Should we purchase LTC insurance at age 40?

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cabfranc
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Should we purchase LTC insurance at age 40?

Post by cabfranc »

We have been looking at our various insurances due to the birth of a second child. First, life then disability. Now we are looking at LTC insurance. We worked with a broker who provided several options.

Unlike life and DI, I find deciding how much LTC insurance to purchase to have a lot of uncertainty. If you die tomorrow, you know how much income you need or want to replace for your family and for how long. Likewise, if you become disabled, you know how much monthly income you need to replace and for how long. With LTC insurance, there is more uncertainty for two reasons. First, you have no idea how long you may be in a nursing home or when you may be admitted. Second, when you are relatively young, you have no idea what your finances will be in retirement and whether you will be able to self-insure or not. And the cost differences between modest and Cadillac policies to cover these extreme scenarios is large.

I have an issue with the fact that most of the policies do not protect against the catastrophic, which I view as the purpose of insurance. For example, a $2000/year policy only covers $150/day for up to 2-3 years. I have no idea what my finances will be in retirement, but if we are fortunate enough to continue our jobs and current rate of savings, I think we would be able to self-insure against that type of expense for both of us. But being in a nursing home for a decade would be financially devastating, especially if one suffered an injury relatively young. Yet most of the policies don't protect against that. A $6000/month policy would provide unlimited period of benefits of $200/day.

So I'm trying to decide between purchasing a policy now and waiting another 10-15 years to see what our finances look like. Of course, waiting to buy insurance always poses the risk one may be insurable in the future.

What do the Bogleheads think?
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JoeRetire
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Re: Should we purchase LTC insurance at age 40?

Post by JoeRetire »

cabfranc wrote: Sun Oct 25, 2020 2:18 pmSo I'm trying to decide between purchasing a policy now and waiting another 10-15 years to see what our finances look like. Of course, waiting to buy insurance always poses the risk one may be insurable in the future.
I think you should wait.

I've always heard that the sweet spot was shortly before turning 60.
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SnowBog
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Re: Should we purchase LTC insurance at age 40?

Post by SnowBog »

Opinions will vary... But the most common I've seen is that LTC is best for those who have enough assets they won't end up on Medicare/government support but not enough to self insure (arguably at some point you may have enough you don't need LTC).

Personally, I'm concerned about LTC rates increasing between now and when I'd need the care, and even if the insurer will still exist in 10-20+ years.

So I'm firmly in the "wait and see" camp...
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Re: Should we purchase LTC insurance at age 40?

Post by Raybo »

I bought LTC when I was that age as I had a long commute over a dangerous highway and was concerned about being maimed in a car accident. My logic was that it also was something I could keep as I got older. I don't recall the cost, but it wasn't all that onerous.

When I retired and stopped driving that road, I kept the LTC. But, after 2 hefty fee increases, I decided that the insurance would get increasingly expensive as time went on and I decided to self-insure.

In my experience, assume the cost will rise above whatever you are currently quoted and that it will happen more than once. Also, it is worth asking how hard it is to get the company to pay out when the time comes.
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Re: Should we purchase LTC insurance at age 40?

Post by smitcat »

JoeRetire wrote: Sun Oct 25, 2020 2:28 pm
cabfranc wrote: Sun Oct 25, 2020 2:18 pmSo I'm trying to decide between purchasing a policy now and waiting another 10-15 years to see what our finances look like. Of course, waiting to buy insurance always poses the risk one may be insurable in the future.
I think you should wait.

I've always heard that the sweet spot was shortly before turning 60.
Agreed - just under 60 would be the best approach.
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Re: Should we purchase LTC insurance at age 40?

Post by Stinky »

cabfranc wrote: Sun Oct 25, 2020 2:18 pm
So I'm trying to decide between purchasing a policy now and waiting another 10-15 years to see what our finances look like.
Good choice in getting your life and disability insurance in place.

I’d wait on LTC for a couple of decades. The products and marketplace of 2040 will likely look entirely different from those of 2020, and hopefully improved.
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Ben Mathew
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Re: Should we purchase LTC insurance at age 40?

Post by Ben Mathew »

The risk of waiting is that you'll develop a health issue that increases your premium or makes you uninsurable. You do get a lower premium by insuring earlier because your risk is lower--so you don't necessarily save on premiums over a lifetime by waiting.

Whether you should wait because the insurance landscape will change or your finances will change is a harder question.
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Re: Should we purchase LTC insurance at age 40?

