An argument against self-insuring for long-term care

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

Post by SQRT »

[quote=WoW2012 post_id=4045872 time=1533067686 user_id=41642

HNW insure lots of things.
Do you think a HNW does NOT insure their jewelry?
Do you have insurance on your wife's jewelry?
[/quote]

I have Flipped around a bit on this one, but generally not. My spouse disagrees and we go back and forth. Quite expensive and probably not worth it in my view. If we lost something would probably not bother to buy it back at this point.
pintail07
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Re: An argument against self-insuring for long-term care

Post by pintail07 »

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:)

A. 8416
B. 19,570 7 years
C. 16,149

All include 3% compound inflation
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JoeRetire
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Re: An argument against self-insuring for long-term care

Post by JoeRetire »

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.
Kind of a funny statement.

There are many folks with assets over $5M who don't have LTCi - instead they self-insure/assume the risk. Of course they probably aren't your clients, since they don't want the insurance and thus have no need for your services.
Last edited by JoeRetire on Tue Jul 31, 2018 3:23 pm, edited 1 time in total.
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WoW2012
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

Lastrun wrote: Tue Jul 31, 2018 3:14 pm
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.
100-year old company.
Excellent rating from AM Best.
The policy's approved in D.C. and about 45 states.
The most experienced actuaries in the LTCi industry.
Policy has single-premium payment option (great for a divorce) and 10-year payment options.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
marcopolo
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Re: An argument against self-insuring for long-term care

Post by marcopolo »

pintail07 wrote: Tue Jul 31, 2018 3:17 pm 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:)

A. 8416
B. 19,570 7 years
C. 16,149

All include 3% compound inflation
What happened to the $4k (or should i say "only 0.4% of your $1M portfolio") that bought a $500k policy?!?
I almost miss the Variable Annuity salesmen.
Last edited by marcopolo on Tue Jul 31, 2018 3:27 pm, edited 1 time in total.
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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 3:14 pm
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.
Again, I don't care what high net worth people do.

"OPM" is used to refer to situations involving leverage. There is no leverage with LTCi.
“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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willthrill81
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Re: An argument against self-insuring for long-term care

Post by willthrill81 »

JoeRetire wrote: Tue Jul 31, 2018 3:19 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.
Kind of a funny statement.

There are many folks with assets over $5M who don't have LTCi - instead they self-insure/assume the risk. Of course they probably aren't your clients, since they don't want the insurance and thus have no need for your services.
Yes, it's a bit like a car wash manager saying that all of his customers get their cars washed.
“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 3:25 pm

"OPM" is used to refer to situations involving leverage. There is no leverage with LTCi.

The older someone is when they buy a policy, the higher the premium, the lower the benefits, and, you're right, NO leverage.

For someone who buys a policy when they are younger and healthy, there's a lot of leverage.

And, yes, a 59-year old couple can buy $1.2 million of LTCi benefits for $4,000 per year.
That's A LOT of leverage.

If you can't see that, I'm sorry.
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 3:23 pm
pintail07 wrote: Tue Jul 31, 2018 3:17 pm 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:)

A. 8416
B. 19,570 7 years
C. 16,149

All include 3% compound inflation
What happened to the $4k (or should i say "only 0.4% of your $1M portfolio") that bought a $500k policy?!?
I almost miss the Variable Annuity salesmen.

Yes, a healthy 59-year old couple can buy $1.2 million of LTCi benefits for $4,000 per year.
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 3:32 pm
willthrill81 wrote: Tue Jul 31, 2018 3:25 pm

"OPM" is used to refer to situations involving leverage. There is no leverage with LTCi.

The older someone is when they buy a policy, the higher the premium, the lower the benefits, and, you're right, NO leverage.

For someone who buys a policy when they are younger and healthy, there's a lot of leverage.

And, yes, a 59-year old couple can buy $1.2 million of LTCi benefits for $4,000 per year.
That's A LOT of leverage.

If you can't see that, I'm sorry.
Leverage involves borrowing assets in order to amplify returns. There's no borrowing here at any age, hence, there's no leverage.

Again, using your logic, a $2 lottery ticket that could be worth $100 million is a great buy. That 59 year old couple has not bought $1.2 million of benefits. That's a gross misnomer, to put it mildly. They are merely insured for up to $1.2 million of LTC costs.
“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
CuriousTacos
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Re: An argument against self-insuring for long-term care

Post by CuriousTacos »

pintail07 wrote: Tue Jul 31, 2018 3:17 pm 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:)

A. 8416
B. 19,570 7 years
C. 16,149

All include 3% compound inflation
How is C cheaper than B? Something doesn't look right there.
pintail07
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Re: An argument against self-insuring for long-term care

Post by pintail07 »

How is C cheaper than B? Something doesn't look right there.
Most companies don't have policies greater than a 5 year benefit. The company quoted in New York Life, really a non player in the business.
WoW2012
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Re: An argument against self-insuring for long-term care

Post by WoW2012 »

willthrill81 wrote: Tue Jul 31, 2018 3:34 pm
Leverage involves borrowing assets in order to amplify returns. There's no borrowing here at any age, hence, there's no leverage.

Again, using your logic, a $2 lottery ticket that could be worth $100 million is a great buy. That 59 year old couple has not bought $1.2 million of benefits. That's a gross misnomer, to put it mildly. They are merely insured for up to $1.2 million of LTC costs.

Leverage does not require borrowing money.
"Puts" and "Calls" provide leverage. There's no borrowing involved.
"Puts" and "Calls" provide A LOT of leverage AND safety.

Insurance gives leverage because insurance is a contract, just like "puts" and "calls" are options contracts.
My medical insurance gives me leverage that I would NOT have if I were not insured.
Long-term care insurance gives me options so that I don't have to liquidate assets in a down market or incur capital gains by selling highly-appreciated assets to pay for my care.

A lottery ticket is a very bad analogy.
A lottery ticket is not a contract.
Long-term care insurance is a contract.
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 3:55 pmA lottery ticket is a very bad analogy.
A lottery ticket is not a contract.
Long-term care insurance is a contract.
In this sense, LTC is very similar to a lottery ticket. In both cases, if your 'numbers come up', someone else must pay you. With the Power Ball lottery, the Multi-State Lottery Association is contractually bound to pay winners the jackpot. With LTCi, the insurance company is contractually bound to pay the insured the amount of their claim. All informed people know that lottery tickets are a losing bet, and while the insurance industry doesn't want the same association, insurance policies are also a losing bet. Some people will win the lottery, and some people will indeed take advantage of that $1.2 million benefit you keep referring to. But on average, people lose by buying either. That is a mathematical fact. One's net worth is irrelevant. Likening it to stock options is irrelevant (again, you're merely describing how it works, not its benefit).

It's clear that you believe that insurance is a panacea for financial problems. I refuse to continue this pointless debate. Hopefully those reading all of this will see for themselves what is really going on.
“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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