Recommending my mother in law cancel life policies

[jerome99]

My mother in law has no debt of any kind and no kids that have any dependency on her for financial help. She currently has 2 $50k whole life policies and 1 $100k term policy. She also has purchased a LTC policy. She is spending $4,500 a year for all this insurance. I cannot think of any reason for her to have life or LTC insurance.

Any reasons to not cancel all this coverage now?

[linuxuser]

Life insurance, yes, cancel.

As for LTC, I wouldn't be so quick to jump the gun.
Have you actually priced out how much it would cost to put her in assisted-living?
How much does the LTC pay in benefits? Is the company solvent?
Are you willing to pay all of nursing home care if that is required?
If not, is your wife, willing to see her mother in a Medicaid facility?

[RadAudit]

I had a similar concern with my Mom a few years back concerning whole life insurance. I told her to look at the cash value of the policy, the face value of the policy, and the annual premium. She was - as far as I could figure - paying an annual insurance premium to receive essentially the same amount of money as the cash value of the policy. She decided to cash in the life insurance policy and put the money in a savings account, and save the expense of an annual premium.

Now on LTC - there could be a number of good reasons to keep that going.

[jerome99]

The LTC policy is with Northwest Mutual and has a max benefit of $200/ day.

[linuxuser]

The LTC policy is with Northwest Mutual and has a max benefit of $200/ day.

How much is she paying for that?

Again, are you prepared to pay for all her care? Can you?
If you can't, your MIL exhausts her savings and go on Medicaid and go into facilities that accept that.

[MathWizard]

Some states require that family members kick in for parent's care if the parents cannot afford
it. I make sure what the law says before convincing her to drop the LTC insurance.

[ddunca1944]

Cancelling the life ins seems a no-brainer. But I'd think long and hard before cancelling the LTC ins. Unless she clearly has sufficient resources to pay for long term care. I am assuming she is single? The majority of nursing home residents are single women.

[mephistophles]

My mother in law has no debt of any kind and no kids that have any dependency on her for financial help. She currently has 2 $50k whole life policies and 1 $100k term policy. She also has purchased a LTC policy. She is spending $4,500 a year for all this insurance. I cannot think of any reason for her to have life or LTC insurance.

Any reasons to not cancel all this coverage now?

Has your mother in law asked for your advice? Does she want your advice?

[Gnirk]

I wouldn't cancel the LTC policy because you never know what may happen. My mother paid for an LTC policy for twenty years. Then my very physically healthy mom was hit with Alzheimer's. The policy is now covering more than the cost of her care (it is a per diem policy) in a private care home. She receives the best possible care, and the policy is returning more than ten times what she paid in total premiums. In her case, the LTC was a good decision.

[kenschmidt]

Based on the information given, I don't know how any advice can be given. Even the whole life policies may have some value depending on the premium and dividends.

[AgAuMoney]

Based on the information given, I don't know how any advice can be given. Even the whole life policies may have some value depending on the premium and dividends.

And the age of the policies...

There just isn't enough information for us to know.

I would surmise based on the death benefit that the policies likely are not needed for estate planning purposes, but that is the most likely "need" for life insurance given the rest of the story.

[dhodson]

I am not an agent but assuming your MIL wants your assistance,

I would have her ask for an in force illustration for the whole life. If the policy has been in force for a very long time and she wants to eventually give money away at her death or have an expensive party thrown at her death then frequently it makes sense to keep these things once held that long. The basic reason is that the costs are sunk and you are at the point that it would be hard to get a better return going forward. Most people shouldnt buy these things in the first place but surrendering them once purchased is a seperate issue. The illustration will give you an idea of how the policy might perform going forward. If she has no intention of leaving any money behind at her death then permanent insurance isnt going to work out. I assume these polices are also from a mutual who pays dividends? Do you know what she is doing with the dividends (buying PUAs, taking it as cash, using it to offset premiums)?

Most people purchase LTCi bc of concern for the costs for a LTC need (it doesnt have to be a nursing home by any menas). Id be surprised if this need has gone away. NWM polices seem to be very pricey but they are also probably less likely to raise rates.

[Col Klink]

Life insurance, yes, cancel.

As for LTC, I wouldn't be so quick to jump the gun.
Have you actually priced out how much it would cost to put her in assisted-living?
How much does the LTC pay in benefits? Is the company solvent?
Are you willing to pay all of nursing home care if that is required?
If not, is your wife, willing to see her mother in a Medicaid facility?

Just one point of clarification from a Nursing Home Administrator... Most nursing homes are dually certified for Medicare and Medicaid. Under federal law a resident receiving Medicaid benefits must be accorded the same treatment as a resident who is receiving Medicare or paying with private funds. The only difference is that the Medicaid resident will not have a private room. Most rooms in a nursing home have two residents. A nursing home provides 24 hour / day skilled nursing care with at least one RN on staff at all times. An assisted living does not usually have an RN in the building 24 hours / day and provides nursing related services ala carte.

LTC insurance IMHO is prohibitively expensive and getting more so. Insurance companies are trying to get out of the business or are raising premiums. However, I would recommend the insurance if anyone has a family member who has a family history of dementia (Alzheimer's). There you have a likelihood of a long term stay in a nursing home at the end of life for a number of years. Most dementia residents at our home are Medicaid recipients for this reason. However, they are cared for just as we care for someone who is short term paying with private funds.

[TN_INVEST]

Maybe she can convert the whole life policies in to some paid up insurance policies? There will be no further premiums...and she'll have something to pass along to the kiddos (don't discount the fact that a lot of older folks do want to leave something for their families and do find an increasing amount of value in the life insurance policies as they age).

[NYBoglehead]

+1 on not dumping the LTC policy. The policy might end up paying for itself in very short order if she needs long-term care.

[MN Finance]

My aunt had $1M VUL policy with $150k in cash value and was not working, though married, and in her late 50s. She asked me for advice about 5 years ago. I recommended that she stop paying on the policy and incorporate the $150k into their retirement plan assets, which amounted to a 10%+ increase in retirement savings assets. 18 months later I attended her funeral. I'm glad she didn't listen to me and her 3 children and surviving spouse each had $250k of inheritance to spend in a way that honored her legacy. I always mention this even though there's no reason your MIL may need the coverage, there's an obvious inherent risk in surrendering the policy.

[dhodson]

When deciding to keep or surrender permanent insurance one should re-evaluate their own health (assuming no insurance need as in the OPs example). If you we're rated as excellent health a few years ago but come to find out that this likely isn't accurate then the policy becomes more valuable per say.