An argument against self-insuring for long-term care

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marcopolo
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Re: An argument against self-insuring for long-term care

Post by marcopolo »

WoW2012 wrote: Tue Jul 31, 2018 1:06 pm Assume I'm a salesman of LTCi.
Please refute my arguments in favor of LTCi.
As has been mentioned before, your use of percentage of portfolio to make the cost seem small is a bit absurd. What does the size of one's portfolio have to do with whether a product is a good value? you say it is only .4% (of a $1M portfolio) to get $500k of coverage. If i have a $4M portfolio, now I have to only pay .1% of my portfolio to get the same $500k of coverage, is the product all of a sudden a 4x better deal for me. It is a common sales tactic used to obfuscate the true costs.

LTCi is a poorly designed product for my situation. I use insurance to cover losses that i can not relatively easily absorb. Limited coverage policies with short elimination periods are expensive for the coverage they provide, precisely because of their design.
Once in a while you get shown the light, in the strangest of places if you look at it right.
pintail07
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Re: An argument against self-insuring for long-term care

Post by pintail07 »

As an insurance broker for over 30 years I can't think of any of my clients with assets over 5,000,000 that don't have LTCi. The small downside of the premiums, inconsequential, is far outweighed by the upside of a claim that last over 6 months. I wrote many clients in the 90's that have experienced large rate increases, and none have dropped the policy, they still view it as a good risk management tool and they have assets to cover long term claims but why would they? Assuming the risks is great as long as there are no claims, otherwise it can be a poor decision.
WoW2012
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

marcopolo wrote: Tue Jul 31, 2018 1:31 pm
WoW2012 wrote: Tue Jul 31, 2018 1:06 pm Assume I'm a salesman of LTCi.
Please refute my arguments in favor of LTCi.
As has been mentioned before, your use of percentage of portfolio to make the cost seem small is a bit absurd. What does the size of one's portfolio have to do with whether a product is a good value? you say it is only .4% (of a $1M portfolio) to get $500k of coverage. If i have a $4M portfolio, now I have to only pay .1% of my portfolio to get the same $500k of coverage, is the product all of a sudden a 4x better deal for me. It is a common sales tactic used to obfuscate the true costs.

LTCi is a poorly designed product for my situation. I use insurance to cover losses that i can not relatively easily absorb. Limited coverage policies with short elimination periods are expensive for the coverage they provide, precisely because of their design.

There are unlimited policies.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
WoW2012
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

marcopolo wrote: Tue Jul 31, 2018 1:31 pm
WoW2012 wrote: Tue Jul 31, 2018 1:06 pm Assume I'm a salesman of LTCi.
Please refute my arguments in favor of LTCi.
As has been mentioned before, your use of percentage of portfolio to make the cost seem small is a bit absurd. What does the size of one's portfolio have to do with whether a product is a good value? you say it is only .4% (of a $1M portfolio) to get $500k of coverage. If i have a $4M portfolio, now I have to only pay .1% of my portfolio to get the same $500k of coverage, is the product all of a sudden a 4x better deal for me. It is a common sales tactic used to obfuscate the true costs.

LTCi is a poorly designed product for my situation. I use insurance to cover losses that i can not relatively easily absorb. Limited coverage policies with short elimination periods are expensive for the coverage they provide, precisely because of their design.
I haven't obfuscated the costs.
$4,000 is .1% of a $4,000,000 portfolio.
If you think that's not a good value, you're thinking like someone in the middle-class.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
pintail07
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Re: An argument against self-insuring for long-term care

Post by pintail07 »

As has been mentioned before, your use of percentage of portfolio to make the cost seem small is a bit absurd. What does the size of one's portfolio have to do with whether a product is a good value? you say it is only .4% (of a $1M portfolio) to get $500k of coverage. If i have a $4M portfolio, now I have to only pay .1% of my portfolio to get the same $500k of coverage, is the product all of a sudden a 4x better deal for me. It is a common sales tactic used to obfuscate the true costs.
Size of the portfolio does make a difference because the larger the portfolio the less impact of the premium. Using your example your it would a smaller impact on the portfolio. What are you referring to as the obfuscated true costs?
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TomatoTomahto
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Re: An argument against self-insuring for long-term care

Post by TomatoTomahto »

pintail07 wrote: Tue Jul 31, 2018 1:37 pm As an insurance broker for over 30 years I can't think of any of my clients with assets over 5,000,000 that don't have LTCi. The small downside of the premiums, inconsequential, is far outweighed by the upside of a claim that last over 6 months. I wrote many clients in the 90's that have experienced large rate increases, and none have dropped the policy, they still view it as a good risk management tool and they have assets to cover long term claims but why would they? Assuming the risks is great as long as there are no claims, otherwise it can be a poor decision.
If I were your client, your first sentence would not be accurate. But, I’m not your client, so perhaps.