Post by adamthesmythe »

At the age of 40, worst case is an accident or disease that leads to a need for decades of custodial care.

Insuring for that will be either impossible or unreasonably expensive. OP's $6000 policy (presumably per year, not per month) would pay maybe half the cost of custodial care today, less in the future.

I think it's better to upgrade a disability policy, and then evaluate the need for a LTC policy when reaching ~60.

Yes, this risks becoming uninsurable. But the other risk is dropping the policy because of high premium increases.
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Nate79
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Re: Should we purchase LTC insurance at age 40?

Post by Nate79 »

In about 20 years maybe.
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Watty
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Re: Should we purchase LTC insurance at age 40?

Post by Watty »

One thing to factor in your decision is that if you are in LTC when you are younger then you would also be collecting disability insurance, probably until you are 65.

That might not be enough to cover the LTC costs and your normal living expenses but it might allow you to get by on your savings for a while before things got too rough.

One thing that you might do is to make a spreadsheet to figure out what your cash flow would look like if you were in LTC and getting disability.

That of course assumes that you have good disability insurance so you should be sure to understand all the details about what you are buying.
Dan999
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Re: Should we purchase LTC insurance at age 40?

Post by Dan999 »

You will have to think about premium increases. My LTC policy was issued about 15 years ago when they underpriced them.
Seven years ago I got a 70% increase.
This year I got a 130% increase. Yep....
I am canceling it since I am now in a CCRC and can afford the upcharge for Nursing care for many years. There are 2 of us, so with one staying in the apt (and getting a reduction down to one person ) and one going to nursing or assisted living there would be an extra cost, but not at the market rate of $150,000. Average stay in nursing care here is about a year. Although, I know a lady who has been there at least 5 years.
Net increase to us would be $35,000 to $45,000.
I will have the premiums I paid set aside for us at the insurance company in case we need them. For me $44,000, for my wife, $33,000, no longer with inflation coverage.

Of course the high entry fee, and high monthly costs is prepaying some of the possible nursing care.

Dan
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Re: Should we purchase LTC insurance at age 40?

Post by marcopolo »

Raybo wrote: Sun Oct 25, 2020 2:51 pm I bought LTC when I was that age as I had a long commute over a dangerous highway and was concerned about being maimed in a car accident. My logic was that it also was something I could keep as I got older. I don't recall the cost, but it wasn't all that onerous.

When I retired and stopped driving that road, I kept the LTC. But, after 2 hefty fee increases, I decided that the insurance would get increasingly expensive as time went on and I decided to self-insure.

In my experience, assume the cost will rise above whatever you are currently quoted and that it will happen more than once. Also, it is worth asking how hard it is to get the company to pay out when the time comes.

This is exactly what the insurance companies are hoping will happen. In fact, that is one of the reason they often cite for hefty rate increases, not enough people cancelled their policies, creating larger than expected liabilities for them.
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Re: Should we purchase LTC insurance at age 40?

Post by nisiprius »

When we bought LTC insurance, we were able to buy it on a "ten year paid-in-full" plan. This roughly doubled the annual premium but it meant that once we had paid for ten years, we owned the policy, no longer needed to make further payments, and (I think!) are no longer vulnerable to price increases. There were no premium increases during the ten years--even one year when the insurer announced stiff premium increases generally--and that may have been a feature of the contract. We also opted for the largest possible inflation allowance, 5% compounded annually. That also doubled the premium, so for the time we were paying, we were paying about four times the premium for a pay-forever-level-benefit policy.

I reasoned not only that this would protect use against premium increases, but but that it would also insure that we were paying the premium during earning years when I was pretty sure we'd be able to keep up the payments, avoiding the exact nightmare scenario of premium increases coming during financial vulnerability in retirement.

I would not consider buying it far in advance without both of these features in place... and I'm not sure ten-year-paid-up plans are available nowadays.

I would not consider buying it decades in advance at all, because of the possibility of "stuff happening" to the insurance company. You get all kinds of useless advice about only buying from a "reputable" company but I have never known what "reputable" means, other than "having a good sales network so you hear about it a lot."

