Long term care (LTC) insurance

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jtelwood
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Joined: Wed Jun 11, 2008 9:45 am

Long term care (LTC) insurance

Post by jtelwood »

My wife and I need to make a decision in the next couple of weeks regarding our LTC insurance policy and would like to hear your thoughts on the best way to analyze/evaluate the option presented by the insurance company.

Summary of LTC insurance benefits -

- We purchased the policy with John Hancock in 2006.
- I am 66, my wife is 62.
- We selected the 4 year shared care benefit with a 60 day elimination period.
- The policy has 5% compound inflation protection.
- The policy was written for South Carolina.

Background -

John Hancock notified us that our premiums will be increased by 23% this year. That's an increase of approximately 400 dollars on each policy. John Hancock has offered the option of avoiding the premium increase by reducing our future annual inflation rate from 5% to 3.9%. This is a one-time offer.

Projecting out 25 years, I calcuated that our daily benefit would be reducted by approximately $150. The 9 year average annual increases for 'long term care settings' are nursing home 3.5%, assisted living facility 3.4%, adult day care 2.2% and home health care aide 1.3%. Our present health conditions are excellent.

We have the ability to pay the increased premiums. Since no one knows the future costs for longterm care, our thinking is to pay the increasee premiums and keep the maximum inflation protection. This seems like the safe approach. Other than the above, what should we consider in making this decision?

Your thoughts are greatly appreciated.

j elwood
dhodson
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Re: Long term care (LTC) insurance

Post by dhodson »

as you may know, LTCi is a controversial topic for many reasons some of which are happening to you (the price increases which may continue over time).

If it were me and i already purchased LTCi and i could easily pay the increase then that is what i would do. I assume you felt the purchase was necessary when you made that purchase and that little about those ideas has changed over the last few years.
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SnapShots
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Re: Long term care (LTC) insurance

Post by SnapShots »

You say you have a "shared" policy but are going to be charged $400 on each policy. I thought a shared policy was one policy and used by the first who needed it. Is the premium increase $400 or $800? Is this per year or per month?

Do you need to cover every single penny of cost or can you afford to supplement care with some of your savings if one of you has to go into assisted or nursing home care? Edit for clarity: 5% compounded interest is a lot and this is the main reason your premiums will continue to increase - and may get so high you cannot afford to continue paying for the insurance - later down the road - when you may need it.

If you policy meets today's nursing home costs - look at reducing your inflation rate to maybe a simple interest or a 2%, 3% compounded rate. Try to work a deal with John Hancock to freeze your premium payments. Compounded interest rates will continually raise your premiums. If you can afford to pay these types of premium increases - may be you don't need all that much insurance and can offset some of the costs if one of you needs care. You probably don't need so much coverage

My husband and I each have a LTCi policies with NY Life and have had it 14 years more or less. We got it in our early 50s and pay a total of $180/mo for both polices. We are now 64 and 69. I took out 3% simple interest. The policy started out at $3000/mo and is now about $4,200/mo. 90 day elimination period. No time limit on how long on stay. Provides at home care, assisted living and/or nursing home care.

14 years later- in my area NH costs ranges from $5000 - $6000/mo. I did not get a compounded interest rate because the premium cost would go up every year/or few years and I wanted something we could afford to keep into retirement. We've never had an increase in premiums. If I had to do it over, I'd consider a 4-5 year limitation - and probably a shared policy. It's something I can do if NY Life wants to go up on our premium. So, far they haven't mentioned it.
Last edited by SnapShots on Tue Jul 17, 2012 3:53 pm, edited 1 time in total.
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tc101
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Re: Long term care (LTC) insurance

Post by tc101 »

I have posted a lot about this. I think LTC insurance is a bad idea. To see all the threads I have posted in, put this in google

long term care tc101 site:bogleheads.org
. | The most important thing you should know about me is that I am not an expert.
yobria
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Re: Long term care (LTC) insurance

Post by yobria »

No right or wrong answer, but I'd probably cancel and self insure, just because it may 30 years before you (more likely your wife) receives any benefits, and so much can happen (eg more increases) during that time. If you were 82 and 86, it would be a different story.
Mandrale
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Re: Long term care (LTC) insurance

