Long term care insurance - Less than meets the eye

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Browser
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Long term care insurance - Less than meets the eye

Post by Browser » Fri Jun 12, 2015 10:08 am

Pretty good article weighing the pros and cons of LTCi. It comes up con. Glad I didn't buy it.
But the drawbacks are significant: premiums are not guaranteed, most policies are too short to protect against the worst scenarios, and filing claims is an arduous process for the family. LTCI offers a fixed dollar benefit — not blanket protection. Despite the impression you may get from an insurance agent, buying LTCI doesn’t eliminate all your long-term care concerns.

The first thing to notice in the present value columns is that this is a grim race with the insurance company: Require long-term care when you are relatively young, and you win, financially. Require it much later, or not at all, and the insurance company wins. LTCI can be a screaming good deal, if you’re afflicted early. But, at the time we are most likely to need it, in our 80’s or 90’s, 30-40 years from now, the picture is less clear.
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dad2000
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Re: Long term care insurance - Less than meets the eye

Post by dad2000 » Fri Jun 12, 2015 10:27 am

I'm sure that this has been beat to death, but the current LTCI plans make little sense to me. I insure against low-probability/high-ruin type events because it is relatively inexpensive to do so. With so many of us projected to need LTC, there can't be much value in plans that have a short waiting period and low-cap for lifetime benefits. Perhaps there was value in previous years when the actuaries underestimated the costs.

I want to insure against that low-probability event of needing LTC for an extended period, say 5 years or greater. So I'd want a long waiting period, which actually aren't allowed by law in many states. I have little hope that these plans will ever exist, so I'll have to self-fund, and may hedge some of the risk with a longevity annuity. And while the Oregon route isn't for everybody, it could become part of my plan.

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Re: Long term care insurance - Less than meets the eye

Post by itstoomuch » Fri Jun 12, 2015 11:09 am

I don't like D. Kirkpatrick's analysis. :annoyed

Part of today's LTCi problem is that older policies did offer "unlimited" coverage.
the 90 day deductible/elimination period will not make a dent in someone's portfolio-Think again. DK, because in a 90 day period what is the likelyhood that the LTC will be lead to eventual much longer or to death in 3 years?

Each person needs to make their own independent analysis. Learn to ask the questions that can give you enough information to make a intelligent decision.

Disclaimer: We have LTCi, purchased 14yr ago(?) @51/54 (?). 14 day elimination. 1095 days @210/day. Premium about $2400/yr, for 2 people, not joint/shared. Recognize a good deal, when you see one.

We intend to spend our portfolio- Just not in health care. We shared the risk with a counter party. :greedy
:mrgreen:
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

rgs92
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Re: Long term care insurance - Less than meets the eye

Post by rgs92 » Fri Jun 12, 2015 11:26 am

Wifey and I pay just a little over $500/month for a major brand-name provider (got it thru my work plan) with $1M per-person coverage w/ 7-year benefit.

Got it our late 40s about 10+ yrs ago. They offer us more coverage every few years for a higher premium . So far, I have said yes each time.
I have many friends who are going nuts with their parents' health failing w/no LTC insurance and they don't know what to do now.
I personally couldn't sleep well without it, even with its flaws.

(I heard in some states, if you have substantial coverage and have financed yourself for several years, even if LTC runs out, they keep you on. How often this happens, I don't know...)

Grandmother and parents w/o it had bad end-of-life experiences; one died at home with inadequate care when a nursing home was called for much earlier and may have saved her life, and another got transferred from self-financed nursing home to medicaid services that were far inferior and seemed to hasten demise.

This is just my personal anecdotal experience. I have no financial interest in this, just wanted to offer my feelings on it.

mule
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Re: Long term care insurance - Less than meets the eye

Post by mule » Fri Jun 12, 2015 1:05 pm

My wife and I both have LTC policies. We pay 134$ a month for both and have unlimited years in qualified nursing home care facility. The policy will be so much a day and the payment directly to us each month would be about 5700$ a month if we had to go into a nursing home. You can do the math but one year in a nursing home will cost you about 65 to 70K a year. I feel it's a way to protect any of my interests and maybe not totally because of increased costs but will help a big deal.

My parents both had the same LTC policy and I seen it work to a T. All for there own but insurance is a gamble no matter what you are insuring.

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Re: Long term care insurance - Less than meets the eye

Post by Jack FFR1846 » Fri Jun 12, 2015 1:17 pm

Certainly facility costs vary, but we were exposed to these costs a few years ago when a relative spent time in a nursing home, then a rest home following her being run over by a truck. The nursing home cost $12,000 per month and the rest home $6,000 per month. This was in Central Massachusetts.
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Independent
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Re: Long term care insurance - Less than meets the eye

Post by Independent » Fri Jun 12, 2015 2:57 pm

There are plenty of problems with LTC insurance, but this isn't one of them:
Require long-term care when you are relatively young, and you win, financially. Require it much later, or not at all, and the insurance company wins. LTCI can be a screaming good deal, if you’re afflicted early. But, at the time we are most likely to need it, in our 80’s or 90’s, 30-40 years from now, the picture is less clear.
That type of comment can be made about any type of insurance. For example, regarding car insurance: You file auto collision insurance claims early and often and you win. But, if you go many years before your one-and-only accident and you lose.

That's pretty much the point of insurance. You win if you have an unusually burdensome loss, you lose if you don't. Prospectively, it reduces the financial uncertainty in your life.

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Re: Long term care insurance - Less than meets the eye

Post by Diogenes » Fri Jun 12, 2015 3:55 pm

Independent wrote:There are plenty of problems with LTC insurance, but this isn't one of them:
Require long-term care when you are relatively young, and you win, financially. Require it much later, or not at all, and the insurance company wins. LTCI can be a screaming good deal, if you’re afflicted early. But, at the time we are most likely to need it, in our 80’s or 90’s, 30-40 years from now, the picture is less clear.

That's pretty much the point of insurance. You win if you have an unusually burdensome loss, you lose if you don't. Prospectively, it reduces the financial uncertainty in your life.
In most cases, sadly it gives only the illusion of reducing financial uncertainty in your life. After looking closely at the very narrow window of breaking even on one of these policies when purchased at 50, the numbers simply didn't at all add up. Too many exclusions, low daily rates, and low caps.
And then there is the worrisome company stability issue.
Let's see the numbers from anyone that has purchased recently.

_D_
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Independent
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Re: Long term care insurance - Less than meets the eye

Post by Independent » Fri Jun 12, 2015 5:02 pm

Diogenes wrote: In most cases, sadly it gives only the illusion of reducing financial uncertainty in your life. After looking closely at the very narrow window of breaking even on one of these policies when purchased at 50, the numbers simply didn't at all add up. Too many exclusions, low daily rates, and low caps.
And then there is the worrisome company stability issue.
Let's see the numbers from anyone that has purchased recently.
_D_
There's also a "very narrow window of breaking even" on most term life insurance policies. But, that doesn't stop us from buying them.
Maybe you're saying the accumulated premiums would exceed the maximum benefit, that would certainly be a problem. I suppose we have to wait for actual numbers to do that calculation.

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Re: Long term care insurance - Less than meets the eye

Post by ChrisC » Fri Jun 12, 2015 5:18 pm

Diogenes wrote:
Independent wrote:There are plenty of problems with LTC insurance, but this isn't one of them:
Require long-term care when you are relatively young, and you win, financially. Require it much later, or not at all, and the insurance company wins. LTCI can be a screaming good deal, if you’re afflicted early. But, at the time we are most likely to need it, in our 80’s or 90’s, 30-40 years from now, the picture is less clear.

That's pretty much the point of insurance. You win if you have an unusually burdensome loss, you lose if you don't. Prospectively, it reduces the financial uncertainty in your life.
In most cases, sadly it gives only the illusion of reducing financial uncertainty in your life. After looking closely at the very narrow window of breaking even on one of these policies when purchased at 50, the numbers simply didn't at all add up. Too many exclusions, low daily rates, and low caps.
And then there is the worrisome company stability issue.
Let's see the numbers from anyone that has purchased recently.

_D_
I didn't purchase recently but when we did at 48/50, twelve years ago, the numbers added up for me. I'm with the Federal Long Term Care Insurance Program offered to the Federal workforce/retirees so I don't really worry that much about company stability though the program is not backed by the Federal Government. Here are my numbers: $214 per month for us both; 90 day waiting period; $256.72 daily benefit allowance with 4% inflation adjustment; 1,825 days (5 years) of coverage; current maximum benefit of $468,514.00.

Hmmm, not sure break-even analysis is appropriate for making a decision to insure; I didn't consider whether I'd ever recapture these sunk costs. If I never call on the policy, that's ok with me -- I would still feel I got my money's worth of peace of mind. If I have to use the policy, I am passing on some of the financial risk of LTC to another party. On the other hand, when you hear about some folks whose parents had difficulty using the policy for appropriate coverage -- it does give one some concern, but for every negative experience I think there are many more positive, unreported good experiences with plan coverage.

Of course, I think we all suffer from personal anecdotal bias on stuff like this.

