Long Term Care Insurance (LTC)

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sam5
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Long Term Care Insurance (LTC)

Post by sam5 »

Hello fellow bogleheads:

I’m having a dilemma with long term care insurance. We took out policies from my spouse’s employer’s group plan in 2006 and continued with it after my spouse retired. There was one premium increase that I accepted. Now, with virtually no notice, I’ve learned that my premium will triple. :confused :oops:

My policy states it will pay:
$1,000 monthly maximum - facility
$600 monthly maximum - assisted living facility
$500 monthly maximum - professional home care
$36,000 lifetime maximum
compound inflation - yes

My premium presently is $25 per quarter, the new quarterly premium will be $74. I’m tempted to cancel the policy and invest the new increased premium amount in my Boglehead-style three-fund portfolio. My thinking is that the amount that this policy pays will be worth very little compared to long term care costs in 20-30 years from now when I am likely to need care. I also suspect that this is not the last premium increase.

My spouse will be keeping their policy intact and paying the new premium. That policy pays:
$3,000 monthly maximum - facility
$1,800 monthly maximum - assisted living facility
$1,500 monthly maximum - professional home care
Our idea is that this policy will prevent depletion of our assets should long term be required for my spouse. Note the difference in our ages.

Our combined net worth is: $2.5 million
my age 59
spouse age 79

What are your thoughts on this?
Am I being foolish or is this a wise move?
Can someone tell me what “compound inflation - yes” means when the policy limits are clearly spelled out and have not changed?
RetiredAL
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Re: Long Term Care Insurance (LTC)

Post by RetiredAL »

sam5 wrote: Mon Sep 14, 2020 6:46 pm Hello fellow bogleheads:

I’m having a dilemma with long term care insurance. We took out policies from my spouse’s employer’s group plan in 2006 and continued with it after my spouse retired. There was one premium increase that I accepted. Now, with virtually no notice, I’ve learned that my premium will triple. :confused :oops:

My policy states it will pay:
$1,000 monthly maximum - facility
$600 monthly maximum - assisted living facility
$500 monthly maximum - professional home care
$36,000 lifetime maximum
compound inflation - yes

My premium presently is $25 per quarter, the new quarterly premium will be $74. I’m tempted to cancel the policy and invest the new increased premium amount in my Boglehead-style three-fund portfolio. My thinking is that the amount that this policy pays will be worth very little compared to long term care costs in 20-30 years from now when I am likely to need care. I also suspect that this is not the last premium increase.

My spouse will be keeping their policy intact and paying the new premium. That policy pays:
$3,000 monthly maximum - facility
$1,800 monthly maximum - assisted living facility
$1,500 monthly maximum - professional home care
Our idea is that this policy will prevent depletion of our assets should long term be required for my spouse. Note the difference in our ages.

Our combined net worth is: $2.5 million
my age 59
spouse age 79

What are your thoughts on this?
Am I being foolish or is this a wise move?
Can someone tell me what “compound inflation - yes” means when the policy limits are clearly spelled out and have not changed?
That is the rate the policy limits increase each year as an inflation factor. What is the compound rate listed on the policy?

For example: A 5% inflation compounded factor after 14 years will bump up the limits approx 2x.
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Watty
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Re: Long Term Care Insurance (LTC)

Post by Watty »

sam5 wrote: Mon Sep 14, 2020 6:46 pm $1,000 monthly maximum - facility
.....
$36,000 lifetime maximum
......
Our combined net worth is: $2.5 million
$36K is barely more than 1% of your net worth.

Even if actually get that $36K someday that is hardly a life changing amount for you even if it is adjusted for inflation.

A general rule for insurance is to only insure against losses you cannot afford.

I agree that keeping your spouses is LTC insurance is worthwhile but in your situation I would drop yours too.
SS Rambo
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Re: Long Term Care Insurance (LTC)

Post by SS Rambo »

What is the elimination period (how long do you have to be in care before coverage kicks in)?

These group policies seem extremely cheap, even after the triple. But as stated above, these should be in place to cover expenses you could not cover out of pocket.
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samsoes
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Re: Long Term Care Insurance (LTC)

Post by samsoes »

Annualized premium for LTC insurance less than $300? That amount of money is barely noise. Keep it!
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Artful Dodger
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Re: Long Term Care Insurance (LTC)

Post by Artful Dodger »

You either don't have compound inflation and the maximums stated are correct, or if you do have it, you need to contact the company to ask for an up to date schedule. It's possible, you had an election option where you could have increased your maximum based on some type of compound inflation formula. This option is offered X number of times with the updated cost. It usually has a limit, so if not optioned after a certain number of offers, they quit offering it.