I have no idea why anyone with significant assets would buy LTCi.
I get the FI part but not the RE part of FIRE.
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willthrill81
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

pintail07 wrote: Tue Jul 31, 2018 1:37 pm As an insurance broker for over 30 years I can't think of any of my clients with assets over 5,000,000 that don't have LTCi. The small downside of the premiums, inconsequential, is far outweighed by the upside of a claim that last over 6 months. I wrote many clients in the 90's that have experienced large rate increases, and none have dropped the policy, they still view it as a good risk management tool and they have assets to cover long term claims but why would they? Assuming the risks is great as long as there are no claims, otherwise it can be a poor decision.
A person with over $5 million has no need for LTC. They may desire some protection, but that's completely separate from whether they truly need it. A $5 million portfolio would easily yield an income enough to pay for both spouses to have nursing home care for decades.

Risks that can be absorbed should be. Insurance is for protecting risks that you cannot afford to self-insure.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
pintail07
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Re: An argument against self-insuring for long-term care

Post by pintail07 »

A person with over $5 million has no need for LTC. They may desire some protection, but that's completely separate from whether they truly need it. A $5 million portfolio would easily yield an income enough to pay for both spouses to have nursing home care for decades.

Risks that can be absorbed should be. Insurance is for protecting risks that you cannot afford to self-insure.
Of course that is your opinion, they and their advisors view it differently.
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willthrill81
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

pintail07 wrote: Tue Jul 31, 2018 1:57 pm
A person with over $5 million has no need for LTC. They may desire some protection, but that's completely separate from whether they truly need it. A $5 million portfolio would easily yield an income enough to pay for both spouses to have nursing home care for decades.

Risks that can be absorbed should be. Insurance is for protecting risks that you cannot afford to self-insure.
Of course that is your opinion, they and their advisors view it differently.
So you're saying that every potential risk that can be insured should be? Insurance policies are, on average, a losing proposition for the insured. That is a mathematical fact. Therefore, if a risk can be self-insured, the mathematically optimal strategy is to do so.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
WoW2012
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

willthrill81 wrote: Tue Jul 31, 2018 1:55 pm

Risks that can be absorbed should be. Insurance is for protecting risks that you cannot afford to self-insure.

Do you have a car that does not have a note on it?
Do you have collision insurance on the car?
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
pintail07
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Re: An argument against self-insuring for long-term care

Post by pintail07 »

So you're saying that every potential risk that can be insured should be? Insurance policies are, on average, a losing proposition for the insured. That is a mathematical fact. Therefore, if a risk can be self-insured, the mathematically optimal strategy is to do so.
I never said any such thing. Regarding the risk of a long term care event many wealthy folks consider the relatively low cost of the premium as a good value. You have your opinion other may and do differ, it's all good.
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

willthrill81 wrote: Tue Jul 31, 2018 2:02 pm

So you're saying that every potential risk that can be insured should be? Insurance policies are, on average, a losing proposition for the insured. That is a mathematical fact. Therefore, if a risk can be self-insured, the mathematically optimal strategy is to do so.
Then why do you have collision insurance on your car?
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

marcopolo wrote: Tue Jul 31, 2018 1:31 pm I use insurance to cover losses that i can not relatively easily absorb.

Do you have collision insurance on your vehicle?
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

pintail07 wrote: Tue Jul 31, 2018 2:07 pm
So you're saying that every potential risk that can be insured should be? Insurance policies are, on average, a losing proposition for the insured. That is a mathematical fact. Therefore, if a risk can be self-insured, the mathematically optimal strategy is to do so.
I never said any such thing. Regarding the risk of a long term care event many wealthy folks consider the relatively low cost of the premium as a good value. You have your opinion other may and do differ, it's all good.
Again, if they have a $5 million portfolio, then they are making a mathematically sub-optimal decision, assuming that maximizing their assets over time is their goal. The "value" they are receiving then must be emotional. That's not to be discounted, but that's a completely separate decision criterion.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

WoW2012 wrote: Tue Jul 31, 2018 2:07 pm
willthrill81 wrote: Tue Jul 31, 2018 2:02 pm

So you're saying that every potential risk that can be insured should be? Insurance policies are, on average, a losing proposition for the insured. That is a mathematical fact. Therefore, if a risk can be self-insured, the mathematically optimal strategy is to do so.
Then why do you have collision insurance on your car?
Because we have a note on it and are required to. Once it's paid off, we'll remove the collision coverage because we can self-insure that risk. That is the mathematically optimal decision to make.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: An argument against self-insuring for long-term care