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Re: Long term care insurance - Less than meets the eye

Post by tj » Fri Jun 12, 2015 5:49 pm

Independent wrote:
Diogenes wrote: In most cases, sadly it gives only the illusion of reducing financial uncertainty in your life. After looking closely at the very narrow window of breaking even on one of these policies when purchased at 50, the numbers simply didn't at all add up. Too many exclusions, low daily rates, and low caps.
And then there is the worrisome company stability issue.
Let's see the numbers from anyone that has purchased recently.
_D_
There's also a "very narrow window of breaking even" on most term life insurance policies. But, that doesn't stop us from buying them.
Maybe you're saying the accumulated premiums would exceed the maximum benefit, that would certainly be a problem. I suppose we have to wait for actual numbers to do that calculation.

Term life is dirt cheap though. That's the difference.

mule
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Re: Long term care insurance - Less than meets the eye

Post by mule » Fri Jun 12, 2015 6:25 pm

Our policy for 134$ a month would cost us 32000 in premiums over 20 year span. The 32000$ would only give me 6 months in a nursing home. The numbers work for me and I worked to hard to give it all to a nursing home. At 70000$ a year it doesn't take long to eat up your saving. Anyone could be in nursing home at any age like an auto accident. If I pay my premiums for 40 years that would be the same as being in a nursing home for one year. I feel the gamble is worth it to me.

It may not be for everyone but my numbers work for me.

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Re: Long term care insurance - Less than meets the eye

Post by randomguy » Fri Jun 12, 2015 6:55 pm

mule wrote:Our policy for 134$ a month would cost us 32000 in premiums over 20 year span. The 32000$ would only give me 6 months in a nursing home. The numbers work for me and I worked to hard to give it all to a nursing home. At 70000$ a year it doesn't take long to eat up your saving. Anyone could be in nursing home at any age like an auto accident. If I pay my premiums for 40 years that would be the same as being in a nursing home for one year. I feel the gamble is worth it to me.

It may not be for everyone but my numbers work for me.
Your ignoring the 6% that you money could be earning for that 20+ years:) Frankly that policey sounds too good to be true (unlimited years at something like 70k/yr coverage if I read your post right) for a mere 134/month for 2 people. But obviously I don't know the details (i.e. you are both in your 20s and the 70k isn't indexed for inflation is a lot different that 2 people in there 60s with an inflation indexed policey). From the policies I have seen, the ones written 15 years ago were decent deals. The ones written today are borderline with limited coverage (both duration and amount).

Personally I just plan on self insuring. 80k/yr sounds like a lot of money but it is much less than I plan on living on in retirement. I sort of figure when I hit the home, a lot of the other costs drop (i.e. probably not doing the european vacation anymore or driving a car). If the kids end up with slightly less money, it isn't a big deal.

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Re: Long term care insurance - Less than meets the eye

Post by ChrisC » Fri Jun 12, 2015 8:19 pm

tj wrote:
Independent wrote:
Diogenes wrote: In most cases, sadly it gives only the illusion of reducing financial uncertainty in your life. After looking closely at the very narrow window of breaking even on one of these policies when purchased at 50, the numbers simply didn't at all add up. Too many exclusions, low daily rates, and low caps.
And then there is the worrisome company stability issue.
Let's see the numbers from anyone that has purchased recently.
_D_
There's also a "very narrow window of breaking even" on most term life insurance policies. But, that doesn't stop us from buying them.
Maybe you're saying the accumulated premiums would exceed the maximum benefit, that would certainly be a problem. I suppose we have to wait for actual numbers to do that calculation.

Term life is dirt cheap though. That's the difference.
Dirt cheap when you're young and have a guaranteed premium level for 10 or 20 years. So, I had two term policies with a 10 year guaranteed premium; first one, the premium was $400 plus for $500K; after that ended, I went to another insurer, $650 for $500K; that policy ended last October when I was approaching 61 years old, and the insurer wanted $11K for the first new year of coverage, with a graduated step-up in premiums that eventually reached almost 6 figures, for the next ten years, where I'm just gambling about my life expectancy on a bet that I would hope to lose wagering against the insurer.

Just saying, term life has sunk costs and paradoxically, those who argue against "forfeiting" premium expenses or sunk costs in their justification for not buying LTCi, appear to lose sight of this notion for other types of insurance.

mule
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Re: Long term care insurance - Less than meets the eye

Post by mule » Fri Jun 12, 2015 10:08 pm

randomguy wrote:
mule wrote:Our policy for 134$ a month would cost us 32000 in premiums over 20 year span. The 32000$ would only give me 6 months in a nursing home. The numbers work for me and I worked to hard to give it all to a nursing home. At 70000$ a year it doesn't take long to eat up your saving. Anyone could be in nursing home at any age like an auto accident. If I pay my premiums for 40 years that would be the same as being in a nursing home for one year. I feel the gamble is worth it to me.

It may not be for everyone but my numbers work for me.
Your ignoring the 6% that you money could be earning for that 20+ years:) Frankly that policey sounds too good to be true (unlimited years at something like 70k/yr coverage if I read your post right) for a mere 134/month for 2 people. But obviously I don't know the details (i.e. you are both in your 20s and the 70k isn't indexed for inflation is a lot different that 2 people in there 60s with an inflation indexed policey). From the policies I have seen, the ones written 15 years ago were decent deals. The ones written today are borderline with limited coverage (both duration and amount).

Personally I just plan on self insuring. 80k/yr sounds like a lot of money but it is much less than I plan on living on in retirement. I sort of figure when I hit the home, a lot of the other costs drop (i.e. probably not doing the european vacation anymore or driving a car). If the kids end up with slightly less money, it isn't a big deal.
Yep that is the cost for two and no limit on years for stay at a nursing home. I just went through it with my insurance agent. My parents had it with the same company and I dealt with each one of them while they were in the home. I had no problems and check came right to them each month. They each spent around 5 year a piece in the home. With out it everything would have been gone in short order. Any insurance is a gamble if we didn't have auto insurance we would save a bunch or house insurance also. Some people never make a claim on their home insurance in their life time. In my case it was cheap enough to get the highest pay out the company had for what I would have in it. We took this policy out 8 years ago and I'm 50 years old. It is with AFLAC and two years after I took the policy they stopped offering LTC policies.

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Re: Long term care insurance - Less than meets the eye

Post by Diogenes » Sat Jun 13, 2015 2:02 am

ChrisC wrote:
Diogenes wrote:
Independent wrote:There are plenty of problems with LTC insurance, but this isn't one of them:

In most cases, sadly it gives only the illusion of reducing financial uncertainty in your life. After looking closely at the very narrow window of breaking even on one of these policies when purchased at 50, the numbers simply didn't at all add up. Too many exclusions, low daily rates, and low caps.
And then there is the worrisome company stability issue.
Let's see the numbers from anyone that has purchased recently.

_D_
I didn't purchase recently but when we did at 48/50, twelve years ago, the numbers added up for me. I'm with the Federal Long Term Care Insurance Program offered to the Federal workforce/retirees so I don't really worry that much about company stability though the program is not backed by the Federal Government. Here are my numbers: $214 per month for us both; 90 day waiting period; $256.72 daily benefit allowance with 4% inflation adjustment; 1,825 days (5 years) of coverage; current maximum benefit of $468,514.00.

Hmmm, not sure break-even analysis is appropriate for making a decision to insure; I didn't consider whether I'd ever recapture these sunk costs. If I never call on the policy, that's ok with me -- I would still feel I got my money's worth of peace of mind. .
Thanks for the information about the Federal Plan. As my pencil tells me that would be $2568/yr or $82176 paid for 32 years ( until 80 years old). We can safely say the lost earnings will make that $100,000. Following that assuming that one enters a nursing home at that age, you would pay for the first three months out of pocket before your benefit kicks in. If we assume, to make it easier, that the cost then is exactly the daily benefit of $256, you would pay $23040 for those 90 days. In order to recover $100,000 of premiums you would need to stay 390 days past 90 days, or a total stay of 16 months.

Problem as I see it is that the median stay in these facilities is actually 5 months:

http://www.geripal.org/2010/08/length-o ... t-end.html

Very few would stay anywhere near 16 months. If you stay the median of 5 you are effectively paying $100,000 for months 4-5. Even If you stay the average of 14 months (which is skewed dramatically by a few long-term folks) you still don't break even. In order to hit the policy maximum of $468,000 you would stay 5 years past the first 90 days, which nobody does.

That a great deal to pay any company now for a little. You're fortunate the have the Federal Plan,as there is at least a greater assurance they will be around to pay out in 30 years. Most of the rest of folks must also worry about stability of their private company, and wild premium increases that are common. Are the premiums the same now in your plan for new purchasers?

Anyone that has purchased any decent plan in the last couple of years? The companies that sell these are not many now, and they wouldn't do it without the assurance of making money.

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Re: Long term care insurance - Less than meets the eye

Post by HIinvestor » Sat Jun 13, 2015 2:43 am

We investigated LTCi policies when the federal government was encouraging its employees to consider them about a decade or more ago. The plans we were interested in and considered had a lot of conditions and limitations on payments and premiums that we considered high, considering we were also going to be paying for college tuitions at that same time. We opted not to purchase the policies, as I believe the premiums were something like $500/month or each of us (or maybe both of us). They really weren't anything we could fit into the budget at that time with the college expenses.

