Long term care insurance - is it worth it?

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edge
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Re: Long term care insurance - is it worth it?

Post by edge » Tue Jul 04, 2017 7:31 pm

It is not worth it. The reason is because actuaries don't understand the risks well. So they have to make the IRR huge to make up for it.

pintail07
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Re: Long term care insurance - is it worth it?

Post by pintail07 » Tue Jul 04, 2017 7:48 pm

edge wrote:It is not worth it. The reason is because actuaries don't understand the risks well. So they have to make the IRR huge to make up for it.
I use to feel the same way, and quit offering it to my clients. However, they know much more now, folks don't lapse their policies, they can't earn much more than 2-3% on reserves. I think some of the carriers understand the risks much better now.

marcopolo
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Re: Long term care insurance - is it worth it?

Post by marcopolo » Tue Jul 04, 2017 7:53 pm

BolderBoy wrote:
bsteiner wrote:The premiums weren't wasted. They went to pay for the benefits that others received, and for the expenses of running the insurance company (including paying the agents and the insurance company's profits). If most people need care for a short time (if at all), a policy with a longer 2 or 3 year waiting period ought to be much less expensive. Does anyone know of any such policies?
Hah! A 2-3 year waiting period would make most (like overwhelming) LTC policies cash cows for the insurance companies and worthless for most people who end up needing "LTC".

Actuaries are very good at what they do.

But, this is exactly the type of coverage insurance is supposed to provide. I can self-insure for short stays. Someone mentioned 70% of elders end up in nursing home for some period of time. Covering that does not sound like insurance, it sounds like pre-paying for a service. Where are the catastrophic policies with long waiting times, and large or preferably unlimited duration once it kicks in. Should rarely be used, but provides large amoiunt of protection in the rare case where it is needed, similar to umbrella policies. That should be cheaper (if actuaries are good), and a better form of insurance for many.
Once in a while you get shown the light, in the strangest of places if you look at it right.

lynneny
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Re: Long term care insurance - is it worth it?

Post by lynneny » Tue Jul 04, 2017 9:36 pm

I'd buy LTCi in a minute if an insurance company would create a catastrophic policy with a 2 or 3-year elimination period. Most new policies seem to cover only a few years of care. Which is as much as most people will ever need, but with my family's history of Alzheimer's, that's a drop in the bucket for us. I'd rather pay for the first couple years myself, and have a policy that would cover the remaining, possibly many, years.

I'm not an actuary, but since few people end up needing care for that long, you'd think insurance companies would be able to make a profit on a catastrophic policy that few people would live to collect on, but that would be very useful to the few who do.

neilpilot
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Re: Long term care insurance - is it worth it?

Post by neilpilot » Tue Jul 04, 2017 9:45 pm

lynneny wrote:I'd buy LTCi in a minute if an insurance company would create a catastrophic policy with a 2 or 3-year elimination period. Most new policies seem to cover only a few years of care. Which is as much as most people will ever need, but with my family's history of Alzheimer's, that's a drop in the bucket for us. I'd rather pay for the first couple years myself, and have a policy that would cover the remaining, possibly many, years.

I'm not an actuary, but since few people end up needing care for that long, you'd think insurance companies would be able to make a profit on a catastrophic policy that few people would live to collect on, but that would be very useful to the few who do.
My LTC policy, which was standard when I purchased it in 1999 except for the optional inflation rider, covers up to a specified $ amount with no elimination period. In current dollars, I estimate it should be sufficient for 8-9 years, assuming today's cost of typical Alzheimer's care.

TravelforFun
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Re: Long term care insurance - is it worth it?

Post by TravelforFun » Tue Jul 04, 2017 9:47 pm

lynneny wrote:I'd buy LTCi in a minute if an insurance company would create a catastrophic policy with a 2 or 3-year elimination period. Most new policies seem to cover only a few years of care. Which is as much as most people will ever need, but with my family's history of Alzheimer's, that's a drop in the bucket for us.
So the alternative for you would be to use up your asset and then go on Medicaid? Do you have a SO? What would happen to that person if your asset is gone?

edge
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Re: Long term care insurance - is it worth it?

Post by edge » Tue Jul 04, 2017 9:58 pm

Don't be fooled. The lack of lapse or reduced benefit acceptance in the face of higher rate actions is mostly because of asymmetric information of policyholder health and because regulators are giving much lower than requested rate increases.

There are almost no major carriers left and the largest one is being sold to a Chinese holding company. The actuaries cannot figure it out and so the pricing is such that the policies make no sense.

And to those asking for Alzheimer's coverage, forget about it. Half of all current claims are long term cognitive, including Alzheimer's. dementia and Alzheimer's are not rare. There is no easy answer.
pintail07 wrote:
edge wrote:It is not worth it. The reason is because actuaries don't understand the risks well. So they have to make the IRR huge to make up for it.
I use to feel the same way, and quit offering it to my clients. However, they know much more now, folks don't lapse their policies, they can't earn much more than 2-3% on reserves. I think some of the carriers understand the risks much better now.

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TD2626
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Re: Long term care insurance - is it worth it?

Post by TD2626 » Wed Jul 05, 2017 10:17 pm

I think that Long Term Care Insurance can be worth it for many.

I feel it should be bought as insurance, not as a hybrid product that combines insurance and investment.

You have to look at the two biggest reasons for the insurance:
1. It allows one to choose how to get care if it is needed - in the home, or in a nicer nursing home that doesn't take medicaid.
2. It protects assets from being used to pay for the costs of care, for the benefit of heirs.

If you are satisfied with the medicaid options in your area, and/or have no heirs or negligible assets to protect, then the insurance probably isn't the best route.

If quality or location of care is important and asset protection is as well, then LTCI may be a good option.

