Long term care insurance

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DrKMP
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Long term care insurance

Post by DrKMP » Tue Aug 30, 2016 6:19 pm

My wife and I turn 71 this year and we have a comfortable retirement based on social security, defined benefit pensions, rental property income and 401K withdrawals. One of the things that could jeopardize our future is a long term care expense. Based on what I read there is about a 40% risk that one of us will need long term care. But the cost of this insurance has skyrocketed and may be difficult for us to get at our ages. What are options we should consider to protect ourselves from this potential landmine?

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powermega
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Re: Long term care insurance

Post by powermega » Tue Aug 30, 2016 11:16 pm

I think insurance works best when the scenario is low-probability and high-impact (significant money involved). In the case of long term care insurance, you're buying insurance for a high-probability and high-impact scenario. The high probability of it means that the insurance cost is high, and especially in the case LTC, increasing.

Unfortunately, there's not much you can do to defray a high-probability scenario like this. You could try to find ways to get care in ways that are cheaper than nursing homes, but that's not so easy as it sounds.

Speaking from my own experience... My parents were extremely fortunate. They (well, my sister really) found a live-in nurse so they could spend their final days in their own home. We lucked out in one way that the nurse was in a stage in her life where she really valued the room and board portion of her compensation. To this day my siblings think she was an angel who took superb care of our parents in their last 15 months. I think the total arrangement was cheaper than both parents being in a nursing home, but there is absolutely no question that they received better care with that live-in nurse. If one of you were to need care, something like this, or even a daytime nurse, could be cost effective.
Even a stopped clock is right twice a day.

2comma
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Re: Long term care insurance

Post by 2comma » Tue Aug 30, 2016 11:59 pm

To expand on the low-probability and high-impact purpose of insurance what really worries me is not one year, or even 5 years on nursing home care - that we could self-insure. What really worries me is if one of us did need very long term care that would wipe us out and most policies have a limit.

If the probability for a couple your age needing LTC is 40% (is that true?) what is the average expected number of years of care needed?
If I am stupid I will pay.

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Phineas J. Whoopee
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Re: Long term care insurance

Post by Phineas J. Whoopee » Wed Aug 31, 2016 12:03 am

Any non-nursing-home care that's adequate is worth pursuing if affordable. Many of the complications come in when long-term care is available to the individual only via Medicaid, which in most states covers nursing home care but not measures short of it. In terms of assets, the major problems apply to the spouse who does not need the care first. That person, while perhaps not totally impoverished, can be greatly harmed financially. Hiding among the legal and financial advantages married couples enjoy, it's one of the disadvantages.

I agree that at age 71 LTCi is unlikely to be affordable to any but those who have so much in assets that the healthier spouse is easily able to get through without it. In your case it seems to be a financial risk you're stuck with.

Everybody ends up stuck with some risks, financial and otherwise.

I bought group LTCi when the opportunity briefly arose via my employer, and my main purpose in carrying it is to stay out of a nursing home if lesser measures, not covered by Medicaid, will be sufficient. I view myself as unusually, and undeservedly, fortunate in this respect.

Oh, and, welcome to the forum!

PJW
Last edited by Phineas J. Whoopee on Wed Aug 31, 2016 12:22 am, edited 1 time in total.

rrppve
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Re: Long term care insurance

Post by rrppve » Wed Aug 31, 2016 12:16 am

One alternative to consider is a reverse home equity loan, HECM. If you own your home free and clear this works well if only one member of the couple needs LTC. The issue occurs when both are no longer living in the home, but you could sell the residence at that point and use the remaining equity to cover the LTC costs.

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powermega
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Location: Colorado

Re: Long term care insurance

Post by powermega » Wed Aug 31, 2016 7:21 am

I forgot to mention that if you do shop for LTC insurance, try to find one with the longest possible elimination period. That could cut down on the cost of the policy.
Even a stopped clock is right twice a day.

Dottie57
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Re: Long term care insurance

Post by Dottie57 » Wed Aug 31, 2016 7:54 am

DrKMP wrote:My wife and I turn 71 this year and we have a comfortable retirement based on social security, defined benefit pensions, rental property income and 401K withdrawals. One of the things that could jeopardize our future is a long term care expense. Based on what I read there is about a 40% risk that one of us will need long term care. But the cost of this insurance has skyrocketed and may be difficult for us to get at our ages. What are options we should consider to protect ourselves from this potential landmine?

I would see an eldercare lawyer who can help you protect assets for the person who is not in th LTC.

pshonore
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Re: Long term care insurance

Post by pshonore » Wed Aug 31, 2016 9:22 am

Phineas J. Whoopee wrote:Any non-nursing-home care that's adequate is worth pursuing if affordable. Many of the complications come in when long-term care is available to the individual only via Medicaid, which in most states covers nursing home care but not measures short of it. In terms of assets, the major problems apply to the spouse who does not need the care first. That person, while perhaps not totally impoverished, can be greatly harmed financially. Hiding among the legal and financial advantages married couples enjoy, it's one of the disadvantages.

I agree that at age 71 LTCi is unlikely to be affordable to any but those who have so much in assets that the healthier spouse is easily able to get through without it. In your case it seems to be a financial risk you're stuck with.

Everybody ends up stuck with some risks, financial and otherwise.

I bought group LTCi when the opportunity briefly arose via my employer, and my main purpose in carrying it is to stay out of a nursing home if lesser measures, not covered by Medicaid, will be sufficient. I view myself as unusually, and undeservedly, fortunate in this respect.

Oh, and, welcome to the forum!

PJW
One advantage of LTC is something called a Partnership policy. It allows you to protect assets in the amount of the LTC your policy pays for if you get into a catastrophic situation and in effect not "impoverish" the spouse. For example if your policy provides a 500K benefit and you blow through that, your spouse can keep 500K of joint assets that would otherwise be spent down before Medicaid picks up the tab. There are also new "hybrid" policies that allow return of premium to your spouse or beneficiary if no care is required. Of course this stuff is quite complicated so you need to look for an agent that can trust. And none of it is cheap.

adamthesmythe
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Re: Long term care insurance

Post by adamthesmythe » Wed Aug 31, 2016 9:25 am

> What really worries me is if one of us did need very long term care that would wipe us out and most policies have a limit.

Yes. My understanding is that policies presently available will NOT protect you in this scenario. So...if you are in a situation where you could afford a few years of care...LTC does not help you.

SuzBanyan
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Re: Long term care insurance

Post by SuzBanyan » Wed Aug 31, 2016 9:26 am

rrppve wrote:One alternative to consider is a reverse home equity loan, HECM. If you own your home free and clear this works well if only one member of the couple needs LTC. The issue occurs when both are no longer living in the home, but you could sell the residence at that point and use the remaining equity to cover the LTC costs.

We discussed this option recently at: viewtopic.php?f=2&t=196362

There is a school of thought that taking out a Reverse Mortgage before need may be the best strategy if you can pay the closing costs from other funds. The amount available compounds annually based on the interest rate. If left to compound long enough, it can even exceed the value of your home.

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