Post by Mandrale »

yobria wrote:No right or wrong answer, but I'd probably cancel and self insure, just because it may 30 years before you (more likely your wife) receives any benefits, and so much can happen (eg more increases) during that time. If you were 82 and 86, it would be a different story.
When you don't need it is when you can get it. When you need it, it's too late. By your logic they should wait until it is more expensive? I don't understand.
yobria
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Re: Long term care (LTC) insurance

Post by yobria »

Mandrale wrote:
yobria wrote:No right or wrong answer, but I'd probably cancel and self insure, just because it may 30 years before you (more likely your wife) receives any benefits, and so much can happen (eg more increases) during that time. If you were 82 and 86, it would be a different story.
When you don't need it is when you can get it. When you need it, it's too late. By your logic they should wait until it is more expensive? I don't understand.
I'm just saying you want to avoid a situation where you're paying premiums (which could rise at any time) for a long period of time. That could mean self insuring (what I do), waiting until later in life to get coverage, buying a single premium policy, etc.
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mickeyd
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Re: Long term care (LTC) insurance

Post by mickeyd »

I'll repeat my previous comment about LTCi and the entire LTCi industry~

LTCi...TICK>>>TICK>>>TICK
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle
BruDude
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Re: Long term care (LTC) insurance

Post by BruDude »

If you cancel the policy now, the rates for a new policy will probably never be anywhere close to what you are currently paying.
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SnapShots
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Re: Long term care (LTC) insurance

Post by SnapShots »

There is no reason to cancel. More information is needed on the policy. The 5% compounded interest is what's driving up the premium. The insurance company tells you upfront this is what will happen. OP is in a good position to adjust this policy. There's no enough information to tell what's going on at this point on the thread.
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green tea
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Re: Long term care (LTC) insurance

Post by green tea »

Jtelwood,

Since you have the ability to pay, I agree with your approach to keep the 5% compounding.

In addition to project out 25 years the daily benefits, another analysis is to project out and compare the total maximum benefits $$ of the 3.9% vs. 5% compounding.

Then you will see, how much less in total benefits dollars if you go with the 3.9%, at the ‘savings’ of $20K additional premium over 25 years.

PS: our LTC policies are 5% compounding.
Honobob
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Re: Long term care (LTC) insurance

Post by Honobob »

My long term care insurance offered me 4 options:
1. Take a $100 increase in preimums.(5%)
2. Reduce from LIFETIME benefit to 6 year and reduce premium by 28%.
3. Reduce from LIFETIME benefit to 3 year and reduce premium by 45%.
4. Keep the same premium but give up the 5% benefit increase for ONE year.

I figure the premium will double ever ten years so after 30 years I'll have $70,000 paid and my first year benefit will be $215,000! I project my income to be about $270,000 a year after 30 years so I could pay for care then but I think this is too good a deal to give up at this time. Even giving up the one year inflation increase would cost me $10,000 20 years from now. One hundred today vs. $10,000 20 years from now.
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SnapShots
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Re: Long term care (LTC) insurance

Post by SnapShots »

Honobob wrote:My long term care insurance offered me 4 options:
1. Take a $100 increase in preimums.(5%)
2. Reduce from LIFETIME benefit to 6 year and reduce premium by 28%.
3. Reduce from LIFETIME benefit to 3 year and reduce premium by 45%.
4. Keep the same premium but give up the 5% benefit increase for ONE year.

I figure the premium will double ever ten years so after 30 years I'll have $70,000 paid and my first year benefit will be $215,000! I project my income to be about $270,000 a year after 30 years so I could pay for care then but I think this is too good a deal to give up at this time. Even giving up the one year inflation increase would cost me $10,000 20 years from now. One hundred today vs. $10,000 20 years from now.
Who's the insurance carrier? I have NY Life and in 14 years they have not increased my premium - at least not yet. What age did you buy your policy and how long have you had it? LCTi is important in the protection of a spouse and inheritance.
the best decision many times is the hardest to do
Topic Author
jtelwood
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Re: Long term care (LTC) insurance

Post by jtelwood »

The insurance carrier, our ages, and length of time owned is in my initial post.
Honobob
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Re: Long term care (LTC) insurance

Post by Honobob »