There is a real risk of needing care for 5+ years (with conditions like Alzheimer's, Parkinson's, stroke, etc). The costs involved in the worst-case scenarios could stretch into the seven figures. Yes, a lifetime policy is hard/impossible to find. But buying one of the longest-term policies offered by a competitive firm in one's area can protect assets for that period and greatly reduce the risk that every dime has to be spent. A, say, 5 or 7 year policy also reduces the length of time that Medicaid gets to decide the quality of care you get.

Long term care insurance, to me, is sort of like a bond fund. The insurance company puts much of the premium money in things like corporate bonds, but this isn't what I am referring to. LTCI is like a bond fund in that, like having bonds, it reduces overall portfolio returns vs being 100% equities - and also reduces risk. A bond fund does this by having a low correlation with equities. The reduction in returns by having some bonds is fairly small compared to the large reduction in risk - which is why people hold bonds in their long-term portfolios.

Similarly, LTCI reduces both returns and risks of a portfolio. Unlike bonds, the return of LTCI is negative - on average, you lose money buying insurance because the insurance company has its overhead / profit margin. However, unlike for bonds, the correlation between LTCI and an equity portfolio's value is very, very sharply negative. (Correlations between bonds and stocks are roughly zero, or only mildly negative).

Why? How could there be a sharply negative correlation between the value of an equity portfolio and whether buying LTCI turns out to be "worth it"? The solution is to see that the value of the stock portfolio declines not just because of market movements, but also because of heavy withdrawals from assets in order to pay for the cost of long term care. In these scenarios, LTCI pays for part of the care and reduces the need to withdrawal from assets as heavily.

So - LTCI is something that, on average you lose money on- but something that has sharply negative correlation with the value of the rest of the portfolio. Should it be bought?

If premiums are so costly that they drag down your assets by too much, then the reduction in risk from the insurance isn't worth the cost. But if one can find policies where the premium expenses (reduction in returns) are fairly compensated by a large reduction in risk, then that may be a good option.

One could use Modern Portfolio Theory to determine how much to buy. One could model things as a negative-return, negative correlation product, and find the tangency portfolio.

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Re: Long term care insurance - is it worth it?

Post by itstoomuch » Wed Jul 05, 2017 11:46 pm

+1@TD2626.
It's all about risk management :oops:
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

SGM
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Re: Long term care insurance - is it worth it?

Post by SGM » Thu Jul 06, 2017 4:20 am

Those who have LTCI tend to be in LTC for longer periods than predicted. Actuaries have failed to account sufficiently for moral hazard according to recent research. Last year at a retirement research conference, we were told that even after the recent increase in premiums the costs to the insurance companies were still too high.

awval999
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Re: Long term care insurance - is it worth it?

Post by awval999 » Thu Jul 06, 2017 7:17 am

Here's a question to ponder.

Many feel that a reasonable Boglehead can self-pay for a year/two of nursing home care. Let's call it $60k/year, so a couple hundred thousand dollars. For most retirements, that's gonna hurt, for sure, but it will be like a rehabilitation. Break leg, hip, do some PT, see the light at the end of the tunnel to go home.

Many here are worried about tail risk. Alzheimer's, stroke/paralysis, heart attack/brain death, etc where you have no ability to ever go home.

Does anyone take into account in those long tail situations "you" won't even know you're alive? You won't be "you" anymore. Your mind, which is what makes you "you" is gone. We don't let our elderly die on the streets in this country. So you'll have a Medicaid nursing home with legal minimum nursing coverage. And it won't be fancy. But you will have a bed. And food.

Is it really "worth it" to pay for this tail end coverage, with money that can be used for memories now, when you won't even be able to appreciate it. Your mind will be gone. You won't be you.

I conclude, that it's not worth it to pay for this tail end coverage. Be able to self-pay for a couple years. If you get dealt a terrible hand, it doesn't matter, you won't be you anymore.

neilpilot
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Re: Long term care insurance - is it worth it?

Post by neilpilot » Thu Jul 06, 2017 7:25 am

awval999 wrote:Here's a question to ponder.

Many feel that a reasonable Boglehead can self-pay for a year/two of nursing home care. Let's call it $60k/year, so a couple hundred thousand dollars. For most retirements, that's gonna hurt, for sure, but it will be like a rehabilitation. Break leg, hip, do some PT, see the light at the end of the tunnel to go home.

Many here are worried about tail risk. Alzheimer's, stroke/paralysis, heart attack/brain death, etc where you have no ability to ever go home.

Does anyone take into account in those long tail situations "you" won't even know you're alive? You won't be "you" anymore. Your mind, which is what makes you "you" is gone. We don't let our elderly die on the streets in this country. So you'll have a Medicaid nursing home with legal minimum nursing coverage. And it won't be fancy. But you will have a bed. And food.

Is it really "worth it" to pay for this tail end coverage, with money that can be used for memories now, when you won't even be able to appreciate it. Your mind will be gone. You won't be you.

I conclude, that it's not worth it to pay for this tail end coverage. Be able to self-pay for a couple years. If you get dealt a terrible hand, it doesn't matter, you won't be you anymore.
And while your spouse spends their last 5 mindless years in a Medicaid nursing home, draining the majority of your joint assets, you are wondering how to fund the rest of your future retirement.

mnnice
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Re: Long term care insurance - is it worth it?

Post by mnnice » Thu Jul 06, 2017 7:40 am

@Neilpilot

I'm not sure that is quite true that is the only option. The healthy "community" spouse can by a SPIA after the first goes to skilled care situation and live off the monthly annuity proceeds. That greatly reduces the odds of any legacy but it keeps the healthy spouse from eating cat food :D

If we all had access to the deal you have LTCi would be a more obvious choice. My great aunt paid LTCi premiums for 30 years. When she actually need care she was already broke and went to Medicaid and died about the same time the elimination period ended.

nova1968
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Re: Long term care insurance - is it worth it?