Post by pintail07 »

Again, if they have a $5 million portfolio, then they are making a mathematically sub-optimal decision, assuming that maximizing their assets over time is their goal. The "value" they are receiving then must be emotional. That's not to be discounted, but that's a completely separate decision criterion.
If maximizing assets over time is their goal, a long term care event sure could impact that goal don't you think. My experience is that most wealthy folks didn't become wealthy by making emotional decisions. Again yours is just opinion.
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

willthrill81 wrote: Tue Jul 31, 2018 2:10 pm
Because we have a note on it and are required to. Once it's paid off, we'll remove the collision coverage because we can self-insure that risk. That is the mathematically optimal decision to make.

Do most bogleheads think collision insurance is a waste of money?
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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willthrill81
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

WoW2012 wrote: Tue Jul 31, 2018 2:16 pm
willthrill81 wrote: Tue Jul 31, 2018 2:10 pm
Because we have a note on it and are required to. Once it's paid off, we'll remove the collision coverage because we can self-insure that risk. That is the mathematically optimal decision to make.

Do most bogleheads think collision insurance is a waste of money?
What they think about it is irrelevant from a mathematical standpoint. The fact is that insurance is, on average, a losing proposition for the insured. That cannot be disproven. People may get emotional value from insurance, but it's still mathematically sub-optimal compared to self-insuring.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
WoW2012
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

willthrill81 wrote: Tue Jul 31, 2018 2:18 pm
WoW2012 wrote: Tue Jul 31, 2018 2:16 pm
willthrill81 wrote: Tue Jul 31, 2018 2:10 pm
Because we have a note on it and are required to. Once it's paid off, we'll remove the collision coverage because we can self-insure that risk. That is the mathematically optimal decision to make.

Do most bogleheads think collision insurance is a waste of money?
What they think about it is irrelevant from a mathematical standpoint. The fact is that insurance is, on average, a losing proposition for the insured. That cannot be disproven. People may get emotional value from insurance, but it's still mathematically sub-optimal compared to self-insuring.
Have you always had such a negative view of collision insurance?
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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willthrill81
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

pintail07 wrote: Tue Jul 31, 2018 2:14 pm
Again, if they have a $5 million portfolio, then they are making a mathematically sub-optimal decision, assuming that maximizing their assets over time is their goal. The "value" they are receiving then must be emotional. That's not to be discounted, but that's a completely separate decision criterion.
If maximizing assets over time is their goal, a long term care event sure could impact that goal don't you think. My experience is that most wealthy folks didn't become wealthy by making emotional decisions. Again yours is just opinion.
I am not basing my statement on opinion but a mathematical fact. Insurance companies would all go bankrupt if they didn't charge more to insure a risk than the actuarial value of that risk (which is why most companies who sold LTCi 20 years ago no longer do today). Yes, LTC can impact one's goals. But if one is easily capable of paying for LTC, which is absolutely the case for someone with a $5 million portfolio, then they are mathematically worse off by buying insurance.

Can you refute that, beyond the "that's your opinion" statement?
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: An argument against self-insuring for long-term care

Post by marcopolo »

WoW2012 wrote: Tue Jul 31, 2018 2:09 pm
marcopolo wrote: Tue Jul 31, 2018 1:31 pm I use insurance to cover losses that i can not relatively easily absorb.

Do you have collision insurance on your vehicle?
I don't. for the same reason.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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willthrill81
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

WoW2012 wrote: Tue Jul 31, 2018 2:21 pm
willthrill81 wrote: Tue Jul 31, 2018 2:18 pm
WoW2012 wrote: Tue Jul 31, 2018 2:16 pm
willthrill81 wrote: Tue Jul 31, 2018 2:10 pm
Because we have a note on it and are required to. Once it's paid off, we'll remove the collision coverage because we can self-insure that risk. That is the mathematically optimal decision to make.

Do most bogleheads think collision insurance is a waste of money?
What they think about it is irrelevant from a mathematical standpoint. The fact is that insurance is, on average, a losing proposition for the insured. That cannot be disproven. People may get emotional value from insurance, but it's still mathematically sub-optimal compared to self-insuring.
Have you always had such a negative view of collision insurance?
Again, it's not a "view" or an "opinion." It's math.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: An argument against self-insuring for long-term care

Post by GAAP »

WoW2012 wrote: Tue Jul 31, 2018 2:16 pm
willthrill81 wrote: Tue Jul 31, 2018 2:10 pm
Because we have a note on it and are required to. Once it's paid off, we'll remove the collision coverage because we can self-insure that risk. That is the mathematically optimal decision to make.