We do have enough income and assets now that H has retired and collecting his pension that we should be able to afford whatever care we decide we need. When you pay for your care as you need it, you have more flexibility as to what you choose--you can hire someone to help you run errands, cook for you, clean for you, let you live in your home or move to another place--nursing home, skilled nursing facility, etc. You can hire a relative, a nurse, or whomever or whatever you choose. You don't have to file any paperwork to prove that you cannot perform x number of the activities of daily living. Of course, you have to be sure you have the assets to pay for what you want and need.

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Re: Long term care insurance - Less than meets the eye

Post by ChrisC » Sat Jun 13, 2015 8:40 am

Diogenes wrote:
ChrisC wrote:
Diogenes wrote:
Independent wrote:There are plenty of problems with LTC insurance, but this isn't one of them:

In most cases, sadly it gives only the illusion of reducing financial uncertainty in your life. After looking closely at the very narrow window of breaking even on one of these policies when purchased at 50, the numbers simply didn't at all add up. Too many exclusions, low daily rates, and low caps.
And then there is the worrisome company stability issue.
Let's see the numbers from anyone that has purchased recently.

_D_
I didn't purchase recently but when we did at 48/50, twelve years ago, the numbers added up for me. I'm with the Federal Long Term Care Insurance Program offered to the Federal workforce/retirees so I don't really worry that much about company stability though the program is not backed by the Federal Government. Here are my numbers: $214 per month for us both; 90 day waiting period; $256.72 daily benefit allowance with 4% inflation adjustment; 1,825 days (5 years) of coverage; current maximum benefit of $468,514.00.

Hmmm, not sure break-even analysis is appropriate for making a decision to insure; I didn't consider whether I'd ever recapture these sunk costs. If I never call on the policy, that's ok with me -- I would still feel I got my money's worth of peace of mind. .
Thanks for the information about the Federal Plan. As my pencil tells me that would be $2568/yr or $82176 paid for 32 years ( until 80 years old). We can safely say the lost earnings will make that $100,000. Following that assuming that one enters a nursing home at that age, you would pay for the first three months out of pocket before your benefit kicks in. If we assume, to make it easier, that the cost then is exactly the daily benefit of $256, you would pay $23040 for those 90 days. In order to recover $100,000 of premiums you would need to stay 390 days past 90 days, or a total stay of 16 months.

Problem as I see it is that the median stay in these facilities is actually 5 months:

http://www.geripal.org/2010/08/length-o ... t-end.html

Very few would stay anywhere near 16 months. If you stay the median of 5 you are effectively paying $100,000 for months 4-5. Even If you stay the average of 14 months (which is skewed dramatically by a few long-term folks) you still don't break even. In order to hit the policy maximum of $468,000 you would stay 5 years past the first 90 days, which nobody does.

That a great deal to pay any company now for a little. You're fortunate the have the Federal Plan,as there is at least a greater assurance they will be around to pay out in 30 years. Most of the rest of folks must also worry about stability of their private company, and wild premium increases that are common. Are the premiums the same now in your plan for new purchasers?

Anyone that has purchased any decent plan in the last couple of years? The companies that sell these are not many now, and they wouldn't do it without the assurance of making money.
Well, thanks for putting a sharp pencil to my numbers. The problem with your break-even analysis and playing the averages is that they aren't good constructs for an individual buying insurance, except perhaps for product insurance. Those constructs don't appear to work well when you're taking insurance against human life or property against the risk of devastating events that could impact your life. So, break-even analysis and the averages might suggest that a type of insurance is not a good financial deal, but break-even analysis and averages mean little to anyone if the event you've considering insuring against actually happens to you! (One thing your analysis does not consider is that my premium payments are tax-affected by Federal deductions or reimburseable through my HSA.)

As I suggested before, most of us suffer from anecdotal or recency bias when we look at insurance. I'm motivated to have LTCi because I've seen my aunt linger in a nursing home for many years before LTCi became available, my mother has been in a nursing home for the last 7 years, and I've had a dear friend suffer a medical calamity that rendered him in need of LTC when he was about to retire. And when I visit my mom in her nursing home, I've seen many residents who have been there 2 plus years.

BTW, isn't insurance always a great deal for the insurance company if the company has appropriately underwritten its policies? I guess I don't understand the implied angst people have about this business reality when it comes to LTCi. I don't know the answer to your question about whether premiums have risen for new purchasers; my premiums were actually lowered a few cents, when I took a haircut on the inflation adjustment feature of my plan -- there was a proposed 25 percent increase in premiums at the end of the 7th year of coverage, but if you shaved off your inflation adjustment from 5% to 4%, the increase did not apply and the premium was lowered a bit for the next 7 years. I have my fingers crossed about the next likely proposed increase.

itstoomuch
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Re: Long term care insurance - Less than meets the eye

Post by itstoomuch » Sat Jun 13, 2015 9:19 am

^ I too really don't understand the angst about LTC.
The problem is fairly simple for me:
I really like to keep riding the bicycle and 50cc motor scooter. :annoyed
[Do I/decision maker, want to be able to have the choice of choosing the facility and level of care. And not have to set aside money for self-funded LTCi. Both choices means that I will take care of myself rather than let the Gov do it. ] :oops:

:oops: We have the means for LTCi . It's INSURANCE that I hope that my heirs will have never use. :beer
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

Independent
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Re: Long term care insurance - Less than meets the eye

Post by Independent » Sat Jun 13, 2015 10:06 am

Diogenes wrote:
ChrisC wrote:
Diogenes wrote:
Independent wrote:There are plenty of problems with LTC insurance, but this isn't one of them:

In most cases, sadly it gives only the illusion of reducing financial uncertainty in your life. After looking closely at the very narrow window of breaking even on one of these policies when purchased at 50, the numbers simply didn't at all add up. Too many exclusions, low daily rates, and low caps.
And then there is the worrisome company stability issue.
Let's see the numbers from anyone that has purchased recently.

_D_
I didn't purchase recently but when we did at 48/50, twelve years ago, the numbers added up for me. I'm with the Federal Long Term Care Insurance Program offered to the Federal workforce/retirees so I don't really worry that much about company stability though the program is not backed by the Federal Government. Here are my numbers: $214 per month for us both; 90 day waiting period; $256.72 daily benefit allowance with 4% inflation adjustment; 1,825 days (5 years) of coverage; current maximum benefit of $468,514.00.

Hmmm, not sure break-even analysis is appropriate for making a decision to insure; I didn't consider whether I'd ever recapture these sunk costs. If I never call on the policy, that's ok with me -- I would still feel I got my money's worth of peace of mind. .
Thanks for the information about the Federal Plan. As my pencil tells me that would be $2568/yr or $82176 paid for 32 years ( until 80 years old). We can safely say the lost earnings will make that $100,000. Following that assuming that one enters a nursing home at that age, you would pay for the first three months out of pocket before your benefit kicks in. If we assume, to make it easier, that the cost then is exactly the daily benefit of $256, you would pay $23040 for those 90 days. In order to recover $100,000 of premiums you would need to stay 390 days past 90 days, or a total stay of 16 months.

Problem as I see it is that the median stay in these facilities is actually 5 months:

http://www.geripal.org/2010/08/length-o ... t-end.html

Very few would stay anywhere near 16 months. If you stay the median of 5 you are effectively paying $100,000 for months 4-5. Even If you stay the average of 14 months (which is skewed dramatically by a few long-term folks) you still don't break even. In order to hit the policy maximum of $468,000 you would stay 5 years past the first 90 days, which nobody does.

That a great deal to pay any company now for a little. You're fortunate the have the Federal Plan,as there is at least a greater assurance they will be around to pay out in 30 years. Most of the rest of folks must also worry about stability of their private company, and wild premium increases that are common. Are the premiums the same now in your plan for new purchasers?

Anyone that has purchased any decent plan in the last couple of years? The companies that sell these are not many now, and they wouldn't do it without the assurance of making money.
I believe you missed the 4% scheduled increase. If this claim occurs at 80, the daily benefit will be $561, and the maximum benefit will be slightly over $1 million. It will take 146 days (about 5 months) of maximum claim payments to recover the premium.

It's not clear to me what "for the both of us" means. Does that mean that each of them pays $214 per month and each has his/her own benefit pool? I think that's your assumption. Or, does it mean they each pay $107 per month and each has his/her own benefit pool? Or does it mean they pay $214 as a couple and they share one benefit pool?

The fact that so many companies have dropped out of the LTCi business indicates to me that many lost money (or, expect to lose money, now that they have a better idea of actual claims, interest, and persistency). The remaining companies stayed in because they think they can make money, not because they have an assurance of making money.

They expect the LTC line, like all lines, will pay out less in claims than they collect in premiums plus investment income. I see that CT, for example, has a 60% minimum loss ratio. That means the present value of expected claims at issue must be at least 60% of the pv of premiums. http://www.cga.ct.gov/2010/rpt/2010-R-0463.htm And, I wouldn't be surprised if filed loss ratios aren't much above the minimum.

(Note that in the link, MetLife says that its currently-expected loss ratio on one series of policies is now 175%-300%.)

