Long Term Care Plans
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Long Term Care Plans
There are basically 3 ways to cover any potential long term care costs:
1. Self-Insure - use your or your family's assets
2. Long Term Care Insurance
3. Medicaid - most people have to spend their assets down to about $2,000 to qualify, with exceptions for a vehicle & residence in most states
What are your plans?
1. Self-Insure - use your or your family's assets
2. Long Term Care Insurance
3. Medicaid - most people have to spend their assets down to about $2,000 to qualify, with exceptions for a vehicle & residence in most states
What are your plans?
Not to be cynical, but you left out Option 4 - Suicide.
http://www.reuters.com/article/idUSTRE4AJ7W320081120
It's not always about the money.
http://www.reuters.com/article/idUSTRE4AJ7W320081120
It's not always about the money.
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One problem is that just when you need to implement you may not be lucid or ambulatory enough to pull it off.Bob B wrote:Not to be cynical, but you left out Option 4 - Suicide.
http://www.reuters.com/article/idUSTRE4AJ7W320081120
It's not always about the money.
I always wanted to be a procrastinator.
- nisiprius
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For those who say they are self-insuring... would you spell out exactly how?
When I did the back-of-the-envelope calculation, the answer I came up with was that in order to feel that I had an adequate reserve for self-insuring, I would need the equivalent of $200 a day times 10-15 years = about $750,000 to $1 million in current dollars. It's not self-insurance if it's not there when you need it, so it really does need to be set aside and not used for anything else but the kids' inheritance. And it needs to be there when you need it so it has to be invested conservatively. And long-term-care is currently growing about 3% faster than inflation and conservative investments probably don't quite grow that fast.
So, are those who say they are self-insuring really setting $1 million aside in as a dedicated, earmarked slice of their portfolio? (Or, what amounts to the same thing, have a portfolio that is so much larger than $1 million that you are confident it can take a $1 million hit without disrupting your financial life?)
If not, what are you doing and why are you confident that it will serve your needs?
When I did the back-of-the-envelope calculation, the answer I came up with was that in order to feel that I had an adequate reserve for self-insuring, I would need the equivalent of $200 a day times 10-15 years = about $750,000 to $1 million in current dollars. It's not self-insurance if it's not there when you need it, so it really does need to be set aside and not used for anything else but the kids' inheritance. And it needs to be there when you need it so it has to be invested conservatively. And long-term-care is currently growing about 3% faster than inflation and conservative investments probably don't quite grow that fast.
So, are those who say they are self-insuring really setting $1 million aside in as a dedicated, earmarked slice of their portfolio? (Or, what amounts to the same thing, have a portfolio that is so much larger than $1 million that you are confident it can take a $1 million hit without disrupting your financial life?)
If not, what are you doing and why are you confident that it will serve your needs?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
I didn't vote as I have not decided on a plan. My mother entered the phase of life last year where LTC is needed, doesn't have LTC insurance, and isn't adequately self-insured. The experience is causing me to consider purchasing a policy in the future.
Being many years from retirement, however, that is my focus. The LTC decision "line" will come later.
Being many years from retirement, however, that is my focus. The LTC decision "line" will come later.
Last edited by paulob on Sat Jan 08, 2011 5:07 am, edited 1 time in total.
Paul
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- nisiprius
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Perhaps.Oneanddone wrote:I think that many people are confusing "self-insure" with "not-insure".
Agreed.Once can't self-insure until they actually have the assets to pay for care out of pocket.
I doubt it. Or at least I'd like to amplify what you mean.Not insuring is often the smart move.
I agree that it is not at all clear that buying long-term-care insurance before reaching 55 or so is a smart move; waiting might well be smarter. But sooner or later you have to choose something.
I would argue that if you are not seriously planning to set aside an adequate earmarked reserve for long-term care, and if you cannot credibly expect to reach a total portfolio well upwards of $3 million, then your plan can only be "qualify for Medicaid." And thank goodness there is Medicaid. Depending on what part of the country you are in, it is not necessarily a terrible option.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
My answer: yes and no. At age 62, I recently bought an LTC policy that would cover me for four years and (under relatively recent federal law) would also protect an equivalent amount of assets for my wife and kids if I need nursing care for longer than that. The policy certainly isn't cheap, but it should be affordable even after I retire, so I think it's a reasonable hedge against the possibility I might suffer a disastrous, but non-fatal disability.