Whether to continue is your call, but that's a reasonable premium for those benefits. I'm paying about 13 times your new cost for a $6800 monthly benefit (though it's for up to 10 years, and I have a 5% annual COLA).
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sam5
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Re: Long Term Care Insurance (LTC)

Post by sam5 »

Original Poster here. After reaching out to the company, I’ve learned that “compound inflation” is 5% compounded annually. They gave me updated payout limits as of 1/1/2020:

$2,653 monthly maximum - facility
$1,591 monthly maximum - assisted living facility 60%
$1,326 monthly maximum - professional home care 50%
$95,518 lifetime maximum

I will contact them again to learn what the percentages (60%, 50%) mean.

Since I’ve learned that the policy benefits are increasing faster than general inflation, the policy seems more attractive. I think I will keep it in force. Can someone give me an idea of what a year of long term care costs either at a facility or at home?
smitcat
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Re: Long Term Care Insurance (LTC)

Post by smitcat »

sam5 wrote: Thu Sep 17, 2020 7:02 pm Original Poster here. After reaching out to the company, I’ve learned that “compound inflation” is 5% compounded annually. They gave me updated payout limits as of 1/1/2020:

$2,653 monthly maximum - facility
$1,591 monthly maximum - assisted living facility 60%
$1,326 monthly maximum - professional home care 50%
$95,518 lifetime maximum

I will contact them again to learn what the percentages (60%, 50%) mean.

Since I’ve learned that the policy benefits are increasing faster than general inflation, the policy seems more attractive. I think I will keep it in force. Can someone give me an idea of what a year of long term care costs either at a facility or at home?
"Can someone give me an idea of what a year of long term care costs either at a facility or at home?"
This is extremely dependent upon excatly where you are and which facilty you choose.
It would be best if you researched your immediate area and selected a couple of facilities that you would choose.
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Artful Dodger
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Re: Long Term Care Insurance (LTC)

Post by Artful Dodger »

sam5 wrote: Thu Sep 17, 2020 7:02 pm Original Poster here. After reaching out to the company, I’ve learned that “compound inflation” is 5% compounded annually. They gave me updated payout limits as of 1/1/2020:

$2,653 monthly maximum - facility
$1,591 monthly maximum - assisted living facility 60%
$1,326 monthly maximum - professional home care 50%
$95,518 lifetime maximum

I will contact them again to learn what the percentages (60%, 50%) mean.

Since I’ve learned that the policy benefits are increasing faster than general inflation, the policy seems more attractive. I think I will keep it in force. Can someone give me an idea of what a year of long term care costs either at a facility or at home?
That’s great! Those look a lot better than your original post. The percentages relate to your monthly maximum benefit. It pays 100% for facility care or $2653, 60% X $2653 or $1591 per month for assisted living facility, and 50% X $2653 or $1326 per month for home care.

You currently have a $87 daily benefit. That would cover about 40% of the cost of a private nursing home room in my area. It’s certainly not going to cover the bill in full, but will pay a lot toward your care and protect your other assets.

Here is a link to Genworth’s cost of care calculator. It lets you input different locations of the country to estimate current LTC costs.

https://www.genworth.com/aging-and-you/ ... -care.html
valleyrock
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Re: Long Term Care Insurance (LTC)

Post by valleyrock »

sam5 wrote: Thu Sep 17, 2020 7:02 pm Original Poster here. After reaching out to the company, I’ve learned that “compound inflation” is 5% compounded annually. They gave me updated payout limits as of 1/1/2020:

$2,653 monthly maximum - facility
$1,591 monthly maximum - assisted living facility 60%
$1,326 monthly maximum - professional home care 50%
$95,518 lifetime maximum

I will contact them again to learn what the percentages (60%, 50%) mean.

Since I’ve learned that the policy benefits are increasing faster than general inflation, the policy seems more attractive. I think I will keep it in force. Can someone give me an idea of what a year of long term care costs either at a facility or at home?
Costs vary by region. Assisted living per month might range from $3500 per month to $5500 per month. Assisted living assistance varies.... some is al la cart, some charge bulk fee.

Nursing home ranges around the country: Maybe $7500 per month to $12,000 per month.