If you want to do your own calculations, I'd suggest reading the '1984-2007 Long Term Care Intercompany Report" which (surprisingly) is available free here: https://www.soa.org/research/experience ... eport.aspx This shows experience on claims actually paid by insurers. But, note disclaimers like "About half of the claim experience is based on policies that provide little in the way of home care benefits. Therefore, this Report is still heavily a Nursing Facility Experience Study." mean that companies have to make explicit additions for modern policies that cover home care and Assisted Living Facilities as well.

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Re: Long term care insurance - Less than meets the eye

Post by Independent » Sat Jun 13, 2015 10:22 am

randomguy wrote: Your ignoring the 6% that you money could be earning for that 20+ years:) ...
That's a good point. As an individual, saving money for my own long term care fund, I can decide to purchase equities. If I am willing to bet it will be at least 30 years before I need care, I can get a lot of investment income on my money.

OTOH, if I pay premiums to an ins company, I know they will invest a chunk of those early premiums in bonds. Over long periods of time, we'd expect equities to outrun bonds. So, buying LTCi means trading out of equities into bonds for this expense which (hopefully) is decades in the future.

Of course the "willing to bet" and "hopefully" above aren't trivial considerations. But, the expense loads in LTC insurance aren't trivial either. It's a complex issue, but the assumed investment return on "self insuring" is always one important factor.

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Re: Long term care insurance - Less than meets the eye

Post by itstoomuch » Sat Jun 13, 2015 11:13 am

^IMO, The issue of self investment of LTCi dollars is a false avenue.
Who will save and invest for 30 years for the use of possible LTC?
SWR and VWR assume that you will draw down the Retirement funds to a near zero balance at a quick death at NNN years old. I never have seen a reserve in the WR for LTC.
Behavior economics at work. :annoyed
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Re: Long term care insurance - Less than meets the eye

Post by ChrisC » Sat Jun 13, 2015 1:46 pm

Independent wrote: I believe you missed the 4% scheduled increase. If this claim occurs at 80, the daily benefit will be $561, and the maximum benefit will be slightly over $1 million. It will take 146 days (about 5 months) of maximum claim payments to recover the premium.

It's not clear to me what "for the both of us" means. Does that mean that each of them pays $214 per month and each has his/her own benefit pool? I think that's your assumption. Or, does it mean they each pay $107 per month and each has his/her own benefit pool? Or does it mean they pay $214 as a couple and they share one benefit pool?

The fact that so many companies have dropped out of the LTCi business indicates to me that many lost money (or, expect to lose money, now that they have a better idea of actual claims, interest, and persistency). The remaining companies stayed in because they think they can make money, not because they have an assurance of making money.
Yes, the 4% scheduled increase was not factored into that calculation. We pay a total of $214 per month, my policy cost $103 and wife's policy cost $111; two separate policies, covering the same benefits. My wife and I would each be entitled to slightly over $1 million in benefits at age 80 according to your calculation. I've actually used some of the pre-care benefits -- the policy provides that you can have a skilled nursing care worker visit and interview a member of your family faced with LTC to report and assess care facilities that might be suitable for the family member -- I used this benefit to evaluate whether my mother could survive in an assisted living facility rather than a nursing home.

And contrary to what another person posted on this thread, the plan provides for a great deal of flexibility in LTC, including home care with a caregiver family member who can be trained and paid for providing the care. One of the reasons we purchased the plan was because we wanted to avoid the paperwork and hassles that might ensue with liquidating assets or drawing down from different sources of funds if we needed to pay LTC expenses. We certainly can afford to assume the entire risk of LTC but we figured if either one of us went into a spiral of dementia or cognitive impairment it would be easier to turn to one source of relief and funding that scurrying around our finances at a time when we needed simple.

Funny that you mention companies dropping out of the LTCi business. The Federal LTCi plan was originally underwritten jointly by Metlife and John Hancock. The insurance contract is awarded every seven years and Metlife dropped out of the Federal plan after the first period. John Hancock is now the sole insurer of the Federal LTCi plan.

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Re: Long term care insurance - Less than meets the eye

Post by Diogenes » Sat Jun 13, 2015 3:35 pm

I think the fact that there is confusion about a Federal Government LTCI policy, which is probably far better than policies available to everyone else, illustrates the issue quite well.
True the 4 percent inflation adjustment was not considered - however neither was the possibility of premium increases. I was curious and found this on ltcfeds.com, the site for the policy under discussion:

Please note: Premiums are not guaranteed. Your premium will not change because you get older or your health changes or for any other reason related solely to you. However, your premiums may increase if you are among a group of enrollees whose premium is determined to be inadequate. While the group policy is in effect, the U.S. Office of Personnel Management (OPM) must approve the change..
This illustrates another problem with all these policies - no idea how much you will actually pay in premiums (in this case $100k would seem to be the minimum)

Bottom line is this is not intended to be critical of a particular policy, but to address the OP. The topic of LTCI has been covered many times on this site, including very comprensively here:

viewtopic.php?t=130943

So far we have not heard from anyone who purchased in the last couple of years...
I continue to look for a reason to buy one, without any luck.

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Re: Long term care insurance - Less than meets the eye

Post by baw703916 » Sat Jun 13, 2015 4:06 pm

itstoomuch wrote:^IMO, The issue of self investment of LTCi dollars is a false avenue.
Who will save and invest for 30 years for the use of possible LTC?
SWR and VWR assume that you will draw down the Retirement funds to a near zero balance at a quick death at NNN years old. I never have seen a reserve in the WR for LTC.
Behavior economics at work. :annoyed
Sorry for going off on you, but I don't think you have considered all the situations one may find themselves in.

I have a medical condition which makes it fairly likely that I may need long-term care at some point in my life, and of course prevents me from buying any insurance to cover it. So yes, I self-insure. What choice do I have? There literally was no point in my adult life when I could have purchased LTCi.

Most conventional financial planning paradigms strike me as silly or not applicable. My financial goal is to have a big enough pile of money that I will never run out, come what may. To have a reasonable chance of doing this I need to 1) have a huge savings rate 2) be willing to take a lot of risk 3) make no behavioral errors.
Most of my posts assume no behavioral errors.

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Re: Long term care insurance - Less than meets the eye

Post by ChrisC » Sat Jun 13, 2015 5:51 pm

Diogenes wrote:I think the fact that there is confusion about a Federal Government LTCI policy, which is probably far better than policies available to everyone else, illustrates the issue quite well.
True the 4 percent inflation adjustment was not considered - however neither was the possibility of premium increases. I was curious and found this on ltcfeds.com, the site for the policy under discussion:

Please note: Premiums are not guaranteed. Your premium will not change because you get older or your health changes or for any other reason related solely to you. However, your premiums may increase if you are among a group of enrollees whose premium is determined to be inadequate. While the group policy is in effect, the U.S. Office of Personnel Management (OPM) must approve the change..
This illustrates another problem with all these policies - no idea how much you will actually pay in premiums (in this case $100k would seem to be the minimum)

Bottom line is this is not intended to be critical of a particular policy, but to address the OP. The topic of LTCI has been covered many times on this site, including very comprensively here:

viewtopic.php?t=130943

So far we have not heard from anyone who purchased in the last couple of years...
I continue to look for a reason to buy one, without any luck.
That wasn't a surprise to many. As I mentioned in an earlier post, premiums did in fact increase but they could be offset by lowering your inflation adjustment from the original 5% to 4%, which I did do. The Federal LTCi plan keeps the rates at the same level every 7 years and with a new award of the contract, rates could increase for the next 7 year cycle. I think you're trying to establish a bogeyman of confusion when none really existed in the eyes of many. Admittedly, many Federal employees and retirees who took out policies during the first award period of the plan were disappointed that rates were proposed to be increased for my age cohort by 25 percent.

Bottom line is that there is no real reason for you to purchase a policy. LTCi rates can go up, just like my term life insurance rate went up from $650 to $11K after my ten year guaranteed level rate level ended.

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Re: Long term care insurance - Less than meets the eye

Post by randomguy » Sat Jun 13, 2015 6:27 pm

itstoomuch wrote:^IMO, The issue of self investment of LTCi dollars is a false avenue.
Who will save and invest for 30 years for the use of possible LTC?
SWR and VWR assume that you will draw down the Retirement funds to a near zero balance at a quick death at NNN years old. I never have seen a reserve in the WR for LTC.
Behavior economics at work. :annoyed
There is no need to dedicate funds for it. You just have to plan for the contingency of having to spend money on LTCi. You might enjoy sticking money into tiny slivers (here is my retirement money, here is my LTCi money, here is my vacation money, here is my new car money) but it isn't necessary. Money is money.

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Re: Long term care insurance - Less than meets the eye

Post by TradingPlaces » Sat Jun 13, 2015 6:33 pm

Most insurance, unless heavily regulated and standardized, is a scam.

There are two simple reasons:

- insurance company has every incentive to not pay, and there is generally no one who is protecting your interest when it is time for them to pay,

- often times, you are not there to collect or enforce collection (dead, disabled, incapacitated, old, or whatever).

