, homeowner insurance and health insurance?

 

[Dtail]

My DM has an LTC plan. It was 7.6k yearly for $350 per day for lifetime coverage.
They changed the premium to 13.6k yearly for the same benefits. After much thought, we changed to another proposed plan by the same company.
It costs 8.6k yearly with $350 per day and 1% compounding increases. The policy now covers only 3 years, but the premium is locked for 9 years. DM is 86 y.o.

 

[easysurfer]

So, let me get this straight. Since you have bought an LTC policy you want to get seriously ill and be confined to a nursing home for many, many months so you will get some of your money back?

...

Curious: do you feel the same about the "lack of return" from life insurance, homeowner insurance and health insurance?

Yeah, I know where you are coming from. Other insurance is a fair comparison. But for some reason, there is a different feeling when come to LTC. Perhaps because that seems so much in the future.

Seems I'm not alone in the sentiment:

I find that some clients can’t get past the “use it or lose it” nature of traditional long-term care insurance. It is emotionally difficult to buy an insurance policy that may cost $4,000 to $8,000 per year and will pay out nothing if you pass away in your sleep. I had a client pass away last year in his mid-80s. He paid about $3,250 per year in premiums for 19 years. That is more than $60,000 that he and his family didn’t get to use for something else.

That is the nature of insurance, however — you pay money to protect yourself from a risk that you hope never happens. If you pay for 20 years on a term life insurance policy and walk away with nothing, you don’t wish you had died during that period. Likewise, I never think that I wasted money on car insurance if I didn’t get in a car accident that year. For some reason, though, many people think differently about long-term care insurance.

Finally, many people cannot stand the thought of paying $30,000 or more in premiums and never receiving a dime back from the insurance company. If that sounds like you, you might be drawn toward a hybrid policy or, as an alternative, a permanent life insurance policy that has a critical-care rider, which is a free or low-cost rider that allows you to be paid most of your death benefit while you are still alive to cover long-term care costs.

https://www.iris.xyz/advisor/the-pros-and-cons-of-long-term-care-insurance-and-hybrid-plans

 

[ncbill]

Your LTC insurance benefits will most likely be used at home or in assisted living, not a nursing home.

Those of you with older policies should check them to make sure they cover the above.

Trust me, you don't want to go into the custodial (not Medicare rehab) side of a nursing home unless you have no other choice.