Do most bogleheads think collision insurance is a waste of money?
I'm not sure most bogleheads agree about much of anything beyond some very high level concepts...

Whether or not vehicle collision insurance is a wast of money depends on the vehicle and the individual situation. It makes more sense on a new vehicle, less on an old one. It makes more sense the less disposable income you have and less sense the more disposable income you have. Apparently, Will can afford to self-insure -- and for him, it doesn't make sense not to do so.
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

willthrill81 wrote: Tue Jul 31, 2018 2:22 pm

I am not basing my statement on opinion but a mathematical fact. Insurance companies would all go bankrupt if they didn't charge more to insure a risk than the actuarial value of that risk (which is why most companies who sold LTCi 20 years ago no longer do today). Yes, LTC can impact one's goals. But if one is easily capable of paying for LTC, which is absolutely the case for someone with a $5 million portfolio, then they are mathematically worse off by buying insurance.

Can you refute that, beyond the "that's your opinion" statement?
Your reasoning is how someone in the middle-class looks at risk.
HNW people look at it differently.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: An argument against self-insuring for long-term care

Post by pintail07 »

People may get emotional value from insurance, but it's still mathematically sub-optimal compared to self-insuring.
One doesn't self insure, they assume the risk, big difference. Again, assuming the risk is a smart choice if one never makes a claim, poor choice if one does. One may have the assets to cover the claim but it would have been a sub optimal choice, don't you agree?
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

WoW2012 wrote: Tue Jul 31, 2018 2:25 pm
willthrill81 wrote: Tue Jul 31, 2018 2:22 pm

I am not basing my statement on opinion but a mathematical fact. Insurance companies would all go bankrupt if they didn't charge more to insure a risk than the actuarial value of that risk (which is why most companies who sold LTCi 20 years ago no longer do today). Yes, LTC can impact one's goals. But if one is easily capable of paying for LTC, which is absolutely the case for someone with a $5 million portfolio, then they are mathematically worse off by buying insurance.

Can you refute that, beyond the "that's your opinion" statement?
Your reasoning is how someone in the middle-class looks at risk.
HNW people look at it differently.
So now you're resorting to ad hominem attacks because you cannot refute my logic?
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: An argument against self-insuring for long-term care

Post by Lastrun »

WoW2012 wrote: Tue Jul 31, 2018 1:42 pm There are unlimited policies.
Hmmm. I am certain you will say they exist and quote some providers. BUT. . . . . recently, we had a prenuptial agreement scenario where the attorney on the other side negotiated for unlimited long-term care for the spouse to be. Honestly, cost was not an issue my client is ultra HNW and was willing to have the coverage for the new spouse and for his children. In searching with three separate reputable agents in the D.C. metro area who specialize in long-term care insurance they each told me such policies do not exist in a traditional policy.
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

pintail07 wrote: Tue Jul 31, 2018 2:26 pmOne doesn't self insure, they assume the risk, big difference. Again, assuming the risk is a smart choice if one never makes a claim, poor choice if one does. One may have the assets to cover the claim but it would have been a sub optimal choice, don't you agree?
Now you're claiming that there's no such thing as self-insuring?

Of course if one has a priori knowledge of the future, one can determine whether to buy insurance. But I don't have a working crystal ball, and neither does anyone else. On average, the insurance company comes out ahead or else they go bankrupt. As an insurance broker, you should understand this very well.
Last edited by willthrill81 on Tue Jul 31, 2018 2:36 pm, edited 1 time in total.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: An argument against self-insuring for long-term care

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Hmmm. I am certain you will say they exist and quote some providers. BUT. . . . . recently, we had a prenuptial agreement scenario where the attorney on the other side negotiated for unlimited long-term care for the spouse to be. Honestly, cost was not an issue my client is ultra HNW and was willing to have the coverage for the new spouse and for his children. In searching with three separate reputable agents in the D.C. metro area who specialize in long-term care insurance they each told me such policies do not exist in a traditional policy.
Find a different agent, they are certainly not specialists. Would you like a quote? Just for information purposes?
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Re: An argument against self-insuring for long-term care

Post by pintail07 »

Now you're claiming that there's no such thing as self-insuring?
Insuring means spreading the risk over multiple insureds. Can't do that with one insured, you just assume the risk. As a math specialist I would think you would know this.
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Re: An argument against self-insuring for long-term care

Post by marcopolo »

WoW2012 wrote: Tue Jul 31, 2018 1:46 pm
marcopolo wrote: Tue Jul 31, 2018 1:31 pm
WoW2012 wrote: Tue Jul 31, 2018 1:06 pm Assume I'm a salesman of LTCi.
Please refute my arguments in favor of LTCi.
As has been mentioned before, your use of percentage of portfolio to make the cost seem small is a bit absurd. What does the size of one's portfolio have to do with whether a product is a good value? you say it is only .4% (of a $1M portfolio) to get $500k of coverage. If i have a $4M portfolio, now I have to only pay .1% of my portfolio to get the same $500k of coverage, is the product all of a sudden a 4x better deal for me. It is a common sales tactic used to obfuscate the true costs.