Sure, I suppose the company could jack up prices or even go under, but I've checked them out and I'm reasonably confident I've made a good bet. I think that's all I can ask.
OTOH, because of various medical conditions, my wife is basically uninsurable for LTC and therefore self-insured by default. I could care for her as long as my own health remains good. After that, she has a pension that would pay, in our area, two-thirds or more of the typical nursing home bill. (Her pension -- yes, it's a teacher pension -- also has a built-in inflation factor, which obviously helps.)
Not a perfect answer for either of us, I suppose, but the combination helps us both sleep a lot easier.
My point is that, for most of us, the answer to buy/not buy LTC isn't cut and dried. You need to consider your own circumstances and make a thoughtful decision. Blowing off the whole idea on the grounds that nobody knows what the future will bring seems short-sighted to me. After all, if people knew the future, there wouldn't be much of a market for any kind of insurance.
Sure, I suppose the company could jack up prices or even go under, but I've checked them out and I'm reasonably confident I've made a good bet. I think that's all I can ask.
OTOH, because of various medical conditions, my wife is basically uninsurable for LTC and therefore self-insured by default. I could care for her as long as my own health remains good. After that, she has a pension that would pay, in our area, two-thirds or more of the typical nursing home bill. (Her pension -- yes, it's a teacher pension -- also has a built-in inflation factor, which obviously helps.)
Not a perfect answer for either of us, I suppose, but the combination helps us both sleep a lot easier.
My point is that, for most of us, the answer to buy/not buy LTC isn't cut and dried. You need to consider your own circumstances and make a thoughtful decision. Blowing off the whole idea on the grounds that nobody knows what the future will bring seems short-sighted to me. After all, if people knew the future, there wouldn't be much of a market for any kind of insurance.
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The option that I chose is self-insure. So far, none of my relatives have ever needed the insurance as they had good genes & lived at home until the end with the exception of one who used her own money for assisted living.
Since prices for all insurances are going up, I really can't justify the cost for myself. I can't see spending the money for xxxx number of years & then having to drop the insurance because of cost, the company going out of business, having problems with claims etc. when I would need it most.
I probably will not leave behind a legacy & really have no need to do so.
Since prices for all insurances are going up, I really can't justify the cost for myself. I can't see spending the money for xxxx number of years & then having to drop the insurance because of cost, the company going out of business, having problems with claims etc. when I would need it most.
I probably will not leave behind a legacy & really have no need to do so.
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Another thing to consider about "self-insuring" is to realize that you might need it at age 60. When I was looking into this, this was one of the things that swayed me to buying. I felt that if we didn't need it till age 85, we probably could self-insure. If the need was there at age 60, there was a big problem that could basically mess up all our plans.
This was one of the hardest financial decisions I've tried to sort out because of all the reasons everyone has mentioned. We ultimately bought a joint plan that covers 8 years between my spouse and I. Seemed like the sweet spot between cost and coverage for us.
This was one of the hardest financial decisions I've tried to sort out because of all the reasons everyone has mentioned. We ultimately bought a joint plan that covers 8 years between my spouse and I. Seemed like the sweet spot between cost and coverage for us.
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I answered self-insure, but that's not the complete answer.
My wife and I are signed up for a "high-end" continuing care, retirement community. This is one of those places where you must be able to live independently when you enter, but has an assisted living wing, skilled nursing section and an Alzheimer's unit. This is where we plan to go next anyway when we are too old to play golf and don't want to take care of a big house.
One of the benefits is, once you are in, you can stay there until you die, even if you run out of money. In essence, the community is ensuring your long-term care not an insurance company.
There is, of course, the possibility you could become permanently disabled before you enter, so it is not an answer for everyone. But I view the risk of becoming permanently disabled and then still living for a long time after that remote.