Post by nova1968 » Thu Jul 06, 2017 7:47 am

awval999 wrote:Here's a question to ponder.

Many feel that a reasonable Boglehead can self-pay for a year/two of nursing home care. Let's call it $60k/year, so a couple hundred thousand dollars. For most retirements, that's gonna hurt, for sure, but it will be like a rehabilitation. Break leg, hip, do some PT, see the light at the end of the tunnel to go home.

Many here are worried about tail risk. Alzheimer's, stroke/paralysis, heart attack/brain death, etc where you have no ability to ever go home.

Does anyone take into account in those long tail situations "you" won't even know you're alive? You won't be "you" anymore. Your mind, which is what makes you "you" is gone. We don't let our elderly die on the streets in this country. So you'll have a Medicaid nursing home with legal minimum nursing coverage. And it won't be fancy. But you will have a bed. And food.

Is it really "worth it" to pay for this tail end coverage, with money that can be used for memories now, when you won't even be able to appreciate it. Your mind will be gone. You won't be you.

I conclude, that it's not worth it to pay for this tail end coverage. Be able to self-pay for a couple years. If you get dealt a terrible hand, it doesn't matter, you won't be you anymore.
Each situation is different, I would compare LTC insurance to owning life insurance. If you want to leave assets to heirs it would be a practical option. For a single person with no concern for leaving an inheritance it makes no sense to own LTC.

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mrc
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Re: Long term care insurance - is it worth it?

Post by mrc » Thu Jul 06, 2017 7:53 am

nova1968 wrote: Each situation is different, I would compare LTC insurance to owning life insurance. If you want to leave assets to heirs it would be a practical option. For a single person with no concern for leaving an inheritance it makes no sense to own LTC.
When we were younger, I always thought of my LTC insurance as protecting my spouse from drained family savings after a catastrophic disability. And vice versa. LTC pays for care, portfolio funds help defray other costs including paying for labor that afflicted spouse cannot perform. As we age, and with nearly equal retirement savings, I still consider LTC good for protecting the tail (Alzheimer, stroke, etc). Clearly, the worst we can do to a spouse is not die, but rather to not completely die.
A great challenge of life: Knowing enough to think you're doing it right, but not enough to know you're doing it wrong. — Neil deGrasse Tyson

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Watty
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Re: Long term care insurance - is it worth it?

Post by Watty » Thu Jul 06, 2017 8:00 am

edge wrote:It is not worth it. The reason is because actuaries don't understand the risks well. So they have to make the IRR huge to make up for it.
One other issue that may have caused insurance companies that sold LTC insurance in the past to do so badly is that they may not have planned for such low interest rates.

Even if the actuaries perfectly understood the risks they would need to charge a lot more for a policy when interest rates are so low.

book lover
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Re: Long term care insurance - is it worth it?

Post by book lover » Thu Jul 06, 2017 8:41 am

Many companies selling LTC policies have dropped out due to unexpected losses. When long term interest rates were higher, companies had a better hedge against costs but with interest rates being low that hedge has become much thinner.There was a rule of thumb that said if your assets exceeded 2 million dollars it was better to self insure. With genetic testing now available, it would seem LTC insurance companies are at a disadvantage for adverse selection and would have to adjust rates higher for that contingency. If I were to buy a policy, I would read the fine print carefully because some policies set a higher bar for qualifying for benefits.

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Re: Long term care insurance - is it worth it?

Post by neilpilot » Thu Jul 06, 2017 8:58 am

Watty wrote:
Even if the actuaries perfectly understood the risks they would need to charge a lot more for a policy when interest rates are so low.
Exactly. Also annual inflation was about 50% higher when I purchased my LTC policy. For not too much more than a fixed benefit, my inflation rider applies a 5% annual increase to the policy limit. So a $250k policy I bought in 1999 is currently capped at $600k and will have a $1.5M payout limit when we're 85/86 yo. That can't be cost effective for the insurance company at a fixed $800/yr premium.

pintail07
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Re: Long term care insurance - is it worth it?

Post by pintail07 » Thu Jul 06, 2017 9:25 am

Another problem with older LTC policies they were not medically underwritten as close as they are currently. Many of the prior policies would never be issued with current underwriting.

Jackson12
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Re: Long term care insurance - is it worth it?

Post by Jackson12 » Thu Jul 06, 2017 9:33 am

Two things to consider:

1. At least know the limits of your state's guaranty coverage , which would come into play if your insurance carrier goes under- - as Penn Treaty recently did. Most states cover $300,000 in benefits. Two states cover only $100,000, including Oregon. I think Missouri is the other , .
Here's info on each state's guaranty limits : http://www.penntreaty.com/Portals/0/PDF ... %20LTC.pdf

2. When a company like Penn Treaty goes under, other types of insurers can be assessed huge amounts.

Regulators ( and guaranty associations) in most states classify long-term care insurance as a life insurance product, even though nearly all of the companies that sold LTC polices focused exclusively on selling long-term care insurance).

So that means that many other insurers, even those who never sold LTC care insurance, will have to help pay the Penn Treaty insolvency costs. .

Here’s a partial list of insurers that have included Penn Treaty assessment estimates in recent financial filings:

Aflac Inc.: $10 million to $20 million.

Anthem Inc.: $190 million to $220 million.

Cigna Corp.: $85 million.

Humana Inc.: $20 million.

UnitedHealth Group Inc.: $350 million.

Source: http://www.thinkadvisor.com/2017/03/06/ ... 1499351959


I wonder how many many here have health insurance with any of the above companies? If so, your company could be assessed millions to help cover the cost of Penn Treaty's failure

Even with these pitfalls, we know people who are getting significant benefits from long-term care coverage. In one case, the couple is each insured for $300,000. One is in a nursing home.