LTCi is a poorly designed product for my situation. I use insurance to cover losses that i can not relatively easily absorb. Limited coverage policies with short elimination periods are expensive for the coverage they provide, precisely because of their design.
I haven't obfuscated the costs.
$4,000 is .1% of a $4,000,000 portfolio.
If you think that's not a good value, you're thinking like someone in the middle-class.
What does the % of portfolio have to do with whether something is a good value?

If you were buying a $40k car, would it be a better value if you had a $4M portfolio than if you only had a $1M portfolio?
Would the person with a $4M portfolio get the same value paying $160k for the same car as someone with a $1M portfolio buying that car for $1M?

You clearly are trying very hard to not understand the simple concept.

I guess Upton Sinclair was right:
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

pintail07 wrote: Tue Jul 31, 2018 2:37 pm
Now you're claiming that there's no such thing as self-insuring?
Insuring means spreading the risk over multiple insureds. Can't do that with one insured, you just assume the risk. As a math specialist I would think you would know this.
At best, that's semantics.
Self-insure is a risk management technique in which a company or individual sets aside a pool of money to be used to remedy an unexpected loss. Theoretically, one can self-insure against any type of loss. In practice, however, most people choose to purchase insurance against potentially large, infrequent losses.
emphasis added
https://www.investopedia.com/terms/s/self-insure.asp
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

Lastrun wrote: Tue Jul 31, 2018 2:28 pm
WoW2012 wrote: Tue Jul 31, 2018 1:42 pm There are unlimited policies.
Hmmm. I am certain you will say they exist and quote some providers. BUT. . . . . recently, we had a prenuptial agreement scenario where the attorney on the other side negotiated for unlimited long-term care for the spouse to be. Honestly, cost was not an issue my client is ultra HNW and was willing to have the coverage for the new spouse and for his children. In searching with three separate reputable agents in the D.C. metro area who specialize in long-term care insurance they each told me such policies do not exist in a traditional policy.

I'm sorry you spoke with agents who aren't on top of the industry.
There's one traditional LTCi policy that has a lifetime/unlimited benefit period.
There's one group LTCi policy that has a lifetime/unlimited benefit period.
There's one hybrid policy that has a lifetime/unlimited benefit period.
And there are several traditional LTCi policies that have benefits that start out at a million or more and grow each year with inflation.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

marcopolo wrote: Tue Jul 31, 2018 2:38 pmI guess Upton Sinclair was right:
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
:sharebeer
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

marcopolo wrote: Tue Jul 31, 2018 2:38 pm
WoW2012 wrote: Tue Jul 31, 2018 1:46 pm
marcopolo wrote: Tue Jul 31, 2018 1:31 pm
WoW2012 wrote: Tue Jul 31, 2018 1:06 pm Assume I'm a salesman of LTCi.
Please refute my arguments in favor of LTCi.
As has been mentioned before, your use of percentage of portfolio to make the cost seem small is a bit absurd. What does the size of one's portfolio have to do with whether a product is a good value? you say it is only .4% (of a $1M portfolio) to get $500k of coverage. If i have a $4M portfolio, now I have to only pay .1% of my portfolio to get the same $500k of coverage, is the product all of a sudden a 4x better deal for me. It is a common sales tactic used to obfuscate the true costs.

LTCi is a poorly designed product for my situation. I use insurance to cover losses that i can not relatively easily absorb. Limited coverage policies with short elimination periods are expensive for the coverage they provide, precisely because of their design.
I haven't obfuscated the costs.
$4,000 is .1% of a $4,000,000 portfolio.
If you think that's not a good value, you're thinking like someone in the middle-class.
What does the % of portfolio have to do with whether something is a good value?

If you were buying a $40k car, would it be a better value if you had a $4M portfolio than if you only had a $1M portfolio?
Would the person with a $4M portfolio get the same value paying $160k for the same car as someone with a $1M portfolio buying that car for $1M?

You clearly are trying very hard to not understand the simple concept.