Here is a simple situation that demonstrates my point. Person Insured has both an annuity and life insurance (let's say term). Person Insured dies. Insurance company immediately stops paying annuity. However, they won't pay out life insurance policy UNLESS there is a valid claim.

How do they know to stop paying the annuity. Simple: the social security death master file. They would stop paying it even if your SSN gets into the death file BY MISTAKE.

LTCI is one of the bigger scams out there. As one gets to an age that requires special care, one needs to reduce their assets so that the government does not seize them. Having LTCI is on the opposite spectrum from this strategy.

Buying LTCI is akin to buying an annuity when you have been diagnosed with cancer and you are about to die. The insurance company is not going to price the fact that you are likely to die in two months, and sell you an annuity as if you have average life expectancy.

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Re: Long term care insurance - Less than meets the eye

Post by TradingPlaces » Sat Jun 13, 2015 6:45 pm

Independent wrote:There are plenty of problems with LTC insurance, but this isn't one of them:
Require long-term care when you are relatively young, and you win, financially. Require it much later, or not at all, and the insurance company wins. LTCI can be a screaming good deal, if you’re afflicted early. But, at the time we are most likely to need it, in our 80’s or 90’s, 30-40 years from now, the picture is less clear.
That type of comment can be made about any type of insurance. For example, regarding car insurance: You file auto collision insurance claims early and often and you win. But, if you go many years before your one-and-only accident and you lose.

That's pretty much the point of insurance. You win if you have an unusually burdensome loss, you lose if you don't. Prospectively, it reduces the financial uncertainty in your life.
I completely disagree with your last paragraph. Something as standardized as car insurance and something as complicated as LTCI should not even be compared in the same sentence.

Complication of rules only benefits one party in a transaction: the more informed, the more resourceful, and the more lawyered up. In every case, that's the insurance company.

There is no way that you can come out ahead, even if the the "insurance premium" considered in most insurance deals.

But let's look at car insurance, which is highly regulated, highly standardized, and massively enforced. I pay $250 /6 months for FULL (collision and comprehensive), $1M liability, with every bolt and nut and feature on, automobile insurance. I just don't see the insurance company winning this. Ever. Why? Because I see this as cost of doing business just like buying gasoline or tires. One big accident, and they will definitely lose, because on average, I am a better driver than most, and on average, the other driver's insurance will pay up. If one day I get into a $50K accident, insurance company pays, and then they refuse to insure, I will just won't drive: taxi, uber, drive, bike, whatever. I don't need to drive.

LTCi is largely a gamble on so many variables that I just don't see winning ever. The entire LTCi sales pitch is based on fear, and when making decisions out of fear, the decision is rarely a good one. The economic value of providing LTCi should be higher than the cost. And keeping half-dead people alive is just not that economically valuable. Even if that person is me.

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Re: Long term care insurance - Less than meets the eye

Post by livesoft » Sat Jun 13, 2015 6:56 pm

If I move to a nursing home for the rest of my life, then I will not be spending $100K a year living in my home, driving my car, going on vacations, etc. Do you think I could just shift from paying regular expenses to paying nursing home expenses and stay solvent?
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Re: Long term care insurance - Less than meets the eye

Post by baw703916 » Sat Jun 13, 2015 7:13 pm

livesoft wrote:If I move to a nursing home for the rest of my life, then I will not be spending $100K a year living in my home, driving my car, going on vacations, etc. Do you think I could just shift from paying regular expenses to paying nursing home expenses and stay solvent?
$100K a year is a lot more than I've ever spent doing those things. Is your spouse also going to stop spending any money? if so it might work. :)
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Re: Long term care insurance - Less than meets the eye

Post by dodecahedron » Sat Jun 13, 2015 8:32 pm

baw703916 wrote:
itstoomuch wrote:^IMO, The issue of self investment of LTCi dollars is a false avenue.
Who will save and invest for 30 years for the use of possible LTC?
SWR and VWR assume that you will draw down the Retirement funds to a near zero balance at a quick death at NNN years old. I never have seen a reserve in the WR for LTC.
Behavior economics at work. :annoyed
Sorry for going off on you, but I don't think you have considered all the situations one may find themselves in.

I have a medical condition which makes it fairly likely that I may need long-term care at some point in my life, and of course prevents me from buying any insurance to cover it. So yes, I self-insure. What choice do I have? There literally was no point in my adult life when I could have purchased LTCi.
Are you sure about this? Obviously an individual policy is likely not possible, but there are definitely employer group plan LTC policies that guarantee issue without proof of insurability IF you sign up at the time you are hired. For example, NY State public employees have 60 days from date of hire when an active employee can sign up with no proof of insurability required. (After that period, they would have to prove insurability. Spouses and dependent parents of the employee also have to provide proof of insurability at any time.) I would guess there are other employers that offer similar provisions. It could be worth looking into the next time you are contemplating a job change.

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Re: Long term care insurance - Less than meets the eye

Post by baw703916 » Sat Jun 13, 2015 9:27 pm

dodecahedron wrote: Are you sure about this? Obviously an individual policy is likely not possible, but there are definitely employer group plan LTC policies that guarantee issue without proof of insurability IF you sign up at the time you are hired. For example, NY State public employees have 60 days from date of hire when an active employee can sign up with no proof of insurability required. (After that period, they would have to prove insurability. Spouses and dependent parents of the employee also have to provide proof of insurability at any time.) I would guess there are other employers that offer similar provisions. It could be worth looking into the next time you are contemplating a job change.
Thanks for the suggestion. I've been a Federal employee for a number of years. Unfortunately their LTCi program has always required underwriting even when it was first rolled out (I already had my present job at the time). It was a simplified underwriting during the initial rollout, but I'm fortunate enough to have something that's an automatic disqualifier even under the simplified procedure. :) I did look into it pretty carefully.
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Re: Long term care insurance - Less than meets the eye

Post by Deepsea » Sat Jun 13, 2015 9:37 pm

I saw my dad live in a nursing home, + he had a private aid+ I visited him all the time.

He wanted to go..... If I was in the same situation, so would I.

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Re: Long term care insurance - Less than meets the eye

Post by sergeant » Sat Jun 13, 2015 9:59 pm

I will jump in as a new purchaser of a LTC policy and welcome any input. We bought from National Peace Officers and Firefighters Benefit Association last year and just started our second year of coverage. Wife issue age 49, annual cost is $1092. My issue age 51, annual cost $1200. Nursing home benefit is $150 a day. Home care $2250 a month. Respite care $150 a day. Care advisory services is 100%. 60 day elimination period, premium waived when receiving benefit, inflation protection 5% a year but limited to 15 years. Plan is paid up in 30 years and there is a $5000 death benefit which disappears at 75. There is no maximum total coverage as it will pay for life.

We can very easily pay for many years of one of us being in a top notch facility without this policy. I decided to go with this policy because the plan is well-funded, there have been only a couple, small premium increases over the past two decades, and to guard against something happening early in our retirement which will begin in 9 months. Another reason is that NPFBA requires the purchase of the policy be made before separating from service. I will continue to monitor my need/desire for this insurance.
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Re: Long term care insurance - Less than meets the eye

Post by Jerry55 » Sat Jun 13, 2015 11:33 pm

I purchased LTCi just prior to retirement at age 57, 60 now.

$200.00 per day, 5 years with 4% Rider @ $210/month. Premiums have stayed constant since then.

If one has to be in a nursing facility for 5+ years, one has to spend down all their assets before Medicare kicks in.
I'm certain that I can dispose of my assets, to my children, before the 5 year look-back begins w/Medicare.
Any funds in a joint account are jointly owned, so if I put $500,000.00 into a joint account with my 3 children, they can only use 125K towards Medicare, the rest belonging to my 3 children. :happy

I didn't purchase it for MY protection, I purchased it to protect my assets, for my children to inherit.
Of course, I may drop dead without ever needing it, but that's how insurance goes. Protection.
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Re: Long term care insurance - Less than meets the eye

Post by bill88 » Sun Jun 14, 2015 12:25 am

Diogenes wrote:So far we have not heard from anyone who purchased in the last couple of years...
I continue to look for a reason to buy one, without any luck.
How about 3 years? :-)

Bought mine in July 2012. For me only; wife uninsurable. (Maybe she would have been insurable if we had a group policy, like Feds or large corp.?)

Got proposals from Hancock, Genworth, Mutual of Omaha and one other. Genworth best price and the only 10-pay.

Had excellent broker, who went above and beyond. Very professional. Even looked at hybrid annuity/LTCi products, which neither of us were wild about.

Went with Genworth.

ROUND 1:
Quotes were for "richer" benefits than we settled for, and were based on both me and wife qualifying, which didn't happen:

Policy quoted is Genworth Priviledged Choice Flex.
3yr. benefit period
$216,000 pool of money; $6,000/monthly benefit
90 day elimination period
5% compound inflation protection
Tax-qualified
Includes 100% home care (I think the policy includes "1st Day Home Care"

Here are the Genworth 7/12 rates (rounded):

10pay SHARED CARE:
$14,700 ($7,500 wife; $7,200 me)

10 pay not shared care:
$12,600 ($6,400 wife; $6,200 me)

FOR LIFE PAY - SHARED CARE:
$7,200 ($3,800 wife; $3,400 me)

FOR LIFE PAY - not shared care:
$6,200 ($3,200 wife; $3,000 me)


ROUND 2: WHAT WE ACTUALLY SETTLED FOR


10pay LTCI for me only. Wife uninsurable. (We had looked a few years earlier; she might have qualified then, albeit, probably at a jacked-up price.)