They both have State partnership plans.

What this means: dollar for dollar asset protection when applying for Medicaid..

So in essence if one of them needs Medicaid, that person can retain $300,000 of assets and still qualify. I assume the $300,000 would primarily benefit the spouse - or perhaps heirs if the rules allow ( I haven't researched that part) state partnership,plans are also transferable between states , useful if a surviving spouse needs to move closer to relatives in another state..

Jackson12
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Re: Long term care insurance - is it worth it?

Post by Jackson12 » Thu Jul 06, 2017 10:00 am

neilpilot wrote:
Watty wrote:
Even if the actuaries perfectly understood the risks they would need to charge a lot more for a policy when interest rates are so low.
Exactly. Also annual inflation was about 50% higher when I purchased my LTC policy. For not too much more than a fixed benefit, my inflation rider applies a 5% annual increase to the policy limit. So a $250k policy I bought in 1999 is currently capped at $600k and will have a $1.5M payout limit when we're 85/86 yo. That can't be cost effective for the insurance company at a fixed $800/yr premium.
And if your insurer goes under ( according to current state guaranty rules) you won't get anywhere near the $600k , let alone $1.5 million in payouts) Most states guarantee only $300,000 in benefits if an insurer fails.

So far LTC company failures have been uncommon. Penn Treaty was a recent exception.

But the guaranty limits still give us pause. Could we cover $300,000 for one of us? We believe so, especially if we sold our house and moved into a smaller and less expensive space.

Question is: what about medical and related costs before long-term care is needed?

I know I spent a great deal of time driving my parents to and from doctors' appointments and checking on them several times a day before they reached the point of needing more than that.
Last edited by Jackson12 on Thu Jul 06, 2017 10:07 am, edited 1 time in total.

neilpilot
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Re: Long term care insurance - is it worth it?

Post by neilpilot » Thu Jul 06, 2017 10:04 am

Jackson12 wrote:
And if your insurer goes under ( according to current state guaranty rules) you won't get anywhere near the $600k , let alone $1.5 million in payouts) Most states guarantee only $300,000 in benefits if an insurer fails.

So far such failures have been uncommon. Penn Treaty was a recent exception.
Although it is unlikely (Hartford is my underwriter), it's possible. But even a $300k benefit isn't a bad deal considering my annual premium.

edge
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Re: Long term care insurance - is it worth it?

Post by edge » Thu Jul 06, 2017 10:05 am

There is a big misconception in the post quoted below and several others in this thread.

LTC policies do not cover tail risk. They just don't. It is not part of their design anymore and hasn't been for a very long time.
mrc wrote:
nova1968 wrote: Each situation is different, I would compare LTC insurance to owning life insurance. If you want to leave assets to heirs it would be a practical option. For a single person with no concern for leaving an inheritance it makes no sense to own LTC.
When we were younger, I always thought of my LTC insurance as protecting my spouse from drained family savings after a catastrophic disability. And vice versa. LTC pays for care, portfolio funds help defray other costs including paying for labor that afflicted spouse cannot perform. As we age, and with nearly equal retirement savings, I still consider LTC good for protecting the tail (Alzheimer, stroke, etc). Clearly, the worst we can do to a spouse is not die, but rather to not completely die.

Jackson12
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Re: Long term care insurance - is it worth it?

Post by Jackson12 » Thu Jul 06, 2017 10:14 am

edge wrote:There is a big misconception in the post quoted below and several others in this thread.

LTC policies do not cover tail risk. They just don't. It is not part of their design anymore and hasn't been for a very long time.
mrc wrote:
nova1968 wrote: Each situation is different, I would compare LTC insurance to owning life insurance. If you want to leave assets to heirs it would be a practical option. For a single person with no concern for leaving an inheritance it makes no sense to own LTC.
When we were younger, I always thought of my LTC insurance as protecting my spouse from drained family savings after a catastrophic disability. And vice versa. LTC pays for care, portfolio funds help defray other costs including paying for labor that afflicted spouse cannot perform. As we age, and with nearly equal retirement savings, I still consider LTC good for protecting the tail (Alzheimer, stroke, etc). Clearly, the worst we can do to a spouse is not die, but rather to not completely die.
I agree. If your policy covers $300,000 in benefits, that's about 3 years ( at most) in a basic nursing home, semi- private room at $90,000 a year ( and far more in some states). When my aunt had Alzheimer's , she lived far longer than 3 years. When an uncle had a heart attack, was unable to walk more than short distances and needed several hours of care a day, he still lived another 5 years.

Long-term care may help preserve assets but only up to a point - unless it is one of the uncommon and usually older polices with unlimited benefits,

pintail07
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Re: Long term care insurance - is it worth it?

Post by pintail07 » Thu Jul 06, 2017 10:20 am

[quote="edge"]There is a big misconception in the post quoted below and several others in this thread.

LTC policies do not cover tail risk. They just don't. It is not part of their design anymore and hasn't been for a very long time.

Some of the Hybrid policies cover for life and rates are guaranteed.

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Re: Long term care insurance - is it worth it?

Post by neilpilot » Thu Jul 06, 2017 10:25 am

Jackson12 wrote: I agree. If your policy covers $300,000 in benefits, that's about 3 years ( at most) in a basic nursing home, semi- private room at $90,000 a year ( and far more in some states). When my aunt had Alzheimer's , she lived far longer than 3 years. When an uncle had a heart attack, was unable to walk more than short distances and needed several hours of care a day, he still lived another 5 years.