As an example of probably harmless "stuff" happening, ours is a John Hancock policy. At the time we bought it, we bought it through an office of an agency named Signator Investors, the name being a reference to John Hancock's signature on the Declaration of Independence and some connection with John Hancock. A few years after we bought it, the office closed, our advisor vanished, John Hancock became a subsidiary of Manulife in Canada, the Hancock Tower in Boston--the second of two once-famous Hancock skyscrapers, the infamous tall glass one that the windows kept falling out of--got officially renamed "200 Clarendon Street." And we got a fat envelope of legalese, "Questions and Answers about the Realignment of John Hancock's Legal Entities." The name of the company has changed from John Hancock Something-or-other to John Hancock Something-different, and the headquarters has moved, but not to worry, nothing has changed. Since we fortunately have had no need for the policy, I have no idea if the insurer will cheerfully pay claims as expected if needed, or whether they have nasty tricks up their sleeve. (The financial strength ratings are still OK).

There is a risk that what is available to buy two decades from now may not be as good as what you can buy now--the situation may continue to deteriorate--but it could just as easily get better. And today's "reputable" companies may be tomorrow's "disreputable" ones or may get out of the business and create difficulties, etc.

Twenty years ahead of time is too long, IMHO.
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Re: Should we purchase LTC insurance at age 40?

Post by mptfan »

I think you should wait.
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Re: Should we purchase LTC insurance at age 40?

Post by IowaFarmBoy »

Your post sounds a lot like where I was about 15 years ago at age 48 and started looking at LTC insurance. I felt like if we didn't need LTC until we were 85, we could likely pay for it. But I was concerned about the scenario where one of us needed it at age 60. That had the potential to devastate financial plans. Most policies that were available felt like they were a pre-paid plan- 30-90 elimination period with three years of coverage for around $350/mth each for my spouse and I. This amount would have really impacted our ability to save for retirement. I wanted something that would cover a catastrophic situation. Ideally, I would have liked something with a 2-3 year elimination period with a lifetime benefit but there was nothing like this in the marketplace.

I found a Genworth policy that offered a one year elimination period and 8 years of shared benefits that could be used by my spouse or I. This was the best compromise I could find at the time. I think it started with a daily benefit of $150/day (15 years ago) and increases by 5%/yr. It wasn't perfect but it seemed like it was the best we could do for coverage and cost. It initially cost about $1800/yr and a couple years back went to $2500/yr.

I'm concerned about the future of this policy- will Genworth stay solvent and what will premium increases be? When we we received the premium increase I realized that I would buy a new policy at this premium level so I sucked it up and went with it. At some point if the increases are too severe, we may need to drop it but it will have given us protection through the years where extended need for LTC would be catastrophic. And hopefully our savings have continued to grow.

I'm not sure you can buy anything like this now so I don't know what I would do if I was shopping at this point.
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Re: Should we purchase LTC insurance at age 40?

Post by racy »

I won't advise what you should do. However, I won't purchase LTC insurance. I don't trust insurance companies now and certainly not what they promise to do in the future. I prefer to save money by using high deductibles, insuring only against catastrophe and self insuring, which I'll also do for long term care if needed.
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Re: Should we purchase LTC insurance at age 40?

Post by Stinky »

nisiprius wrote: Mon Oct 26, 2020 7:17 am When we bought LTC insurance, we were able to buy it on a "ten year paid-in-full" plan. This roughly doubled the annual premium but it meant that once we had paid for ten years, we owned the policy, no longer needed to make further payments, and (I think!) are no longer vulnerable to price increases. There were no premium increases during the ten years--even one year when the insurer announced stiff premium increases generally--and that may have been a feature of the contract. We also opted for the largest possible inflation allowance, 5% compounded annually. That also doubled the premium, so for the time we were paying, we were paying about four times the premium for a pay-forever-level-benefit policy.
Given what's happened in the LTC marketplace, doing a "10-pay" policy was an absolutely brilliant thing for you to do. As more and more experience has come in about LTC claims, insurers have been raising premiums on inforce policies right and left. But you're insulated from those rate increases because you paid all of your premiums up front.

Brilliant!
nisiprius wrote: Mon Oct 26, 2020 7:17 am
As an example of probably harmless "stuff" happening, ours is a John Hancock policy. At the time we bought it, we bought it through an office of an agency named Signator Investors, the name being a reference to John Hancock's signature on the Declaration of Independence and some connection with John Hancock. A few years after we bought it, the office closed, our advisor vanished, John Hancock became a subsidiary of Manulife in Canada, the Hancock Tower in Boston--the second of two once-famous Hancock skyscrapers, the infamous tall glass one that the windows kept falling out of--got officially renamed "200 Clarendon Street." And we got a fat envelope of legalese, "Questions and Answers about the Realignment of John Hancock's Legal Entities." The name of the company has changed from John Hancock Something-or-other to John Hancock Something-different, and the headquarters has moved, but not to worry, nothing has changed. Since we fortunately have had no need for the policy, I have no idea if the insurer will cheerfully pay claims as expected if needed, or whether they have nasty tricks up their sleeve. (The financial strength ratings are still OK).
Yes, all of the things that you mention are "harmless stuff". Advisors and agents come and go, ownership of the stock of John Hancock Life passes to Manulife, insurance companies are realigned, office locations are changed, but your policy remains in force. Your policy's terms remain unchanged.