And in Round 2, they jacked up (in insurance co. terms, 'standard' rating rather than 'preferred') my premium proposal based on medical exam in my home by itinerant, third world practitioner (my impression; didn't see the degree hanging on his wall; oh, wait, he didn't have a wall).

I went with 10pay because I only want to give them 10 chances to jack my rate up into the stratosphere, instead of every year for the rest of my life unless/until I qualify for ltc. 4 payments in, so far, so good. (I would have considered 1-pay, but no such beast exists.)

Note: The premium went up when I lost the preferred health status, and we lost the joint policy discount. We cut costs by dropping the pool of money to $180,000 from $216,000 (broker advised against doing this), and the monthly benefit from $6,000 to $5,000. And the 90 day elimination period to 365 days. Broker advised strongly against this, and I agreed with her reasoning. I really hate a 1-year elimination period. But realistically, we're buying coverage for maybe half of what our LTC costs would be (if we're lucky). I figure we should be able to handle the other half, and, though it will be a significant burden, we can handle the first year on our own. Then we've got 3 years of half coverage. If the gods are kind, we won't need more than that. We did feel that at least some inflation protection was important, and we have that.

Final Policy for me at age 63: Genworth Priviledged Choice Flex.
3yr. benefit period
$180,000 pool of money; $5,000/monthly benefit
365 day elimination period
EQUAL 5% inflation protection (NOT compounding)
Tax-qualified
Includes 100% home care (I think the policy includes "1st Day Home Care"
Annual premium: 10pay -- $3,603

(Rate can increase at any time, by any amount. A real crap-shoot. 4 years paid, 6 to go, fingers crossed. :-)
The 5% EQUAL option gives better coverage than 3% compound, but not as good as 5% compound. Very little difference between 5% EQUAL and 5% compound for the first 10 years (from start of policy, at age 63; then the gap widens in the later years.

I thought -- and I think our broker didn't disagree -- that a 5% EQUAL policy would be less likely to see a rate increase than a 5% compound policy. But that's just my sense based on extended conversations.

Bottom line: I'll be paid up at 73, having paid $33,706 in premiums for $180,000 of coverage.
After 5 years, $216,000 coverage
After 10 years, $261,000 coverage
After 20 years, $351,000 coverage

I don't think this is anywhere near a great deal, or even a good deal. It might be an okay deal.

And if we never need it, a super deal. :-)

Bill
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Re: Long term care insurance - Less than meets the eye

Post by itstoomuch » Sun Jun 14, 2015 12:36 am

baw703916 wrote:
itstoomuch wrote:^IMO, The issue of self investment of LTCi dollars is a false avenue.
Who will save and invest for 30 years for the use of possible LTC?
SWR and VWR assume that you will draw down the Retirement funds to a near zero balance at a quick death at NNN years old. I never have seen a reserve in the WR for LTC.
Behavior economics at work. :annoyed
Sorry for going off on you, but I don't think you have considered all the situations one may find themselves in.

I have a medical condition which makes it fairly likely that I may need long-term care at some point in my life, and of course prevents me from buying any insurance to cover it. So yes, I self-insure. What choice do I have? There literally was no point in my adult life when I could have purchased LTCi.

Most conventional financial planning paradigms strike me as silly or not applicable. My financial goal is to have a big enough pile of money that I will never run out, come what may. To have a reasonable chance of doing this I need to 1) have a huge savings rate 2) be willing to take a lot of risk 3) make no behavioral errors.
Completely understand.
You don't have a choice.
What am surprised, is that so many people assume and even expect the Gov to provide LTC, after spending down their retirement portfolio.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: Long term care insurance - Less than meets the eye

Post by Browser » Sun Jun 14, 2015 10:46 am

sergeant wrote:I will jump in as a new purchaser of a LTC policy and welcome any input. We bought from National Peace Officers and Firefighters Benefit Association last year and just started our second year of coverage. Wife issue age 49, annual cost is $1092. My issue age 51, annual cost $1200. Nursing home benefit is $150 a day. Home care $2250 a month. Respite care $150 a day. Care advisory services is 100%. 60 day elimination period, premium waived when receiving benefit, inflation protection 5% a year but limited to 15 years. Plan is paid up in 30 years and there is a $5000 death benefit which disappears at 75. There is no maximum total coverage as it will pay for life.

We can very easily pay for many years of one of us being in a top notch facility without this policy. I decided to go with this policy because the plan is well-funded, there have been only a couple, small premium increases over the past two decades, and to guard against something happening early in our retirement which will begin in 9 months. Another reason is that NPFBA requires the purchase of the policy be made before separating from service. I will continue to monitor my need/desire for this insurance.
My mother stayed in a nursing home recently for rehab. The costs were typical for the midwest, which is a less costly region of the country for elder care. The nursing home cost was over $200 per day. Unskilled home care typically bills out at $20/hour so if you need 8 hours per day your monthly cost would be $4800, and that does not cover visits by a nurse which will bill out at a much higher rate. So your benefit amounts are not likely to cover your costs. If you were to elect home care, you have to add the costs of your housing, food, etc. My mother lives in a retirement home which costs $2400 per month, so if she were to need home care her total costs would be $7200 per month which is on par with nursing home costs. If you own your own home you can continue to live there with home care, but then you don't have access to the funds you would have by selling your home, unless you were to do a reverse mortgage.
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Re: Long term care insurance - Less than meets the eye

Post by sergeant » Sun Jun 14, 2015 1:15 pm

Browser wrote:
sergeant wrote:I will jump in as a new purchaser of a LTC policy and welcome any input. We bought from National Peace Officers and Firefighters Benefit Association last year and just started our second year of coverage. Wife issue age 49, annual cost is $1092. My issue age 51, annual cost $1200. Nursing home benefit is $150 a day. Home care $2250 a month. Respite care $150 a day. Care advisory services is 100%. 60 day elimination period, premium waived when receiving benefit, inflation protection 5% a year but limited to 15 years. Plan is paid up in 30 years and there is a $5000 death benefit which disappears at 75. There is no maximum total coverage as it will pay for life.

We can very easily pay for many years of one of us being in a top notch facility without this policy. I decided to go with this policy because the plan is well-funded, there have been only a couple, small premium increases over the past two decades, and to guard against something happening early in our retirement which will begin in 9 months. Another reason is that NPFBA requires the purchase of the policy be made before separating from service. I will continue to monitor my need/desire for this insurance.
My mother stayed in a nursing home recently for rehab. The costs were typical for the midwest, which is a less costly region of the country for elder care. The nursing home cost was over $200 per day. Unskilled home care typically bills out at $20/hour so if you need 8 hours per day your monthly cost would be $4800, and that does not cover visits by a nurse which will bill out at a much higher rate. So your benefit amounts are not likely to cover your costs. If you were to elect home care, you have to add the costs of your housing, food, etc. My mother lives in a retirement home which costs $2400 per month, so if she were to need home care her total costs would be $7200 per month which is on par with nursing home costs. If you own your own home you can continue to live there with home care, but then you don't have access to the funds you would have by selling your home, unless you were to do a reverse mortgage.
Browser, I agree with your statement. My back of the envelope calculations showed our policy would pay for about half the true costs of long term care. We are in a high COL area so care costs are more than in the Midwest. Our pensions are extremely generous with 2% cola and purchasing protection guarantees and would more than fund our LTC if needed. We have a large asset base and will own our home in nine months.
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Re: Long term care insurance - Less than meets the eye

Post by Independent » Sun Jun 14, 2015 1:57 pm

Diogenes wrote: So far we have not heard from anyone who purchased in the last couple of years...
If you want numbers, the Federal Long Term Care Insurance program has a premium calculator that provides rates for age/plan combinations that you specify. https://www.ltcfeds.com/ltcWeb/do/asses ... atecalcOut

That site also has policy descriptions so you can see what you're buying
https://ltcfeds.com/programdetails/

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Re: Long term care insurance - Less than meets the eye

Post by Independent » Sun Jun 14, 2015 2:19 pm

TradingPlaces wrote:
Independent wrote:There are plenty of problems with LTC insurance, but this isn't one of them:
Require long-term care when you are relatively young, and you win, financially. Require it much later, or not at all, and the insurance company wins. LTCI can be a screaming good deal, if you’re afflicted early. But, at the time we are most likely to need it, in our 80’s or 90’s, 30-40 years from now, the picture is less clear.
That type of comment can be made about any type of insurance. For example, regarding car insurance: You file auto collision insurance claims early and often and you win. But, if you go many years before your one-and-only accident and you lose.

That's pretty much the point of insurance. You win if you have an unusually burdensome loss, you lose if you don't. Prospectively, it reduces the financial uncertainty in your life.
I completely disagree with your last paragraph. Something as standardized as car insurance and something as complicated as LTCI should not even be compared in the same sentence.