What I would consider buying, if it existed, is catastrophic long-term care insurance--long-term care insurance that doesn't kick in for several years or until you reach some out-of-pocket maximum. We have sufficient income and assets to pay for long-term care for a reasonable number of years, but I would be willing to insure against that very remote possibility we might need long-term care for say10-20 years.
I haven’t looked into long-term care insurance for a few years, but the last time I did, most of the affordable policies had a maximum amount of time they would pay for long-term care of around 6-years. This is just the opposite of what I want. I want insurance that doesn’t kick-in for 6-years or so.
plannerman
My wife and I are signed up for a "high-end" continuing care, retirement community. This is one of those places where you must be able to live independently when you enter, but has an assisted living wing, skilled nursing section and an Alzheimer's unit. This is where we plan to go next anyway when we are too old to play golf and don't want to take care of a big house.
One of the benefits is, once you are in, you can stay there until you die, even if you run out of money. In essence, the community is ensuring your long-term care not an insurance company.
There is, of course, the possibility you could become permanently disabled before you enter, so it is not an answer for everyone. But I view the risk of becoming permanently disabled and then still living for a long time after that remote.
What I would consider buying, if it existed, is catastrophic long-term care insurance--long-term care insurance that doesn't kick in for several years or until you reach some out-of-pocket maximum. We have sufficient income and assets to pay for long-term care for a reasonable number of years, but I would be willing to insure against that very remote possibility we might need long-term care for say10-20 years.
I haven’t looked into long-term care insurance for a few years, but the last time I did, most of the affordable policies had a maximum amount of time they would pay for long-term care of around 6-years. This is just the opposite of what I want. I want insurance that doesn’t kick-in for 6-years or so.
plannerman
It sounds like you want an "elimination period" of 6-years. It is pretty standard to offer a policy with an elimination period of 365 days. I do not see why you could not find a company that would be glad to offer you a longer period. In fact, what you are suggesting is a very sensible approach. The more assets you have the longer the elimination period you should be willing tolerate, and the lower the premiums you will have to pay.plannerman wrote: I want insurance that doesn’t kick-in for 6-years or so.
plannerman
Sam
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After my diligent evaluation, I determined that I was primarily interested in more of a catastrophic coverage. The most I could find were 180 & 365 day elimination periods & that does vary by state.
I can afford a large up front single pay policy & the policy option that is the most appealing to me is one from a major company that offers a 100% return of the single premium at anytime, minus any claims that have been paid. So, my cost of the policy is the lost opportunity cost of the single premium payment, i.e. what I might earn in a CD or market appreciation minus tax on that amount. Also, this gives me the option to re-evaluate if new policys come out or interest rates go much higher.
I can afford a large up front single pay policy & the policy option that is the most appealing to me is one from a major company that offers a 100% return of the single premium at anytime, minus any claims that have been paid. So, my cost of the policy is the lost opportunity cost of the single premium payment, i.e. what I might earn in a CD or market appreciation minus tax on that amount. Also, this gives me the option to re-evaluate if new policys come out or interest rates go much higher.
Guess what my financial goal is. Unfortunately, I'm not able to insure medically for LTC, and fairly likely to need it. So either I get to the Magic Number, or probably end up on Medicaid.nisiprius wrote: I would argue that if you are not seriously planning to set aside an adequate earmarked reserve for long-term care, and if you cannot credibly expect to reach a total portfolio well upwards of $3 million...
Most of my posts assume no behavioral errors.
Return of premium is a sucker's bet. The older you get, the higher the cost for a new LTC policy, so surrendering your old one would probably be a bad idea. As time goes on, LTC policies will get watered down to make them more affordable, just as health insurance has now, so what you buy might not even be available again in 5 or 10 years. In all likelihood, your health will be worse as you get older, making it even more expensive or not possible to get other coverage. The only time an ROP would help is if we went to a single payer LTC system, which isn't going to happen anytime soon. Just my 2 cents.orlandoman wrote:I can afford a large up front single pay policy & the policy option that is the most appealing to me is one from a major company that offers a 100% return of the single premium at anytime, minus any claims that have been paid. So, my cost of the policy is the lost opportunity cost of the single premium payment, i.e. what I might earn in a CD or market appreciation minus tax on that amount. Also, this gives me the option to re-evaluate if new policys come out or interest rates go much higher.