And that's right now. Inflation drives it up.

And one might look a the differences between for-profit and non-profit types of places.

Here's a couple of web sites on costs:
https://longtermcare.acl.gov/costs-how- ... -care.html
https://www.seniorliving.org/nursing-homes/costs/
https://www.kiplinger.com/article/insur ... s-now.html (An article in Kiplingers in 2014)
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djmbob
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Re: Long Term Care Insurance (LTC)

Post by djmbob »

Although not an answer on keeping or not, this year has been a big eye opener for me. I manage all of my 92 yo mom's finances and pay her bills. She did not get an LC policy.

This year she has been declining quite a bit... two hospital stays with follow-on rehab care. Once she was "good enough" that Medicare stopped paying, she still needed home care which is not covered.

For aides to come in 3x per day for 2 hours at a time, and one staying 8 hours overnight, together with her retirement community fee we were paying about $12,500 a month.

She really needs full time care now so the first week of August we moved her into the Assisted Living section of the retirement community and her monthly cost is $8,500 (for her "level D" care), and all the "extra" things they do adds to the bill. But, it is still less than the cost for the "part time" aides she had in her independent living apartment.

I used to think LC care policies were expensive, but now think there may be some benefit. I think those who get them should always get an inflation or other annual increase rider. For example, $1,000 per month sounds like a lot when you buy a policy, but in this case it wouldn't help much.

Cheers,
Rays
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sam5
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Re: Long Term Care Insurance (LTC)

Post by sam5 »

OP here. Thank you very much everyone for taking the time to reply. It has helped me to clarify my thinking on this policy and to learn about issues that I had not thought of. The policy will remain in place. :thumbsup I really appreciate this group.
Seasonal
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Re: Long Term Care Insurance (LTC)

Post by Seasonal »

An issue with LTC policies is the requirements for them to pay. For example, I recently saw a policy that would not pay unless the holder was unable to perform two Activities of Daily Living or had cognitive impairment severe enough to cause her to be unsafe. Coverage is up to $300,000 for a 95 year old, so it seems worth continuing at $3,000/year even if she might never meet the criteria.
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Taylor Larimore
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Re: Long Term Care Insurance (LTC)

Post by Taylor Larimore »

sam5:

You can easily afford the "$95,518 lifetime maximum" benefit. Consider discontinuing the policy (especially if you are in good health). Put the premiums into additional savings.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Invest you must."
"Simplicity is the master key to financial success." -- Jack Bogle
TN_Boy
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Re: Long Term Care Insurance (LTC)

Post by TN_Boy »

Seasonal wrote: Mon Sep 21, 2020 10:32 am An issue with LTC policies is the requirements for them to pay. For example, I recently saw a policy that would not pay unless the holder was unable to perform two Activities of Daily Living or had cognitive impairment severe enough to cause her to be unsafe. Coverage is up to $300,000 for a 95 year old, so it seems worth continuing at $3,000/year even if she might never meet the criteria.
The policy requirements you are talking about:
unable to perform two Activities of Daily Living or had cognitive impairment severe enough to cause her to be unsafe
are pretty much the standard. And you need a doctor's diagnosis on those conditions. The LTC insurance company will want to see a lot of records to verify the conditions.

They don't write policies that say "you are older and need some help, we'll pay you $$ per day for that help."

I think it is very common for someone to be at a level where they clearly cannot safely live alone, but just as clearly, do not qualify for LTC insurance to start paying. The "good" news is that as they decline, if they live long enough, they will hit the threshold of qualifying for payment.

This is not a comment for or against LTC insurance, just an observation that you are describing the usual policy conditions for starting payments.
Seasonal
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Re: Long Term Care Insurance (LTC)

Post by Seasonal »

TN_Boy wrote: Mon Sep 21, 2020 12:26 pm
Seasonal wrote: Mon Sep 21, 2020 10:32 am An issue with LTC policies is the requirements for them to pay. For example, I recently saw a policy that would not pay unless the holder was unable to perform two Activities of Daily Living or had cognitive impairment severe enough to cause her to be unsafe. Coverage is up to $300,000 for a 95 year old, so it seems worth continuing at $3,000/year even if she might never meet the criteria.
The policy requirements you are talking about:
unable to perform two Activities of Daily Living or had cognitive impairment severe enough to cause her to be unsafe
are pretty much the standard. And you need a doctor's diagnosis on those conditions. The LTC insurance company will want to see a lot of records to verify the conditions.