I guess Upton Sinclair was right:
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”


HNW people who own long-term care insurance look at it the way they look at stock options. An LTCi policy is like a put. You pay the premium each year to avoid the loss. If the loss comes, you use OPM to cover it.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: An argument against self-insuring for long-term care

Post by randomguy »

pintail07 wrote: Tue Jul 31, 2018 2:35 pm
Hmmm. I am certain you will say they exist and quote some providers. BUT. . . . . recently, we had a prenuptial agreement scenario where the attorney on the other side negotiated for unlimited long-term care for the spouse to be. Honestly, cost was not an issue my client is ultra HNW and was willing to have the coverage for the new spouse and for his children. In searching with three separate reputable agents in the D.C. metro area who specialize in long-term care insurance they each told me such policies do not exist in a traditional policy.
Find a different agent, they are certainly not specialists. Would you like a quote? Just for information purposes?
How about giving us a couple quotes along the lines of (feel free to switch the actual age/coverage amounts to whatever matches the standard policies you offer)
a) 60 year old, 5 years of coverage at 100k/year (with some adjustment)
b) 60 year old couple, say 8-10 years of coverage at 100k/year (with some adjustment)
c) 60 year old couple, unlimited years of coverage at 100k/year (with some adjustment)

Given those numbers you can make some guesses (policy rate increases, investment returns) and see what the difference is in LTC versus saving for a bunch of different cases. B has been the case where I have seen LTCi be interesting. A doesn't have an enough of an upside(only 500k) or downside (your single) to matter. I haven't seen a C in a long time:)
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

WoW2012 wrote: Tue Jul 31, 2018 2:46 pmHNW people who own long-term care insurance look at it the way they look at stock options. An LTCi policy is like a put. You pay the premium each year to avoid the loss. If the loss comes, you use OPM to cover it.
So do you recommend that people insure their cell phones or televisions?
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

willthrill81 wrote: Tue Jul 31, 2018 2:27 pm
WoW2012 wrote: Tue Jul 31, 2018 2:25 pm
willthrill81 wrote: Tue Jul 31, 2018 2:22 pm

I am not basing my statement on opinion but a mathematical fact. Insurance companies would all go bankrupt if they didn't charge more to insure a risk than the actuarial value of that risk (which is why most companies who sold LTCi 20 years ago no longer do today). Yes, LTC can impact one's goals. But if one is easily capable of paying for LTC, which is absolutely the case for someone with a $5 million portfolio, then they are mathematically worse off by buying insurance.

Can you refute that, beyond the "that's your opinion" statement?
Your reasoning is how someone in the middle-class looks at risk.
HNW people look at it differently.
So now you're resorting to ad hominem attacks because you cannot refute my logic?

I'm sorry if I hurt your feelings. That wasn't my intent.
I'm not attacking you personally. I'm just saying that your reasoning is how middle-class people think.
It's different from how HNW people think.

HNW people who own long-term care insurance look at it the way they look at stock options. An LTCi policy is like a put. You pay the premium each year to avoid the loss. If the loss comes, you use OPM to cover it.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: An argument against self-insuring for long-term care

Post by letsgobobby »

willthrill81 wrote: Sun Jul 29, 2018 10:47 pm
DC3509 wrote: Sun Jul 29, 2018 10:35 pmIt seems to me that it would make sense for people who live in HCOL and where there is a major difference between nursing homes that accept and do not accept Medicaid, and who are not otherwise able to self-fund it. For everyone else, the case seems to me to be very tough to justify economically.
I agree. The argument for LTCi essentially seems to revolve around (1) a belief that one will have superior care by self-paying rather than with Medicaid and (2) fear that Medicaid won't be around if/when it's needed. I won't say whether those beliefs are justified or not, especially since the first may be very dependent on the area. But if you reject these two premises, then I haven't heard a strong case as to why it's necessary for anyone.
Another valid argument is wanting to preserve one's estate for heirs or a surviving life partner. Taking the known loss of the premium cost would be justified since it mitigates the catastrophic loss of the entire estate, Medicaid or no Mediciad.
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Re: An argument against self-insuring for long-term care

Post by UpperNwGuy »

pintail07 wrote: Tue Jul 31, 2018 2:26 pm One doesn't self insure, they assume the risk, big difference.
There is no difference at all other than the words you use to describe it, and the emotional power of those words.
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

WoW2012 wrote: Tue Jul 31, 2018 2:49 pm
willthrill81 wrote: Tue Jul 31, 2018 2:27 pm
WoW2012 wrote: Tue Jul 31, 2018 2:25 pm
willthrill81 wrote: Tue Jul 31, 2018 2:22 pm

I am not basing my statement on opinion but a mathematical fact. Insurance companies would all go bankrupt if they didn't charge more to insure a risk than the actuarial value of that risk (which is why most companies who sold LTCi 20 years ago no longer do today). Yes, LTC can impact one's goals. But if one is easily capable of paying for LTC, which is absolutely the case for someone with a $5 million portfolio, then they are mathematically worse off by buying insurance.

