I help manage finances for in-laws. Spouse pays the bills. Here is a real life situation. In 2005, two LTC premiums were $7500 total. The policies were started in the 90's, and the premiums were probably a few thousand at most in the beginning. $6,800 went to Schedule A medical in 2005. This pushed them beyond the standard deduction, but this factor is not enough to sway a decision one way or the other I feel.
In late 2011 they had to leave the house and move to independent living. This was about $4,200 rent per month, and doable with their monthly income. The LTC insurance premiums had grown to yearly $8,500. In a year or so M-I-L required more care (dementia) and the monthly rent went to $6,800 (M-I-L, acute care) + $3,600 (F-I-L, original apartment).
In late 2013, F-I-L moved to assisted living ($7,000 monthly rent). M-I-L monthly rent is now $7,500. LTC insurance reimburses these amounts in full. With the cap in their policies, we are looking at 4-5 years before the insurance is exhausted.
Now their monthly income goes all to investments. Without LTC there would be a lot of arguing amongst the children as to how to proceed with paying the additional costs. As it now stands these decisions were made by the in-laws quite a while ago.
In 2005 I would have been one who said the LTC premiums were a waste, but now have a different opinion. In some cases it makes sense obviously, but you need a detailed analysis and projection, and can't rely just on what a salesman says.