Complication of rules only benefits one party in a transaction: the more informed, the more resourceful, and the more lawyered up. In every case, that's the insurance company.

There is no way that you can come out ahead, even if the the "insurance premium" considered in most insurance deals.

But let's look at car insurance, which is highly regulated, highly standardized, and massively enforced. I pay $250 /6 months for FULL (collision and comprehensive), $1M liability, with every bolt and nut and feature on, automobile insurance. I just don't see the insurance company winning this. Ever. Why? Because I see this as cost of doing business just like buying gasoline or tires. One big accident, and they will definitely lose, because on average, I am a better driver than most, and on average, the other driver's insurance will pay up. If one day I get into a $50K accident, insurance company pays, and then they refuse to insure, I will just won't drive: taxi, uber, drive, bike, whatever. I don't need to drive.

LTCi is largely a gamble on so many variables that I just don't see winning ever. The entire LTCi sales pitch is based on fear, and when making decisions out of fear, the decision is rarely a good one. The economic value of providing LTCi should be higher than the cost. And keeping half-dead people alive is just not that economically valuable. Even if that person is me.
Since you quoted me, I feel that I should respond. But, I'm not sure where to begin. I'll state a couple facts,
Both auto and LTC insurers price their products so that they (hope they) will collect more in premiums than they pay in claims (after adjusting for investment income).
Some individuals get more back than they paid in, others get less back than they paid in, on both types of insurance.
Long Term Care insurance is heavily regulated. Just Google on "Individual LTC Insurance Checklist New York" open the pdf file and start filing it out.

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Re: Long term care insurance - Less than meets the eye

Post by TomatoTomahto » Sun Jun 14, 2015 2:38 pm

randomguy wrote:
itstoomuch wrote:^IMO, The issue of self investment of LTCi dollars is a false avenue.
Who will save and invest for 30 years for the use of possible LTC?
SWR and VWR assume that you will draw down the Retirement funds to a near zero balance at a quick death at NNN years old. I never have seen a reserve in the WR for LTC.
Behavior economics at work. :annoyed
There is no need to dedicate funds for it. You just have to plan for the contingency of having to spend money on LTCi. You might enjoy sticking money into tiny slivers (here is my retirement money, here is my LTCi money, here is my vacation money, here is my new car money) but it isn't necessary. Money is money.
I'm with randomguy and livesoft. Have a big pile of money. If I'm giving money to the nursing home, I'm no longer giving it to airlines, hotels, and restaurants (unless they deliver to nursing homes). My spouse will be doing the same. If we're both in nursing homes, we can sell our house(s).

The more narrow the insured event (LTC, cancer other than skin cancer, accidental death, death while flying, etc.), the worse a deal it seems to be. I'm self-insuring to live past next week.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: Long term care insurance - Less than meets the eye

Post by baw703916 » Sun Jun 14, 2015 2:53 pm

Independent wrote:There are plenty of problems with LTC insurance, but this isn't one of them:
Require long-term care when you are relatively young, and you win, financially. Require it much later, or not at all, and the insurance company wins. LTCI can be a screaming good deal, if you’re afflicted early. But, at the time we are most likely to need it, in our 80’s or 90’s, 30-40 years from now, the picture is less clear.
That type of comment can be made about any type of insurance. For example, regarding car insurance: You file auto collision insurance claims early and often and you win. But, if you go many years before your one-and-only accident and you lose.

That's pretty much the point of insurance. You win if you have an unusually burdensome loss, you lose if you don't. Prospectively, it reduces the financial uncertainty in your life.
Actually, you don't win if you need LTC at a fairly young age--unless you happen to have a policy with unlimited benefits. You may receive more in benefits than you paid in, but this is the wrong way to look at insurance. You should look at it in terms of mitigating the risks to a point that they're not a financial catastrophe if they show up. Having been a net receiver of money from the insurance company isn't going to be so appealing if you need LTC at 50, use up all your benefits by 55, and still have a considerable life expectancy.
Most of my posts assume no behavioral errors.

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Re: Long term care insurance - Less than meets the eye

Post by TradingPlaces » Sun Jun 14, 2015 3:05 pm

Independent wrote:
TradingPlaces wrote:
Independent wrote:There are plenty of problems with LTC insurance, but this isn't one of them:
Require long-term care when you are relatively young, and you win, financially. Require it much later, or not at all, and the insurance company wins. LTCI can be a screaming good deal, if you’re afflicted early. But, at the time we are most likely to need it, in our 80’s or 90’s, 30-40 years from now, the picture is less clear.
That type of comment can be made about any type of insurance. For example, regarding car insurance: You file auto collision insurance claims early and often and you win. But, if you go many years before your one-and-only accident and you lose.

That's pretty much the point of insurance. You win if you have an unusually burdensome loss, you lose if you don't. Prospectively, it reduces the financial uncertainty in your life.
I completely disagree with your last paragraph. Something as standardized as car insurance and something as complicated as LTCI should not even be compared in the same sentence.

Complication of rules only benefits one party in a transaction: the more informed, the more resourceful, and the more lawyered up. In every case, that's the insurance company.

There is no way that you can come out ahead, even if the the "insurance premium" considered in most insurance deals.

But let's look at car insurance, which is highly regulated, highly standardized, and massively enforced. I pay $250 /6 months for FULL (collision and comprehensive), $1M liability, with every bolt and nut and feature on, automobile insurance. I just don't see the insurance company winning this. Ever. Why? Because I see this as cost of doing business just like buying gasoline or tires. One big accident, and they will definitely lose, because on average, I am a better driver than most, and on average, the other driver's insurance will pay up. If one day I get into a $50K accident, insurance company pays, and then they refuse to insure, I will just won't drive: taxi, uber, drive, bike, whatever. I don't need to drive.

LTCi is largely a gamble on so many variables that I just don't see winning ever. The entire LTCi sales pitch is based on fear, and when making decisions out of fear, the decision is rarely a good one. The economic value of providing LTCi should be higher than the cost. And keeping half-dead people alive is just not that economically valuable. Even if that person is me.
Since you quoted me, I feel that I should respond. But, I'm not sure where to begin. I'll state a couple facts,
Both auto and LTC insurers price their products so that they (hope they) will collect more in premiums than they pay in claims (after adjusting for investment income).
Some individuals get more back than they paid in, others get less back than they paid in, on both types of insurance.
Long Term Care insurance is heavily regulated. Just Google on "Individual LTC Insurance Checklist New York" open the pdf file and start filing it out.
I completely disagree with everything you said.

Here are the differences:

STANDARDIZATION
If car insurance was like LTCi, then car insurance would read like this:

- accidents not covered on Wednsedays,
- accidents not covered on the intersection of Busy Street and Violent Avenue,
- accidents not covered if Full Moon,
- accidents not covered if low pressure in left rear tire,
- accidents not covered if there are more than two passengers in the car,
- accidents not covered if the car is driven more than 6K a year,
etc

RISK POOL
Everyone has car insurance. The pool of car insurance buyers is large. Thus, the insurance aspect costs less to the society.

LTCi is not as widely used. Insurance company has a reason to believe that the purchaser of LTCi will adverse fill the insurance company. Thus, the insurance company will over-price the policy.

INVESTMENT ASPECTS

The longer the insurance company holds your money, the more they creap from the crop. Auto insurance policies are paid our relatively frequently, so relatively speaking, not much capital is being invested.

LTCi pays out dozens of years later. During these dozens of years, the insurance company rips the policy holders by charging excessive investment management fees.

Are you still going to argue that LTCi is highly regulated, standardized, and the same as any other insurance?

When LTCi is forced upon everyone, is EXACTLY standard for everyone, and the insurance industry is not allowed to charge excessive sales charges or excessive investment management fees, then maybe LTCi will become like car insurance.

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Re: Long term care insurance - Less than meets the eye

Post by Independent » Sun Jun 14, 2015 3:37 pm

baw703916 wrote: Actually, you don't win if you need LTC at a fairly young age--unless you happen to have a policy with unlimited benefits. You may receive more in benefits than you paid in, but this is the wrong way to look at insurance. You should look at it in terms of mitigating the risks to a point that they're not a financial catastrophe if they show up. Having been a net receiver of money from the insurance company isn't going to be so appealing if you need LTC at 50, use up all your benefits by 55, and still have a considerable life expectancy.
You're correct that "win" is a fuzzy term. I was using it in the context of some earlier posts that compared benefits to premiums.

Ideally, any insurance would cover all my financial losses arising from some event. But, that isn't always true. My auto liability has a cap, so I buy umbrella liability, but it also has a cap. I still think my liability policies are worth buying, even though I know that they wouldn't cover the extreme case.

There are certainly people on this board who think that the few hundred thousand they might get from a LTC policy isn't worth the trade-off. The risk mitigation isn't significant, the loss ratio is too low, they're willing to hold enough assets to cover any "reasonable" period of care. I don't have any complaint with that analysis for those people.