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Now that 40 states have "LTC Partnership programs" you do not have to buy an "unlimited" long-term care insurance policy. You only need to buy an amount of long-term care insurance equal to the amount of assets you want to protect for yourself, your spouse or partner, and/or your heirs.
The Long-Term Care Partnership programs provide dollar-for-dollar asset protection. Each dollar that your partnership policy pays out in benefits entitles you to keep a dollar of your assets if you ever need to apply for Medicaid services.
Four states have successfully run LTC Partnership programs for years, namely, California, Connecticut, Indiana and New York. 36 other states have implemented similar programs since the passage of the Deficit Reduction Act in 2005.
Here’s a link to a more detailed explanation:
http://bit.ly/How-Partnership-Policies-Protect-Assets
The Long-Term Care Partnership programs provide dollar-for-dollar asset protection. Each dollar that your partnership policy pays out in benefits entitles you to keep a dollar of your assets if you ever need to apply for Medicaid services.
Four states have successfully run LTC Partnership programs for years, namely, California, Connecticut, Indiana and New York. 36 other states have implemented similar programs since the passage of the Deficit Reduction Act in 2005.
Here’s a link to a more detailed explanation:
http://bit.ly/How-Partnership-Policies-Protect-Assets
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Most owners of long-term care insurance have never had any increase on their premiums. Most of those who have had premium increases it has been less than a 2% per year increase. There are two types of long-term care policies that can never have a rate increase. Here's an explanation of them:steve roy wrote:Self insure.
To pay for a "Long-term care insurance policy" for twenty years, only to see the rates shoot up or the coverage plunge (as has happened to policies recently) makes purchasing l.t. care insurance less than an ideal option, at least to me.
http://bit.ly/Level-Premium-LTC-Insurance
As I posted on a recent thread, there's about a 2% chance someone's going to need LTCI benefits for more than five years (much less if you're male).nisiprius wrote:For those who say they are self-insuring... would you spell out exactly how?
I can self insure for five years. The negatives of LTCI are so great that I'll happily take the 1-2% risk of ending up on Medicaid.
Nick
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yobria wrote:Exactly. With LTCI, you'll probably leaving a legacy - to the insurance company...CAP wrote:I probably will not leave behind a legacy & really have no need to do so.
Nick
Most people who purchase long-term care insurance are not concerned about leaving assets to their hers. Most are concerned about maintaining their lifestyle if their spouse/partner needs long-term care.
Just what I would be interested in. Has anyone had success finding a policy with a 3+ year elimination period? Since the assumed risk to the insurance company would be extremely low, I would think the premiums would also be much more affordable.SamB wrote:It sounds like you want an "elimination period" of 6-years. It is pretty standard to offer a policy with an elimination period of 365 days. I do not see why you could not find a company that would be glad to offer you a longer period. In fact, what you are suggesting is a very sensible approach. The more assets you have the longer the elimination period you should be willing tolerate, and the lower the premiums you will have to pay.plannerman wrote: I want insurance that doesn’t kick-in for 6-years or so.
plannerman
Sam
dcb
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If you want to see the statistics of % of need & type of care needed, for how long, see:
http://www.allhealth.org/briefingmateri ... ct-461.pdf
See the 2 charts on page 342, this is 16 pages from a larger report.
http://www.allhealth.org/briefingmateri ... ct-461.pdf
See the 2 charts on page 342, this is 16 pages from a larger report.
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yobria wrote:As I posted on a recent thread, there's about a 2% chance someone's going to need LTCI benefits for more than five years (much less if you're male).nisiprius wrote:For those who say they are self-insuring... would you spell out exactly how?
I can self insure for five years. The negatives of LTCI are so great that I'll happily take the 1-2% risk of ending up on Medicaid.
Nick
a) There are currently over ten million people in this country needing long-term care (most of them receiving that care at home.)
b) 20% of the people who need long-term care need it for over 5 years.
c) There is no objective basis for that 1% to 2% figure.
http://www.nytimes.com/2010/11/05/busin ... 5CARE.htmlLittleOlMe wrote:
a) There are currently over ten million people in this country needing long-term care (most of them receiving that care at home.)
b) 20% of the people who need long-term care need it for over 5 years.
c) There is no objective basis for that 1% to 2% figure.