Can you refute that, beyond the "that's your opinion" statement?
Your reasoning is how someone in the middle-class looks at risk.
HNW people look at it differently.
So now you're resorting to ad hominem attacks because you cannot refute my logic?

I'm sorry if I hurt your feelings. That wasn't my intent.
I'm not attacking you personally. I'm just saying that your reasoning is how middle-class people think.
It's different from how HNW people think.

HNW people who own long-term care insurance look at it the way they look at stock options. An LTCi policy is like a put. You pay the premium each year to avoid the loss. If the loss comes, you use OPM to cover it.
First, I was not offended. You are trying to defend your product.

Second, an ad hominem attack is defined as follows: "(of an argument or reaction) directed against a person rather than the position they are maintaining." This business of saying that someone thinks like "middle-class people" is a pure ad hominem attack not based on any logic.

Third, by comparing LTCi to stock options, you are merely describing how LTCi functions, not why it is advantageous for the insured. On average, the insured loses money compared to self-insuring. Therefore, from a purely rational perspective, insurance should only be used for risks that cannot be assumed by the entity at risk. High net worth individuals can afford to self-insure, so they logically should. What they actually do is irrelevant. People do illogical things all the time, and an appeal to some group's net worth is pointless.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

letsgobobby wrote: Tue Jul 31, 2018 2:51 pm
willthrill81 wrote: Sun Jul 29, 2018 10:47 pm
DC3509 wrote: Sun Jul 29, 2018 10:35 pmIt seems to me that it would make sense for people who live in HCOL and where there is a major difference between nursing homes that accept and do not accept Medicaid, and who are not otherwise able to self-fund it. For everyone else, the case seems to me to be very tough to justify economically.
I agree. The argument for LTCi essentially seems to revolve around (1) a belief that one will have superior care by self-paying rather than with Medicaid and (2) fear that Medicaid won't be around if/when it's needed. I won't say whether those beliefs are justified or not, especially since the first may be very dependent on the area. But if you reject these two premises, then I haven't heard a strong case as to why it's necessary for anyone.
Another valid argument is wanting to preserve one's estate for heirs or a surviving life partner. Taking the known loss of the premium cost would be justified since it mitigates the catastrophic loss of the entire estate, Medicaid or no Mediciad.
Yes, good point.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: An argument against self-insuring for long-term care

Post by SQRT »

willthrill81 wrote: Tue Jul 31, 2018 1:55 pm
pintail07 wrote: Tue Jul 31, 2018 1:37 pm As an insurance broker for over 30 years I can't think of any of my clients with assets over 5,000,000 that don't have LTCi. The small downside of the premiums, inconsequential, is far outweighed by the upside of a claim that last over 6 months. I wrote many clients in the 90's that have experienced large rate increases, and none have dropped the policy, they still view it as a good risk management tool and they have assets to cover long term claims but why would they? Assuming the risks is great as long as there are no claims, otherwise it can be a poor decision.
A person with over $5 million has no need for LTC. They may desire some protection, but that's completely separate from whether they truly need it. A $5 million portfolio would easily yield an income enough to pay for both spouses to have nursing home care for decades.

Risks that can be absorbed should be. Insurance is for protecting risks that you cannot afford to self-insure.
Totally agree. My spouse and I could cover any LTC costs out of our current travel budget. Why would I buy LTC insurance? Then have to hassle with the Ins co to get any benefit. Not to mention friction costs of commissions paid to agents. I don’t have life insurance any more either.
Last edited by SQRT on Tue Jul 31, 2018 3:11 pm, edited 1 time in total.
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

marcopolo wrote: Tue Jul 31, 2018 2:38 pm

What does the % of portfolio have to do with whether something is a good value?

If you were buying a $40k car, would it be a better value if you had a $4M portfolio than if you only had a $1M portfolio?
Would the person with a $4M portfolio get the same value paying $160k for the same car as someone with a $1M portfolio buying that car for $1M?

You clearly are trying very hard to not understand the simple concept.

I guess Upton Sinclair was right:
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

If you have to incorrectly state my argument, you've already lost the debate.

At the cost of only 10 basis points, a healthy 59-year old couple, with $4M in assets, can own a call worth $1.2 million in long-term care benefits.

That's an excellent value. [OT comment removed by admin LadyGeek]

P.S. Just make sure you use an LTCi specialist who knows the market.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: An argument against self-insuring for long-term care

Post by SQRT »

WoW2012 wrote: Tue Jul 31, 2018 2:09 pm
marcopolo wrote: Tue Jul 31, 2018 1:31 pm I use insurance to cover losses that i can not relatively easily absorb.