They don't write policies that say "you are older and need some help, we'll pay you $$ per day for that help."

I think it is very common for someone to be at a level where they clearly cannot safely live alone, but just as clearly, do not qualify for LTC insurance to start paying. The "good" news is that as they decline, if they live long enough, they will hit the threshold of qualifying for payment.

This is not a comment for or against LTC insurance, just an observation that you are describing the usual policy conditions for starting payments.
Those criteria are standard, but many people don't realize that, hence the post.
TN_Boy
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Re: Long Term Care Insurance (LTC)

Post by TN_Boy »

Seasonal wrote: Mon Sep 21, 2020 12:51 pm
TN_Boy wrote: Mon Sep 21, 2020 12:26 pm
Seasonal wrote: Mon Sep 21, 2020 10:32 am An issue with LTC policies is the requirements for them to pay. For example, I recently saw a policy that would not pay unless the holder was unable to perform two Activities of Daily Living or had cognitive impairment severe enough to cause her to be unsafe. Coverage is up to $300,000 for a 95 year old, so it seems worth continuing at $3,000/year even if she might never meet the criteria.
The policy requirements you are talking about:
unable to perform two Activities of Daily Living or had cognitive impairment severe enough to cause her to be unsafe
are pretty much the standard. And you need a doctor's diagnosis on those conditions. The LTC insurance company will want to see a lot of records to verify the conditions.

They don't write policies that say "you are older and need some help, we'll pay you $$ per day for that help."

I think it is very common for someone to be at a level where they clearly cannot safely live alone, but just as clearly, do not qualify for LTC insurance to start paying. The "good" news is that as they decline, if they live long enough, they will hit the threshold of qualifying for payment.

This is not a comment for or against LTC insurance, just an observation that you are describing the usual policy conditions for starting payments.
Those criteria are standard, but many people don't realize that, hence the post.
Sorry, your wording threw me off a bit "I recently saw a policy" so I wanted to point out that probably all the policies you'll see will look like that.
Seasonal
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Re: Long Term Care Insurance (LTC)

Post by Seasonal »

TN_Boy wrote: Mon Sep 21, 2020 12:54 pm
Seasonal wrote: Mon Sep 21, 2020 12:51 pm
TN_Boy wrote: Mon Sep 21, 2020 12:26 pm
Seasonal wrote: Mon Sep 21, 2020 10:32 am An issue with LTC policies is the requirements for them to pay. For example, I recently saw a policy that would not pay unless the holder was unable to perform two Activities of Daily Living or had cognitive impairment severe enough to cause her to be unsafe. Coverage is up to $300,000 for a 95 year old, so it seems worth continuing at $3,000/year even if she might never meet the criteria.
The policy requirements you are talking about:
unable to perform two Activities of Daily Living or had cognitive impairment severe enough to cause her to be unsafe
are pretty much the standard. And you need a doctor's diagnosis on those conditions. The LTC insurance company will want to see a lot of records to verify the conditions.

They don't write policies that say "you are older and need some help, we'll pay you $$ per day for that help."

I think it is very common for someone to be at a level where they clearly cannot safely live alone, but just as clearly, do not qualify for LTC insurance to start paying. The "good" news is that as they decline, if they live long enough, they will hit the threshold of qualifying for payment.

This is not a comment for or against LTC insurance, just an observation that you are describing the usual policy conditions for starting payments.
Those criteria are standard, but many people don't realize that, hence the post.
Sorry, your wording threw me off a bit "I recently saw a policy" so I wanted to point out that probably all the policies you'll see will look like that.
FWIW, I spoke to the administrator of a day facility that this policy owner sometimes attends. The administrator said she sometimes sees policies that don't have this requirement. In any event, I agree it's standard, but people should check to see what the criteria are for payment and what the policy will pay.
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celia
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Re: Long Term Care Insurance (LTC)

Post by celia »

Taylor Larimore wrote: Mon Sep 21, 2020 10:40 am You can easily afford the "$95,518 lifetime maximum" benefit. Consider discontinuing the policy (especially if you are in good health). Put the premiums into additional savings.
Taylor, I think it is irrelevant if OP can afford to pay out of pocket. I think paying $300 a year for $95K of coverage is a good deal.