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yobria wrote:http://www.nytimes.com/2010/11/05/busin ... 5CARE.htmlLittleOlMe wrote:
a) There are currently over ten million people in this country needing long-term care (most of them receiving that care at home.)
b) 20% of the people who need long-term care need it for over 5 years.
c) There is no objective basis for that 1% to 2% figure.
That article disproves your figures.
With those odds, and since I'm in my sixties already, I've opted to accumulate and roll the dice.yobria wrote:As I posted on a recent thread, there's about a 2% chance someone's going to need LTCI benefits for more than five years (much less if you're male).nisiprius wrote:For those who say they are self-insuring... would you spell out exactly how?
I can self insure for five years. The negatives of LTCI are so great that I'll happily take the 1-2% risk of ending up on Medicaid.
In some ways, this is a lot like investing and asset allocation. You make your best assumptions, and move forward. I've made the determination that since I ...
1) Neither smoke nor drink, 2) have long-lived family genes, 3) exercise seven days a week (and have for forty-eight years), 3) have enough money to pay for five-plus years of lying in a bed with a drool cup
... that I will play the odds. And I fully understand that God laughs at those who make long-term plans.
Alas, you'll never know the joys of filing a LTCI claim....steve roy wrote:With those odds, and since I'm in my sixties already, I've opted to accumulate and roll the dice.yobria wrote:As I posted on a recent thread, there's about a 2% chance someone's going to need LTCI benefits for more than five years (much less if you're male).nisiprius wrote:For those who say they are self-insuring... would you spell out exactly how?
I can self insure for five years. The negatives of LTCI are so great that I'll happily take the 1-2% risk of ending up on Medicaid.
http://www.nytimes.com/2007/03/26/business/26care.html
I would think that long-lived family genes would argue for LTC, not against it.steve roy wrote:.
In some ways, this is a lot like investing and asset allocation. You make your best assumptions, and move forward. I've made the determination that since I ...
1) Neither smoke nor drink, 2) have long-lived family genes, 3) exercise seven days a week (and have for forty-eight years), 3) have enough money to pay for five-plus years of lying in a bed with a drool cup
Paul
Many LTC policies are poorly structured and the insurance companies have limited claims experience. The result is a product that is either currently over priced, under priced, or poorly priced. Self insurance has worked well so far and is what I have always opted for.
Part-Owner of Texas |
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“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
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yobria wrote:Alas, you'll never know the joys of filing a LTCI claim....steve roy wrote:With those odds, and since I'm in my sixties already, I've opted to accumulate and roll the dice.yobria wrote:As I posted on a recent thread, there's about a 2% chance someone's going to need LTCI benefits for more than five years (much less if you're male).nisiprius wrote:For those who say they are self-insuring... would you spell out exactly how?
I can self insure for five years. The negatives of LTCI are so great that I'll happily take the 1-2% risk of ending up on Medicaid.
http://www.nytimes.com/2007/03/26/business/26care.html
A recent federal study concluded that there is no data supporting the claims made in this article.
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mickeyd wrote:Many LTC policies are poorly structured and the insurance companies have limited claims experience. The result is a product that is either currently over priced, under priced, or poorly priced. Self insurance has worked well so far and is what I have always opted for.
How many of you who have chosen to "self-insure" your home? Do you think that the odds of a catastrophic loss of your home are substantially greater than the odds of needing 5+ years of long-term care?
The risk of needing 5+ years of long-term care are significantly greater than the risk of a catastrophic loss of your home.
But, most people cannot imagine become disabled. It is a lot easier to imagine your home burning down.
Hence, it is not logic that causes you to insure the lesser risk and not insure the greater risk-----------what is it then?
Maybe it's that people will sell me insurance on my home, but not LTCi?LittleOlMe wrote: How many of you who have chosen to "self-insure" your home? Do you think that the odds of a catastrophic loss of your home are substantially greater than the odds of needing 5+ years of long-term care?