Long-term care may help preserve assets but only up to a point - unless it is one of the uncommon and usually older polices with unlimited benefits,
I also agree. However the AVERAGE annual cost of Memory Care in my state is $46k, and a private room at a top-tier facility runs about $70k in 2016 dollars. So here a $300k policy would last 4-6 years. Maybe that $300k will not cover an extended stay, but it sure beats nothing by a significant amount.

cjcerny
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Re: Long term care insurance - is it worth it?

Post by cjcerny » Thu Jul 06, 2017 10:25 am

I'd say LTC insurance is worth it if you don't have enough money when you retire money to self-insure against an average long term care stay. I think the average cost of long term care is about $250k or so. So, if you are retiring with $3 million, you have self-insured against the typical LTC costs. If you are retiring with $125k, LTC will keep you out of financial trouble if you end up needing it.

edge
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Re: Long term care insurance - is it worth it?

Post by edge » Thu Jul 06, 2017 10:46 am

Umm, not that I have seen. The hybrid policies allow you to drain the life insurance benefit or a portion thereof. They are not unlimited. And since life insurance payout is a certainty vs a potential the insurance co can price better.

Lincoln moneyguard has been the king of the hybrid policies for a long time. It is based on UL chassis.

http://www.lfg.com/ss/Satellite?c=Page& ... roductPage


pintail07 wrote:
edge wrote:There is a big misconception in the post quoted below and several others in this thread.

LTC policies do not cover tail risk. They just don't. It is not part of their design anymore and hasn't been for a very long time.

Some of the Hybrid policies cover for life and rates are guaranteed.

pintail07
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Re: Long term care insurance - is it worth it?

Post by pintail07 » Thu Jul 06, 2017 10:54 am

edge wrote:Umm, not that I have seen. The hybrid policies allow you to drain the life insurance benefit or a portion thereof. They are not unlimited. And since life insurance payout is a certainty vs a potential the insurance co can price better.

pintail07 wrote:
edge wrote:There is a big misconception in the post quoted below and several others in this thread.

LTC policies do not cover tail risk. They just don't. It is not part of their design anymore and hasn't been for a very long time.

Some of the Hybrid policies cover for life and rates are guaranteed.
One company does cover lifetime benefits, it is a rider to the original policy. Typically if under 70 and in fair health the life annuity is the best deal, over 70 or with health issues the annuity hybrid works better. The net cost of these policies is the lost opportunity the deposit could have learned. I am meeting with a wealthy attorney tomorrow that read about these policies in the Law Review. Not for all, but for some a sfer bet than traditional LTC.

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Re: Long term care insurance - is it worth it?

Post by neilpilot » Thu Jul 06, 2017 10:57 am

pintail07 wrote:
I am meeting with a wealthy attorney tomorrow that read about these policies in the Law Review.
Do you plan to make this attorney even more wealthy :)

pintail07
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Re: Long term care insurance - is it worth it?

Post by pintail07 » Thu Jul 06, 2017 11:09 am

neilpilot wrote:
pintail07 wrote:
I am meeting with a wealthy attorney tomorrow that read about these policies in the Law Review.
Do you plan to make this attorney even more wealthy :)
Perhaps if he understands the potential risk of a long LTC claim and the minimal cost of covering that risk. Why do you ask? Odd question.

neilpilot
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Re: Long term care insurance - is it worth it?

Post by neilpilot » Thu Jul 06, 2017 11:11 am

pintail07 wrote:
neilpilot wrote:
pintail07 wrote:
I am meeting with a wealthy attorney tomorrow that read about these policies in the Law Review.
Do you plan to make this attorney even more wealthy :)
Perhaps if he understands the potential risk of a long LTC claim and the minimal cost of covering that risk. Why do you ask? Odd question.
Just a joke.....I think you meant "wealth" attorney

Jackson12
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Re: Long term care insurance - is it worth it?

Post by Jackson12 » Thu Jul 06, 2017 11:12 am

cjcerny wrote:I'd say LTC insurance is worth it if you don't have enough money when you retire money to self-insure against an average long term care stay. I think the average cost of long term care is about $250k or so. So, if you are retiring with $3 million, you have self-insured against the typical LTC costs. If you are retiring with $125k, LTC will keep you out of financial trouble if you end up needing it.

If you have long- term insurance that meets state partnership plan guidelines, you've not only self insured against significant LTC costs but protected your assets up to the policy limits, while still meeting Medicaid eligibility guidelines : https://www.aaltci.org/subpages/resourc ... pplans.pdf

I am not an insurance agent and ambivalent about long- term care insurance. Premium hikes concern me. But so does the cost of long- term care.

edge
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Re: Long term care insurance - is it worth it?

Post by edge » Thu Jul 06, 2017 2:22 pm

The annuity lifetime coverage is a redirect of an already lifetime income stream that is funded by a large initial premium. Be careful of the shell games that can be played with that.

It could be better to wait till you get sick and then get a medically underwritten annuity with higher payouts.
pintail07 wrote:
edge wrote:Umm, not that I have seen. The hybrid policies allow you to drain the life insurance benefit or a portion thereof. They are not unlimited. And since life insurance payout is a certainty vs a potential the insurance co can price better.

pintail07 wrote:
edge wrote:There is a big misconception in the post quoted below and several others in this thread.

LTC policies do not cover tail risk. They just don't. It is not part of their design anymore and hasn't been for a very long time.

Some of the Hybrid policies cover for life and rates are guaranteed.
One company does cover lifetime benefits, it is a rider to the original policy. Typically if under 70 and in fair health the life annuity is the best deal, over 70 or with health issues the annuity hybrid works better. The net cost of these policies is the lost opportunity the deposit could have learned. I am meeting with a wealthy attorney tomorrow that read about these policies in the Law Review. Not for all, but for some a sfer bet than traditional LTC.

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mrc
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Re: Long term care insurance - is it worth it?