Do you have collision insurance on your vehicle?
Very high deductible. Come to think of it I probably shouldn’t. Just habit I guess.
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

WoW2012 wrote: Tue Jul 31, 2018 3:02 pmAt the cost of only 10 basis points, a healthy 59-year old couple, with $4M in assets, can own a call worth $1.2 million in long-term care benefits.
Using that logic, lottery tickets are a great buy.
WoW2012 wrote: Tue Jul 31, 2018 3:02 pmI'm posting this for the benefit of those who are not suffering from cognitive dissonance.
Another ad hominem attack.
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

willthrill81 wrote: Tue Jul 31, 2018 2:55 pm
Third, by comparing LTCi to stock options, you are merely describing how LTCi functions, not why it is advantageous for the insured. On average, the insured loses money compared to self-insuring. Therefore, from a purely rational perspective, insurance should only be used for risks that cannot be assumed by the entity at risk. High net worth individuals can afford to self-insure, so they logically should. What they actually do is irrelevant. People do illogical things all the time, and an appeal to some group's net worth is pointless.
HNW insure lots of things.
Do you think a HNW does NOT insure their jewelry?
Do you have insurance on your wife's jewelry?
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

WoW2012 wrote: Tue Jul 31, 2018 3:08 pm
willthrill81 wrote: Tue Jul 31, 2018 2:55 pm
Third, by comparing LTCi to stock options, you are merely describing how LTCi functions, not why it is advantageous for the insured. On average, the insured loses money compared to self-insuring. Therefore, from a purely rational perspective, insurance should only be used for risks that cannot be assumed by the entity at risk. High net worth individuals can afford to self-insure, so they logically should. What they actually do is irrelevant. People do illogical things all the time, and an appeal to some group's net worth is pointless.
HNW insure lots of things.
Do you think a HNW does NOT insure their jewelry?
Do you have insurance on your wife's jewelry?
Again, what "high net worth individuals" do is irrelevant.

My wife pays for insurance on one piece of her jewelry. She knows that this is a bad financial move but wants it for emotional security. As I said, there can be emotional value in insurance, but it insuring jewelry that represents a tiny fraction of one's assets is a sub-optimal financial decision.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: An argument against self-insuring for long-term care

Post by Lastrun »

WoW2012 wrote: Tue Jul 31, 2018 2:40 pm I'm sorry you spoke with agents who aren't on top of the industry.
There's one traditional LTCi policy that has a lifetime/unlimited benefit period.
There's one group LTCi policy that has a lifetime/unlimited benefit period.
There's one hybrid policy that has a lifetime/unlimited benefit period.
And there are several traditional LTCi policies that have benefits that start out at a million or more and grow each year with inflation.
As I said, I knew you would respond as above. Group is not applicable, hybrid is not what was asked for. The other firm searched as well but I am not sure with how many and the type of agents. Is the ONE LTCi policy you cite with a reputable company that writes in this area? Be careful when you throw out comments the way you do, without full knowledge of the experience and credentials of the multiple insurance professionals involved, you are looking glib, particularly when you have repeatedly refused to disclose yours.
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

willthrill81 wrote: Tue Jul 31, 2018 3:11 pm
WoW2012 wrote: Tue Jul 31, 2018 3:08 pm
willthrill81 wrote: Tue Jul 31, 2018 2:55 pm
Third, by comparing LTCi to stock options, you are merely describing how LTCi functions, not why it is advantageous for the insured. On average, the insured loses money compared to self-insuring. Therefore, from a purely rational perspective, insurance should only be used for risks that cannot be assumed by the entity at risk. High net worth individuals can afford to self-insure, so they logically should. What they actually do is irrelevant. People do illogical things all the time, and an appeal to some group's net worth is pointless.
HNW insure lots of things.
Do you think a HNW does NOT insure their jewelry?
Do you have insurance on your wife's jewelry?
Again, what "high net worth individuals" do is irrelevant.

My wife pays for insurance on one piece of her jewelry. She knows that this is a bad financial move but wants it for emotional security. As I said, there can be emotional value in insurance, but it insuring jewelry that represents a tiny fraction of one's assets is a sub-optimal financial decision.

You look at risk differently than HNW people.
That is why plenty of HNW people with liquidate assets over $5M own long-term care insurance.
They see the value in using OPM.
Especially since business owners can usually pay LTCi premiums on a pre-tax basis, it makes even more sense.
Pre-tax premiums.
Tax-free benefits.
No brainer.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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