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Re: Long term care insurance - Less than meets the eye

Post by Browser » Sun Jun 14, 2015 3:42 pm

sergeant wrote:
Browser wrote:
sergeant wrote:I will jump in as a new purchaser of a LTC policy and welcome any input. We bought from National Peace Officers and Firefighters Benefit Association last year and just started our second year of coverage. Wife issue age 49, annual cost is $1092. My issue age 51, annual cost $1200. Nursing home benefit is $150 a day. Home care $2250 a month. Respite care $150 a day. Care advisory services is 100%. 60 day elimination period, premium waived when receiving benefit, inflation protection 5% a year but limited to 15 years. Plan is paid up in 30 years and there is a $5000 death benefit which disappears at 75. There is no maximum total coverage as it will pay for life.

We can very easily pay for many years of one of us being in a top notch facility without this policy. I decided to go with this policy because the plan is well-funded, there have been only a couple, small premium increases over the past two decades, and to guard against something happening early in our retirement which will begin in 9 months. Another reason is that NPFBA requires the purchase of the policy be made before separating from service. I will continue to monitor my need/desire for this insurance.
My mother stayed in a nursing home recently for rehab. The costs were typical for the midwest, which is a less costly region of the country for elder care. The nursing home cost was over $200 per day. Unskilled home care typically bills out at $20/hour so if you need 8 hours per day your monthly cost would be $4800, and that does not cover visits by a nurse which will bill out at a much higher rate. So your benefit amounts are not likely to cover your costs. If you were to elect home care, you have to add the costs of your housing, food, etc. My mother lives in a retirement home which costs $2400 per month, so if she were to need home care her total costs would be $7200 per month which is on par with nursing home costs. If you own your own home you can continue to live there with home care, but then you don't have access to the funds you would have by selling your home, unless you were to do a reverse mortgage.
Browser, I agree with your statement. My back of the envelope calculations showed our policy would pay for about half the true costs of long term care. We are in a high COL area so care costs are more than in the Midwest. Our pensions are extremely generous with 2% cola and purchasing protection guarantees and would more than fund our LTC if needed. We have a large asset base and will own our home in nine months.
Does your LTCi policy have an inflation rider? I don't see how any LTCi policy would be worth much without this. I think you're right that your policy would net out at covering about half of your total expenses until the max payout is reached.
We don't know where we are, or where we're going -- but we're making good time.

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Re: Long term care insurance - Less than meets the eye

Post by Diogenes » Sun Jun 14, 2015 3:55 pm

bill88 wrote:
Diogenes wrote:So far we have not heard from anyone who purchased in the last couple of years...
I continue to look for a reason to buy one, without any luck.
How about 3 years
I went with 10pay because I only want to give them 10 chances to jack my rate up into the stratosphere, instead of every year for the rest of my life unless/until I qualify for ltc. 4 payments in, so far, so good. (I would have considered 1-pay, but no such beast exists.)

Note: The premium went up when I lost the preferred health status, and we lost the joint policy discount. We cut costs by dropping the pool of money to $180,000 from $216,000 (broker advised against doing this), and the monthly benefit from $6,000 to $5,000. And the 90 day elimination period to 365 days. Broker advised strongly against this, and I agreed with her reasoning. I really hate a 1-year elimination period. But realistically, we're buying coverage for maybe half of what our LTC costs would be (if we're lucky). I figure we should be able to handle the other half, and, though it will be a significant burden, we can handle the first year on our own. Then we've got 3 years of half coverage. If the gods are kind, we won't need more than that. We did feel that at least some inflation protection was important, and we have that.

Final Policy for me at age 63: Genworth Priviledged Choice Flex.
3yr. benefit period
$180,000 pool of money; $5,000/monthly benefit
365 day elimination period
EQUAL 5% inflation protection (NOT compounding)
Tax-qualified
Includes 100% home care (I think the policy includes "1st Day Home Care"
Annual premium: 10pay -- $3,603

(Rate can increase at any time, by any amount. A real crap-shoot. 4 years paid, 6 to go, fingers crossed. :-)
The 5% EQUAL option gives better coverage than 3% compound, but not as good as 5% compound. Very little difference between 5% EQUAL and 5% compound for the first 10 years (from start of policy, at age 63; then the gap widens in the later years.

I thought -- and I think our broker didn't disagree -- that a 5% EQUAL policy would be less likely to see a rate increase than a 5% compound policy. But that's just my sense based on extended conversations.

Bottom line: I'll be paid up at 73, having paid $33,706 in premiums for $180,000 of coverage.
After 5 years, $216,000 coverage
After 10 years, $261,000 coverage
After 20 years, $351,000 coverage

I don't think this is anywhere near a great deal, or even a good deal. It might be an okay deal.

And if we never need it, a super deal. :-)

Bill
Bill, thanks for the good analysis. So all things considered would the policy be the same as placing $180,000 aside now in a conservative investment vehicle? That way no worry about increases, no worry about the company?
I find that many that have bought policies get locked in (i.e. "I've already paid in $25k so I must bite the bullet and pay the premium increases or I walk away with nothing" syndrome).
All the company has to do is rachet the premiums up significantly and they know many folks will drop off, $20k in or no. It becomes a cash flow problem when you are retired.
What would you do if your premiums went up 50 percent next year?

The main difference with this product, as was mentioned, is that the numbers of people in the risk pool is small.
Seems you gave it a lot of thought.

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Re: Long term care insurance - Less than meets the eye

Post by baw703916 » Sun Jun 14, 2015 3:56 pm

Independent wrote:
baw703916 wrote: Actually, you don't win if you need LTC at a fairly young age--unless you happen to have a policy with unlimited benefits. You may receive more in benefits than you paid in, but this is the wrong way to look at insurance. You should look at it in terms of mitigating the risks to a point that they're not a financial catastrophe if they show up. Having been a net receiver of money from the insurance company isn't going to be so appealing if you need LTC at 50, use up all your benefits by 55, and still have a considerable life expectancy.
You're correct that "win" is a fuzzy term. I was using it in the context of some earlier posts that compared benefits to premiums.

Ideally, any insurance would cover all my financial losses arising from some event. But, that isn't always true. My auto liability has a cap, so I buy umbrella liability, but it also has a cap. I still think my liability policies are worth buying, even though I know that they wouldn't cover the extreme case.
I think we agree that benefits vs. premiums isn't a useful comparison. I would be perfectly happy not to get into a car accident or have my house burn down and have the premium money go to waste!

I guess one thing that frustrates me on LTCi (as an observer since I can't buy it myself) is that one of the selling points is how financially devastating an extended stay in LTC can be--but few of the policies being sold would actually mitigate that risk. There's also a lot of shifting between the median stay and the average stay, which are very different due to a skewed distribution. The typical benefit period of five years happening to match the Medicaid look-back period appears not to be a coincidence. :) The one that sergeant is buying does appear to fulfill the risk mitigation adequately.
Most of my posts assume no behavioral errors.

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Re: Long term care insurance - Less than meets the eye

Post by Independent » Sun Jun 14, 2015 4:04 pm

TradingPlaces wrote:
Independent wrote: Since you quoted me, I feel that I should respond. But, I'm not sure where to begin. I'll state a couple facts,
Both auto and LTC insurers price their products so that they (hope they) will collect more in premiums than they pay in claims (after adjusting for investment income).
Some individuals get more back than they paid in, others get less back than they paid in, on both types of insurance.
Long Term Care insurance is heavily regulated. Just Google on "Individual LTC Insurance Checklist New York" open the pdf file and start filing it out.
I completely disagree with everything you said.

Here are the differences:

STANDARDIZATION
If car insurance was like LTCi, then car insurance would read like this:

- accidents not covered on Wednsedays,
- accidents not covered on the intersection of Busy Street and Violent Avenue,
- accidents not covered if Full Moon,
- accidents not covered if low pressure in left rear tire,
- accidents not covered if there are more than two passengers in the car,
- accidents not covered if the car is driven more than 6K a year,
etc

RISK POOL
Everyone has car insurance. The pool of car insurance buyers is large. Thus, the insurance aspect costs less to the society.

LTCi is not as widely used. Insurance company has a reason to believe that the purchaser of LTCi will adverse fill the insurance company. Thus, the insurance company will over-price the policy.

INVESTMENT ASPECTS

The longer the insurance company holds your money, the more they creap from the crop. Auto insurance policies are paid our relatively frequently, so relatively speaking, not much capital is being invested.

LTCi pays out dozens of years later. During these dozens of years, the insurance company rips the policy holders by charging excessive investment management fees.

Are you still going to argue that LTCi is highly regulated, standardized, and the same as any other insurance?

When LTCi is forced upon everyone, is EXACTLY standard for everyone, and the insurance industry is not allowed to charge excessive sales charges or excessive investment management fees, then maybe LTCi will become like car insurance.
Actually, I don't think you disagreed with anything I said.

I said that all types of private insurance have a couple common features. I said that LTC "heavily" regulated, and gave you a link that you could study.

I did not say that LTCi is exactly like any other form of insurance.
I didn't say that LTCi is standardized.
I didn't make any claims about risk pools.
I didn't say anything about investments in this post (though I did in an earlier post, you can see what I said there).

You obviously have some strong opinions, don't assume that I disagree with every one of them.

(I will disagree with your claim regarding Wednesdays. Here is the exclusion list for the Federal policy. https://www.ltcfeds.com/programdetails/exclusions.html )

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