Post by mrc » Thu Jul 06, 2017 2:37 pm

Jackson12 wrote:
edge wrote:There is a big misconception in the post quoted below and several others in this thread.

LTC policies do not cover tail risk. They just don't. It is not part of their design anymore and hasn't been for a very long time.
I agree. If your policy covers $300,000 in benefits, that's about 3 years ( at most) in a basic nursing home, semi- private room at $90,000 a year ( and far more in some states). When my aunt had Alzheimer's , she lived far longer than 3 years. When an uncle had a heart attack, was unable to walk more than short distances and needed several hours of care a day, he still lived another 5 years.

Long-term care may help preserve assets but only up to a point - unless it is one of the uncommon and usually older polices with unlimited benefits,
Effective date 2/8/03
Benefit Lifetime
Inflation protection 5% compounded
Discounts Couples
Premium waiver Yes
Current benefit $282/day
A great challenge of life: Knowing enough to think you're doing it right, but not enough to know you're doing it wrong. — Neil deGrasse Tyson

edge
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Re: Long term care insurance - is it worth it?

Post by edge » Thu Jul 06, 2017 2:40 pm

Yes, policies like this one are no longer sold. They are also why there are no majors left selling LTC and why Penn Treaty went under.

Hold onto that as long as you can. Esp if there is a history of age related cognitive issues in your family history.

In fact, most companies e.g. Transamerica have stopped selling 5% inflation products also.
mrc wrote:
Jackson12 wrote:
edge wrote:There is a big misconception in the post quoted below and several others in this thread.

LTC policies do not cover tail risk. They just don't. It is not part of their design anymore and hasn't been for a very long time.
I agree. If your policy covers $300,000 in benefits, that's about 3 years ( at most) in a basic nursing home, semi- private room at $90,000 a year ( and far more in some states). When my aunt had Alzheimer's , she lived far longer than 3 years. When an uncle had a heart attack, was unable to walk more than short distances and needed several hours of care a day, he still lived another 5 years.

Long-term care may help preserve assets but only up to a point - unless it is one of the uncommon and usually older polices with unlimited benefits,
Effective date 2/8/03
Benefit Lifetime
Inflation protection 5% compounded
Discounts Couples
Premium waiver Yes
Current benefit $282/day

pintail07
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Re: Long term care insurance - is it worth it?

Post by pintail07 » Thu Jul 06, 2017 2:45 pm

The annuity lifetime coverage is a redirect of an already lifetime income stream that is funded by a large initial premium. Be careful of the shell games that can be played with that.
What kind of shell game could be played when benefit, benefit period and premium are contractually guaranteed. Where is their wiggle room?

edge
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Re: Long term care insurance - is it worth it?

Post by edge » Thu Jul 06, 2017 4:28 pm

The contract is whatever it is. They will abide. The shell game is in the annuity premium they charged you at the start. As mentioned you would probably have been better served with first getting an annuity w/o rider and then later when you get ill and look towards LTC, an annuity that pays a higher rate based on your new mortality expectation.

pintail07
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Re: Long term care insurance - is it worth it?

Post by pintail07 » Thu Jul 06, 2017 5:19 pm

edge wrote:The contract is whatever it is. They will abide. The shell game is in the annuity premium they charged you at the start. As mentioned you would probably have been better served with first getting an annuity w/o rider and then later when you get ill and look towards LTC, an annuity that pays a higher rate based on your new mortality expectation.
Do you have any sample figures using your plan. It seems to me you are still using your own money, no leverage.

Limoncello402
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Re: Long term care insurance - is it worth it?

Post by Limoncello402 » Thu Jul 06, 2017 5:44 pm

I am single, have no need to leave money for anyone, and am comfortable for now keeping my LTC policy. For one thing it covers care if I, tomorrow, fall and break something and need care. I have no one--no relatives--who could care for me in this way and would otherwise have to pay out of pocket.
At the point I enter a type A facility, or at the point when I have no worries about affording care, I will drop the policy. Insurance is after all something you hope you don't have to ever use. Myy policy is also one where I'm not merely "throwing away" the premiums but they are there forever for me to use if I need LTC even if I drop the policy.
I looked into some of the new hybrid policies and so no advantage in them over the traditional LTC policies.
I hate insurance in general. I'm not thrilled about LTC but I'm also not thrilled about not having it.

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Re: Long term care insurance - is it worth it?

Post by protagonist » Thu Jul 06, 2017 6:02 pm

A quick Google search yielded this from a few sources....I don't know how useful or accurate it is but you can fact-check:

Average Length of Stays (Nursing Homes)
5 years or more 12.0%
3 to 5 years 12.0%
1 to 3 years 30.3%
6 to 12 months 14.2%
3 to 6 months 10.0%
less than 3 months 20.0%
Average Length Of Stay in Years
Female 2.6 years
Male 2.3 years
Married 1.6 years
Single / Never Married 3.8 years
Widowed 2.3 years
Divorced / Separated 2.7 years"
"In 2012, there were about 1.2 million nursing home residents over 65 years old in the United States. Of these, 18 percent were 65 to 74 years old, 32 percent were between 75 and 84, 41 percent were between 85 and 94, and 9 percent were 95 or older. "
"According to the American Association for Long-Term Care Insurance, in 2012 64 percent of long-term care claims were made by those over age 80 and only 9 percent were from those in their 60s. Meanwhile, according to the association's figures for 2008, 44 percent nursing home residents stay less than a year, 30 percent stay between one and three years, and only 24 percent spend more than three years in a facility. "
"So, what do all of these statistics mean in terms of your planning? First, the odds are that you will not need care until you are at least 80 or 85. Second, if you do need nursing home care, there's a 44 percent chance it will last less than a year (either because you will return home after a period of rehabilitation or you will not survive more than a year) and only a one-in-four chance that your stay will last three or more years. Of course, if it does, your costs will become prohibitive. However, since only 40 percent of seniors spend any time in a nursing home and only a quarter of those stay longer than three years, this means that statistically you have only a one in 10 chance of needing more than three years of nursing home care."
SO, you might consider your own situation....your overall health, your fitness, your family situation, etc. And consider how much your premiums would add up to from now until , say, age 80 or 85 if you live that long (also taking into account your probability of living that long). Balance all of that with the cost of long term care for given periods of time and your perception of your chance of needing it, given all of the info above. Also consider your risk tolerance, what you can afford, and your options. From there you may be able to come up with a reasonable assessment as to whether the insurance is worth it to you.

