how to decide whether to self-insure LTC or buy insurance?

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Old Sage(brush)
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how to decide whether to self-insure LTC or buy insurance?

Post by Old Sage(brush) »

I just read another post on LTC insurance increase premiums and made me wonder the question. I've never bought LTC as it always seemed too distant, too many contingencies, too expensive and just too much subject to the usual insurance game. So, curious if others have found a way to more analytically answer this question?
Last edited by Old Sage(brush) on Sun Sep 13, 2020 8:12 am, edited 1 time in total.
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TomatoTomahto
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Re: how to decide whether to self-insure LTC or buy insurance?

Post by TomatoTomahto »

Not analytically, but I put LTC insurance in same category as single disease insurance.

ETA: apparently, good policies were written many years ago. Can’t get one today.
Okay, I get it; I won't be political or controversial. The Earth is flat.
Chris K Jones
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Re: how to decide whether to self-insure LTC or buy insurance?

Post by Chris K Jones »

I don't have an analytical way to evaluate this. I sort of stumbled into self insurance. In August 2016, I applied for one with John Hancock. I was turned down. I had/have no significant health problems but had a knee injury that required physical therapy the year before I applied. No hypertension, no diabetes, no nothing else. The markets have had a good return and my nest egg has grown since then so self insurance was the right choice for me. Because of the unpredictable increases in premiums I am glad I didn't buy. In researching my answer to your post, I just learned that John Hancock pushed through an 83% rate hike before exiting long term care insurance in December, 2016! They did me a favor by turning me down.
Last edited by Chris K Jones on Sun Sep 13, 2020 8:16 am, edited 1 time in total.
MikeG62
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Location: New Jersey

Re: how to decide whether to self-insure LTC or buy insurance?

Post by MikeG62 »

Old Sage(brush) wrote: Sun Sep 13, 2020 7:51 am I just read another post on LTC insurance increase premiums and made me wonder the question. I've never bought LTC as it always seemed too distant, too many contingencies and just too much subject to the usual insurance game. So, curious if others have found a way to more analytically answer this question?
Lots and lots of threads on LTC insurance here. Your question has been covered and debated more times than you would believe. Here is one:

viewtopic.php?f=2&t=312101&p=5194467&hilit=LTC#p5194467

And here:

viewtopic.php?f=2&t=303010&p=5009648&hilit=LTC#p5009648

Use the search bar as this is just the tip of the iceberg.
Real Knowledge Comes Only From Experience
Topic Author
Old Sage(brush)
Posts: 132
Joined: Sat Dec 08, 2018 8:27 am

Re: how to decide whether to self-insure LTC or buy insurance?

Post by Old Sage(brush) »

Thanks, Mike. Yes, looks like this topic had been beaten to death. And at that point, no LTCi needed!
kaufeegurl
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Re: how to decide whether to self-insure LTC or buy insurance?

Post by kaufeegurl »

We are going through that painful process right now. We have talked extensively with 2 LTCi specialists and feel we have a really good handle on the good, the bad, and the ugly. We have narrowed our choices down to one company and tailored the plan with the monthly payout per year, number of years, and inflation rider %. The cost is staggering. The company we have chosen (should we decide to go forward) has a single premium or 10 year pay option which is attractive to minimize rate increases. Early on we ruled out the popular hybrid policies as a terrible product. Pure LTCi seems to be the way to go.

I have done a search on Bogleheads.com and have read a long list of posts covering this topic. I have listened to podcasts, read blogs by Kitces et al, and performed a survey of friends and family to see who has jumped and who is still on the sidelines. The overwhelming takeaway is that it is a personal choice - there is no right answer because everyone who can actually afford the insurance can also afford to self-pay and has a different risk tolerance. The second takeaway is that there is a large group that is not served by the LTCi industry because they do not offer a tail insurance product. We don't need LTC insurance to kick in within 90 days. We need it to cover a fat tail event. And from all the reading and conversations I've been having this is why people agonize over purchasing LTCi - the LTC industry still doesn't have it right - it's expensive insurance that doesn't fit their actual needs. We are in this group. We can self-pay but it would help to have some insurance and we would have some hard decisions to make should a fat tail event occur. It gives me some pause when a respected financial planner like Christine Benz from Morningstar says that she and her spouse can self-pay but will be purchasing LTCi. In a recent article "When Risk Gets Personal" she says:
"Is it any wonder that I obsess over how to manage long-term care risk in my own plan? In my mind, suboptimal or even bad financial outcomes are swirling around with deeply sad times. That explains why, in contrast with stock-market volatility, which I can readily shrug off, long-term care is a risk that I’d happily insure against, even if the numbers might say my husband and I don’t need to. I have had experience with this risk, and it wasn’t pleasant."

We are meeting with our financial planner for a retirement check-up tomorrow and we will see how the numbers for LTCi vs self-pay fit into our financial plan. My back of the envelope calculations show that we would almost be better putting the premium in an investment account and let it compound. However, like Ms. Benz, I have a high tolerance for stock-market volatility, but I'm not sure I want to risk LTC.
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Watty
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Re: how to decide whether to self-insure LTC or buy insurance?

Post by Watty »

Old Sage(brush) wrote: Sun Sep 13, 2020 8:22 am Thanks, Mike. Yes, looks like this topic had been beaten to death. And at that point, no LTCi needed!
One of the reasons there is so much discussion about LTC is that the prices vary so much in different parts of the country so people are facing very different problems with funding LTC.

This link may be helpful.

https://www.genworth.com/aging-and-you/ ... -care.html
Rex66
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Re: how to decide whether to self-insure LTC or buy insurance?

Post by Rex66 »

Hybrid policies are more available bc that’s what the insurance companies prefers to sell. They have the methods on selling annuities or permanent insurance and making bank down pat. Which is what those are. They don’t like the possibility of not getting requested rate increases. Hybrid policies don’t transfer enough risk to the insurance company for the cost.
GreenLawn
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Re: how to decide whether to self-insure LTC or buy insurance?

Post by GreenLawn »

Also going through the research now. I have enough money to self-insure except for a long drawn out event like Alzheimer's, car crash permanent disability, etc

I've read enough that I don't feel in a hurry to purchase it until I come to a firm conclusion years from now. With the massive wave of boomers hitting the nursing homes starting in 20 years, there is no telling what the future holds. Who could have foreseen ACA subsidies prior to their being enacted? Will something similar be setup for LTC for boomers?

Too many unknowns and questions for me to buy a policy now. What I do know is I have a fat investment account, and none of that money is exiting that account until I feel good where it's going. And nothing about purchasing LTC insurance feels good right now.
Chuck107
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Re: how to decide whether to self-insure LTC or buy insurance?

Post by Chuck107 »

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Last edited by Chuck107 on Mon Oct 05, 2020 8:37 am, edited 1 time in total.
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adamthesmythe
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Re: how to decide whether to self-insure LTC or buy insurance?

Post by adamthesmythe »

A recent thread attempted to develop "principles" for making the choice between renting and buying. It devolved into arguments and counter-arguments about using "investment" and "consumption" in unconventional ways. Maybe we could do the same here?

Anyway- my decision was simple enough. I decided I did not want LTCi because 50% of my assets could easily fund 10 years of long-term care. (The other 50% for the other spouse).
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