SnapShots wrote:
Who's the insurance carrier? I have NY Life and in 14 years they have not increased my premium - at least not yet. What age did you buy your policy and how long have you had it? LCTi is important in the protection of a spouse and inheritance.
My LTCi is through CalPers. I bought in late 40"s and have had for over 10 years. The rate increases are because of the 5% annual increases. Do you have an inflation factor? I have no spouse or anyone that needs an inheritance at this time. I think the MOST important protection is MY care. People seem to think that your brain turns off when you need in home or skilled nursing care. I've seen just the opposite of people clinging to life. I do not want to be old and sick AND poor!
It's slowly dawned on me that we won the real estate lottery!
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SnapShots
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Re: Long term care (LTC) insurance

Post by SnapShots »

Honobob wrote:
SnapShots wrote:
Who's the insurance carrier? I have NY Life and in 14 years they have not increased my premium - at least not yet. What age did you buy your policy and how long have you had it? LCTi is important in the protection of a spouse and inheritance.
My LTCi is through CalPers. I bought in late 40"s and have had for over 10 years. The rate increases are because of the 5% annual increases. Do you have an inflation factor? I have no spouse or anyone that needs an inheritance at this time.
I think the MOST important protection is MY care. People seem to think that your brain turns off when you need in home or skilled nursing care. I've seen just the opposite of people clinging to life.
I do not want to be old and sick AND poor!
I AGREE!!! I took out LCTi when I was 48-49 My husband was 52-53 yrs old. I have 3% simple interest rate. At the time I took out insurance, nursing home care was $3,000/mo. Current, benefit would pay about $4,280/mo. Today, nursing home care is $5,000 - $6,000/mo in our area. I wanted a premium we could afford to pay into old age and felt we were in a position of off setting some of the expense. Our premium is $180/mo - for two life time - policies with NY Life. As of yet, we have not had any premium increase for about 14 years. I've had some experience with nursing homes and found there is room for negotiation. If you have LTCi, sometimes you can negotiate what the policy will pay. Hopefully, we are just throwing this money away and will never be in a nursing home. :D

When my mother was in skilled nursing from a broken hip the personnel treated her like she had no brain. No dementia. She was full with it. And, BOY! did she resent being treated like she wasn't there.
the best decision many times is the hardest to do
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BruceM
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Re: Long term care (LTC) insurance

Post by BruceM »

j
You are asking the right question.

My view is that you have two large unknown variables before you that you should probably research a bit to try to answer your question of whether to keep or lapse these policies. And judging from your description of what you've done so far, I think you are well equipped to research the answers to these questions:

1. Premium hikes. This has been discussed many times, but in general terms. How much the insurer is 'underfunded', much like an underfunded pension, will depend on assumptions and their current long term capital. It will take an insurance actuary to be able to try to determine the company's current shortfall and the likely premium hikes that will be necessary to make it up over the decades ahead. I would think the insurance credit raters like A.M. Best or the independent rater, Weiss, would be good places to start.

2. Denial of Claim. In my view, this is the 600 lb gorilla in the room that no one wants to talk about, particularly the insurance industry, but in 15 to 20 years, will dominate these kinds of conversations. When an insurer is stuck with a large number of in-force policies, a high probability of a high claims rate and not enough reserve capital, it is certainly understandable that they will go into survival mode and adopt a policy of initial claim denial, thus subjecting all claims to a drawn out review process that will not be well suited to 80 and 90 somethings who are nearing the end of life. Here is one example of this:

http://www.explainmyclaim.com/insurance-denial.html

Good luck to you, and if you would, please post back what you find.

BruceM
Honobob
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Re: Long term care (LTC) insurance

Post by Honobob »

http://csuerfa.org/long-term-care.html

CalPers seems to have a pretty good satisfaction rate and a low denial rate. Definitely something you'd want to monitor over time.
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SnapShots
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Re: Long term care (LTC) insurance

Post by SnapShots »

I've had a NY Life LTC policy for 14 years with a 3% annual simple interest rider. My premium has never gone up. Feb 2011, NY Life brochures state - they have NEVER increased premium rates. Below is a link about NY Life paying dividends on LTC policies staring in 2005. If you have a compounded 5% rate increase - premiums will increase and you have the option of accepting the increase or not. NY Life offers many options and now is offering a CPI-U option. I have not heard of any problems with obtaining coverage with NY Life. The policy is very clear on what is covered. If there's problem with NY Life, I'd like to know about them.

http://www.lifehealthpro.com/2011/02/11 ... -dividends
the best decision many times is the hardest to do
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