If I had to guess, I would think for most people who are not unusually risk-averse the insurance would not be a good investment, but I did not crunch the numbers . If you are considering buying it, determine costs in various scenarios and crunch some numbers.

Don't just buy it out of fear.

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Re: Long term care insurance - is it worth it?

Post by Alan S. » Thu Jul 06, 2017 9:01 pm

Keep in mind that the LTC marketplace has been deteriorating for years, and could currently be characterized as dysfunctional. Further, the prospects for improvement are nowhere in sight.

Therefore, the odds that you will receive what you are purchasing at the price of your initial premiums are therefore not good, and since there is a subjective element to claims eligibility when you are in a limited position to contest denials, this all adds up to a very narrow window where a purchase should be considered. And if you do purchase coverage, do not shoot for full coverage of the worst case scenario. Target the limit for the average case at most.

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TD2626
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Re: Long term care insurance - is it worth it?

Post by TD2626 » Thu Jul 06, 2017 9:16 pm

nova1968 wrote:
awval999 wrote:Here's a question to ponder.

Many feel that a reasonable Boglehead can self-pay for a year/two of nursing home care. Let's call it $60k/year, so a couple hundred thousand dollars. For most retirements, that's gonna hurt, for sure, but it will be like a rehabilitation. Break leg, hip, do some PT, see the light at the end of the tunnel to go home.

Many here are worried about tail risk. Alzheimer's, stroke/paralysis, heart attack/brain death, etc where you have no ability to ever go home.

Does anyone take into account in those long tail situations "you" won't even know you're alive? You won't be "you" anymore. Your mind, which is what makes you "you" is gone. We don't let our elderly die on the streets in this country. So you'll have a Medicaid nursing home with legal minimum nursing coverage. And it won't be fancy. But you will have a bed. And food.

Is it really "worth it" to pay for this tail end coverage, with money that can be used for memories now, when you won't even be able to appreciate it. Your mind will be gone. You won't be you.

I conclude, that it's not worth it to pay for this tail end coverage. Be able to self-pay for a couple years. If you get dealt a terrible hand, it doesn't matter, you won't be you anymore.
Each situation is different, I would compare LTC insurance to owning life insurance. If you want to leave assets to heirs it would be a practical option. For a single person with no concern for leaving an inheritance it makes no sense to own LTC.
Both of you make good points. The decision on what care is desired is personal, and if someone values the peace of mind of knowing that should they get Alzheimers, they will have top-quality (not legal minimum) care, then LTCI may be a good option.

Also, the medicaid route involves spend-down to nearly the last penny. If leaving money for future generations is a strong consideration for someone, LTCI may be a good choice even if they would otherwise be fine with medicaid level care.

Again, someone with no heirs who is satisfied with medicaid level quality of care would have no need for LTCI. Someone who wants high quality care and wants to protect a substantial portfolio from LTC expenses for the benefit of heirs would want to strongly consider LTCI.

TravelforFun
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Re: Long term care insurance - is it worth it?

Post by TravelforFun » Thu Jul 06, 2017 9:28 pm

Alan S. wrote:Keep in mind that the LTC marketplace has been deteriorating for years, and could currently be characterized as dysfunctional. Further, the prospects for improvement are nowhere in sight.

Therefore, the odds that you will receive what you are purchasing at the price of your initial premiums are therefore not good, and since there is a subjective element to claims eligibility when you are in a limited position to contest denials, this all adds up to a very narrow window where a purchase should be considered. And if you do purchase coverage, do not shoot for full coverage of the worst case scenario. Target the limit for the average case at most.
Is this your opinion or can you point to reports or studies?

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TD2626
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Re: Long term care insurance - is it worth it?

Post by TD2626 » Thu Jul 06, 2017 9:38 pm

itstoomuch wrote:+1@TD2626.
It's all about risk management :oops:
Thank you.

It's all too often that people simplysay "the premiums are too high" or "the cost of a nursing home is staggering".

Buying LTCI is simply more nuanced than that. One must look at the both return (in this case, negative return - i.e. cost) and risk at the same time.

The real question is "Does the reduction in returns due to the cost of an insurer's overhead/profit margin outweigh the benefits of reduced LTC-related expenditure risks to the portfolio?". A classic risk-return tradeoff.
protagonist wrote: SO, you might consider your own situation....your overall health, your fitness, your family situation, etc. And consider how much your premiums would add up to from now until , say, age 80 or 85 if you live that long (also taking into account your probability of living that long). Balance all of that with the cost of long term care for given periods of time and your perception of your chance of needing it, given all of the info above. Also consider your risk tolerance, what you can afford, and your options. From there you may be able to come up with a reasonable assessment as to whether the insurance is worth it to you.

If I had to guess, I would think for most people who are not unusually risk-averse the insurance would not be a good investment, but I did not crunch the numbers . If you are considering buying it, determine costs in various scenarios and crunch some numbers.

Don't just buy it out of fear.
When you say crunch the numbers - did you have any ideas on how?