This is like saying someone with $4M of assets can drop homeowners insurance on their $400,000 house because they can afford to pay to rebuild it if a disaster strikes.
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Taylor Larimore
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Re: Long Term Care Insurance (LTC)

Post by Taylor Larimore »

This is like saying someone with $4M of assets can drop homeowners insurance on their $400,000 house because they can afford to pay to rebuild it if a disaster strikes.
celia:

You're right. If I had "$4M of assets" I would stop paying premium on a $400,000 house. Despite what the insurance salesman tells us, It usually makes sense to avoid paying insurance premiums if we can afford to pay the loss ourselves.

I've used the thousands of dollars in premiums we've saved to increase our portfolio for a more comfortable retirement.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: “There is a critical difference between designing a product that sells, and creating an investment that serves.”
"Simplicity is the master key to financial success." -- Jack Bogle
TN_Boy
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Re: Long Term Care Insurance (LTC)

Post by TN_Boy »

Seasonal wrote: Mon Sep 21, 2020 12:58 pm
TN_Boy wrote: Mon Sep 21, 2020 12:54 pm
Seasonal wrote: Mon Sep 21, 2020 12:51 pm
TN_Boy wrote: Mon Sep 21, 2020 12:26 pm
Seasonal wrote: Mon Sep 21, 2020 10:32 am An issue with LTC policies is the requirements for them to pay. For example, I recently saw a policy that would not pay unless the holder was unable to perform two Activities of Daily Living or had cognitive impairment severe enough to cause her to be unsafe. Coverage is up to $300,000 for a 95 year old, so it seems worth continuing at $3,000/year even if she might never meet the criteria.
The policy requirements you are talking about:
unable to perform two Activities of Daily Living or had cognitive impairment severe enough to cause her to be unsafe
are pretty much the standard. And you need a doctor's diagnosis on those conditions. The LTC insurance company will want to see a lot of records to verify the conditions.

They don't write policies that say "you are older and need some help, we'll pay you $$ per day for that help."

I think it is very common for someone to be at a level where they clearly cannot safely live alone, but just as clearly, do not qualify for LTC insurance to start paying. The "good" news is that as they decline, if they live long enough, they will hit the threshold of qualifying for payment.

This is not a comment for or against LTC insurance, just an observation that you are describing the usual policy conditions for starting payments.
Those criteria are standard, but many people don't realize that, hence the post.
Sorry, your wording threw me off a bit "I recently saw a policy" so I wanted to point out that probably all the policies you'll see will look like that.
FWIW, I spoke to the administrator of a day facility that this policy owner sometimes attends. The administrator said she sometimes sees policies that don't have this requirement. In any event, I agree it's standard, but people should check to see what the criteria are for payment and what the policy will pay.
For my own curiosity, could you tell me more about the policy mentioned? (This is for my general information). I've not heard of such a policy, and I'm wondering how the payout requirements are phrased. And the cost ....
Seasonal
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Re: Long Term Care Insurance (LTC)

Post by Seasonal »

TN_Boy wrote: Mon Sep 21, 2020 2:54 pm For my own curiosity, could you tell me more about the policy mentioned? (This is for my general information). I've not heard of such a policy, and I'm wondering how the payout requirements are phrased. And the cost ....
Sorry, I have no information other than what I was told by an administrator of the adult day care facility, that some policies don't require ADL problems or severe cognitive problems in order to pay. I was calling on behalf of the owner of a standard policy, so I didn't press.

FWIW, the owner would have liked her policy to pay and I was trying to get a judgment on whether the carrier's nurse was likely to find the owner met the policy's criteria.
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Re: Long Term Care Insurance (LTC)

Post by abuss368 »

Taylor Larimore wrote: Mon Sep 21, 2020 2:32 pm
This is like saying someone with $4M of assets can drop homeowners insurance on their $400,000 house because they can afford to pay to rebuild it if a disaster strikes.
celia:

You're right. If I had "$4M of assets" I would stop paying premium on a $400,000 house. Despite what the insurance salesman tells us, It usually makes sense to avoid paying insurance premiums if we can afford to pay the loss ourselves.

I've used the thousands of dollars in premiums we've saved to increase our portfolio for a more comfortable retirement.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: “There is a critical difference between designing a product that sells, and creating an investment that serves.”
I recently dialed down the term life insurance we carry. As the portfolio grows, debt is reduced, and life's needs are satisfied at certain stages, there is less of a need. I am investing the difference.
John C. Bogle: “Simplicity is the master key to financial success."
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