The risk of needing 5+ years of long-term care are significantly greater than the risk of a catastrophic loss of your home.
But, most people cannot imagine become disabled. It is a lot easier to imagine your home burning down.
Hence, it is not logic that causes you to insure the lesser risk and not insure the greater risk-----------what is it then?
Guess it's my fault for waiting too long (say, age 20) to buy it. Not that it even existed then.
Most of my posts assume no behavioral errors.
LittleOlMe wrote:mickeyd wrote:Many LTC policies are poorly structured and the insurance companies have limited claims experience. The result is a product that is either currently over priced, under priced, or poorly priced. Self insurance has worked well so far and is what I have always opted for.
How many of you who have chosen to "self-insure" your home? Do you think that the odds of a catastrophic loss of your home are substantially greater than the odds of needing 5+ years of long-term care?
The risk of needing 5+ years of long-term care are significantly greater than the risk of a catastrophic loss of your home.
But, most people cannot imagine become disabled. It is a lot easier to imagine your home burning down.
Hence, it is not logic that causes you to insure the lesser risk and not insure the greater risk-----------what is it then?
With the tanked real estate market in many areas, many people probably could "self insure" their home now. Hopefully life will last until the market does improve.
I I guess it comes down to finances & how much risk one is willing to take as to whether to purchase LTC insurance. I suppose I am a "risk taker" in the LTC area.
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This response looks to be similar to that wording in several LTC marketing pieces that I have seen in the past. Vague "facts", fear of the unknown, compare/contrast of very different items. Still does not motivate me to "sign on the line which is dotted."LittleOlMe wrote:mickeyd wrote:Many LTC policies are poorly structured and the insurance companies have limited claims experience. The result is a product that is either currently over priced, under priced, or poorly priced. Self insurance has worked well so far and is what I have always opted for.
How many of you who have chosen to "self-insure" your home? Do you think that the odds of a catastrophic loss of your home are substantially greater than the odds of needing 5+ years of long-term care?
The risk of needing 5+ years of long-term care are significantly greater than the risk of a catastrophic loss of your home.
But, most people cannot imagine become disabled. It is a lot easier to imagine your home burning down.
Hence, it is not logic that causes you to insure the lesser risk and not insure the greater risk-----------what is it then?
Part-Owner of Texas |
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“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
This is really comparing apples to hamburger.LittleOlMe wrote:mickeyd wrote:Many LTC policies are poorly structured and the insurance companies have limited claims experience. The result is a product that is either currently over priced, under priced, or poorly priced. Self insurance has worked well so far and is what I have always opted for.
How many of you who have chosen to "self-insure" your home? Do you think that the odds of a catastrophic loss of your home are substantially greater than the odds of needing 5+ years of long-term care?
The risk of needing 5+ years of long-term care are significantly greater than the risk of a catastrophic loss of your home.
But, most people cannot imagine become disabled. It is a lot easier to imagine your home burning down.
Hence, it is not logic that causes you to insure the lesser risk and not insure the greater risk-----------what is it then?
Property and casualty insurance goes year to year. If the insurer gets into financial trouble or develops a bad reputation for paying on legitimate claims, I can discontinue the policy at the end of the coverage period and go somewhere else. Can't do that with LTCi when I'm 80.
You do not pay a property insurer (for most consumers, this would be home and auto) premiums today for highly probable claims in 25 years. The homeowner's insurance to LTCi analogy is I buy a homeowner's polciy with the understanding that eventually the house will burn down.
The insurance industry just loves to publish 'white papers' on 'research' they have done on the need for LTC, the results of which...SURPRISE...shows that I'm going to spend my last months or years of life in some institution costing a bazillion dollars a day and bankrupt my estate and put my family in debtors prison and all other manner of anguish. And the only way to prevent this is to...SURPRISE...buy their insurance. Well, if I do run a high risk of spending months/years in some expensive institution, that means that my probability of a claim is relatively high...which means LTCI is much more like dental insurance....odds are I'm going to use it. This is completely unlike consumer P&C insurance, which many consumers will carry all their lives and make either no claims or few claims, with very few ever making catestrophic claims.
BruceM
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