The rigorous way to go about this would be to write a Monte Carlo simulation that takes into account actuarial data, the distribution of possible investment returns, data on the distribution of possible lengths of stays in nursing homes, and the costs and benefits of several different levels of potential long term care insurance options (ranging from buying no insurance, to buying a little, to buying a lot). I have previously done this, but it was very difficult and required a lot of coding and debugging.

Everyone has to do their due diligence. Sadly, in this case, doing due diligence is especially difficult. Running Monte Carlo simulations basically involves simulating the death of you or a loved one several million times. Reading an LTCI contract involves learning about the definition of such uncomfortable things as "Standby Assistance" vs "Hands-On Assistance" vs "Substantial Assistance" - when the assistance refers to help with basic activities like "Eating", "Bathing", "Toileting", and "Transferring". The diseases that LTCI covers are some of the most dreaded -- the kind where you don't know who you are for year after year after year. And the number of dollars at stake are also staggering. Paying, say, $4000 a year in premiums for 25 years could add up to $100,000 in premiums - but the cost of staying for 10 years in a nursing home (which some end up needing) could be over $1,000,000. Add it all together and it makes for a really difficult problem to solve rigorously. It's hard, and scary, but we all need to do due diligence.

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TD2626
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Re: Long term care insurance - is it worth it?

Post by TD2626 » Thu Jul 06, 2017 9:58 pm

TravelforFun wrote:
Alan S. wrote:Keep in mind that the LTC marketplace has been deteriorating for years, and could currently be characterized as dysfunctional. Further, the prospects for improvement are nowhere in sight.

Therefore, the odds that you will receive what you are purchasing at the price of your initial premiums are therefore not good, and since there is a subjective element to claims eligibility when you are in a limited position to contest denials, this all adds up to a very narrow window where a purchase should be considered. And if you do purchase coverage, do not shoot for full coverage of the worst case scenario. Target the limit for the average case at most.
Is this your opinion or can you point to reports or studies?
Respectfully, I feel that Alan S.'s position is overly pessimistic. While I agree that the market is currently less than stellar, I feel that to first approximation, you will get what you buy. Yes, premiums may go up somewhat, but they already have a lot and are much more fairly priced.

Also, I feel that targeting the average case alone is dangerous. Yes, targeting the worst possible case is not reasonable. But targeting a fairly bad worst case (needing round-the-clock care, 24 hrs/day * $20/hr *365 days/year * 10 years) = $1,752,000 seems to be a reasonable target in my opinion. Remember that you don't have to sail through your worst case target - the target worst case is the one in which you barely, barely squeak through.

In terms of good studies, here's one: http://www.naic.org/documents/cipr_curr ... urance.pdf. I've read it and it's very informative. Yes, it's a 181 page long study, but there's a lot of graphs to make it go faster.

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Re: Long term care insurance - is it worth it?

Post by bsteiner » Thu Jul 06, 2017 10:12 pm

Alan S. wrote:... if you do purchase coverage, do not shoot for full coverage of the worst case scenario. Target the limit for the average case at most.
Insurance for the average case is more like prepaying an expense than insurance. The concern is if you're the one who needs care for a very long time. There should be policies that pay unlimited benefits, but with a 2 or 3 year waiting period.

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Re: Long term care insurance - is it worth it?

Post by Index Fan » Thu Jul 06, 2017 10:49 pm

One factor not often mentioned is- what if the insurance company disputes your claim?

There are horror stories out there online if you care to look for them. Think of how much hassle health insurers cause through outright denial of claims and one has to jump through hoops to get them to honor their agreements. Now, imagine yourself at an advanced age and of unsound mind and the LTC insurer disputes your claim. Who will fight for you?

I've seen enough insurance company BS to have little faith in them.
"Optimum est pati quod emendare non possis." | -Seneca

Rupert
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Re: Long term care insurance - is it worth it?

Post by Rupert » Fri Jul 07, 2017 8:59 am

Index Fan wrote:One factor not often mentioned is- what if the insurance company disputes your claim?

There are horror stories out there online if you care to look for them. Think of how much hassle health insurers cause through outright denial of claims and one has to jump through hoops to get them to honor their agreements. Now, imagine yourself at an advanced age and of unsound mind and the LTC insurer disputes your claim. Who will fight for you?

I've seen enough insurance company BS to have little faith in them.
Read this horrifying story in the New York Times today: https://www.nytimes.com/2017/07/07/your ... ngine&_r=0

Then think about what the proposed changes to Medicaid in the healthcare legislation pending before Congress might mean for all of us. Even people like the woman in the story who worked hard, planned, saved, bought insurance, and had sophisticated children to help her end up destitute at the end. I'm not so much concerned for my own care as for my mother's in ten years or so. Her care might bankrupt me if Medicaid is no longer an option.

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Re: Long term care insurance - is it worth it?

Post by jimishooch » Fri Jul 07, 2017 10:36 am

pintail07 wrote:
edge wrote:Umm, not that I have seen. The hybrid policies allow you to drain the life insurance benefit or a portion thereof. They are not unlimited. And since life insurance payout is a certainty vs a potential the insurance co can price better.

pintail07 wrote:
edge wrote:There is a big misconception in the post quoted below and several others in this thread.

LTC policies do not cover tail risk. They just don't. It is not part of their design anymore and hasn't been for a very long time.

Some of the Hybrid policies cover for life and rates are guaranteed.
One company does cover lifetime benefits, it is a rider to the original policy. Typically if under 70 and in fair health the life annuity is the best deal, over 70 or with health issues the annuity hybrid works better. The net cost of these policies is the lost opportunity the deposit could have learned. I am meeting with a wealthy attorney tomorrow that read about these policies in the Law Review. Not for all, but for some a sfer bet than traditional LTC.
with rider lifetime benefits...

https://www.buaweb.com/cms/resource_lib ... ochure.pdf

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