And, under Manulife's ownership, John Hancock is arguably a stronger company.

You have an overwhelming likelihood that your claim will be fully paid if you ever need to draw on the policy.
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Re: Should we purchase LTC insurance at age 40?

Post by willthrill81 »

SnowBog wrote: Sun Oct 25, 2020 2:43 pm Opinions will vary... But the most common I've seen is that LTC is best for those who have enough assets they won't end up on Medicare/government support but not enough to self insure (arguably at some point you may have enough you don't need LTC).
Many, probably most, on this forum should be able to self-insure LTC with relative ease. For those with $2 million portfolios or more in their 60s and a paid-off home, it should be a breeze.

As such, the question as to whether who ever needs LTC insurance is driven largely by one's assets.
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Re: Should we purchase LTC insurance at age 40?

Post by crefwatch »

The ten year plan "sounds" good, but I'd like to know if it is actually "Universal Life with LTC Rider." The problem is that nearly invisible cost deductions can continue to occur inside the policy, until you receive a warning that the "income" no longer covers the "costs". (Remember that famous movie-business about "... the only Net in this business is the net they put you in for believing that there IS any Net.")

Do you understand that class-wide changes in premiums are frequently approved by state regulators? My mother's policy has had two increases since she took it out in the 1990s. Her provider (TIAA) also tried to transfer the "insurance" exposure to the purchaser of the business, but was forced to allow policy holders to refuse that part of the transfer. Only the "administration" was transferred to Met Life, the purchaser. Met Life is not a dramatically weaker company, but what if the company that your insuror sells to is?
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Re: Should we purchase LTC insurance at age 40?

Post by wfrobinette »

smitcat wrote: Sun Oct 25, 2020 3:06 pm
JoeRetire wrote: Sun Oct 25, 2020 2:28 pm
cabfranc wrote: Sun Oct 25, 2020 2:18 pmSo I'm trying to decide between purchasing a policy now and waiting another 10-15 years to see what our finances look like. Of course, waiting to buy insurance always poses the risk one may be insurable in the future.
I think you should wait.

I've always heard that the sweet spot was shortly before turning 60.
Agreed - just under 60 would be the best approach.
Me too!
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cabfranc
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Re: Should we purchase LTC insurance at age 40?

Post by cabfranc »

IowaFarmBoy wrote: Mon Oct 26, 2020 7:36 am Your post sounds a lot like where I was about 15 years ago at age 48 and started looking at LTC insurance. I felt like if we didn't need LTC until we were 85, we could likely pay for it. But I was concerned about the scenario where one of us needed it at age 60. That had the potential to devastate financial plans. Most policies that were available felt like they were a pre-paid plan- 30-90 elimination period with three years of coverage for around $350/mth each for my spouse and I. This amount would have really impacted our ability to save for retirement. I wanted something that would cover a catastrophic situation. Ideally, I would have liked something with a 2-3 year elimination period with a lifetime benefit but there was nothing like this in the marketplace.

I found a Genworth policy that offered a one year elimination period and 8 years of shared benefits that could be used by my spouse or I. This was the best compromise I could find at the time. I think it started with a daily benefit of $150/day (15 years ago) and increases by 5%/yr. It wasn't perfect but it seemed like it was the best we could do for coverage and cost. It initially cost about $1800/yr and a couple years back went to $2500/yr.

I'm concerned about the future of this policy- will Genworth stay solvent and what will premium increases be? When we we received the premium increase I realized that I would buy a new policy at this premium level so I sucked it up and went with it. At some point if the increases are too severe, we may need to drop it but it will have given us protection through the years where extended need for LTC would be catastrophic. And hopefully our savings have continued to grow.

I'm not sure you can buy anything like this now so I don't know what I would do if I was shopping at this point.
A plan that had a 2 or even 3 year elimination period but provided unlimited or several years of benefits after that would be ideal. It would allow us to save to self-insure for an average length of stay, but the policy would insure against the catastrophic long-term stay. Presumably such a plan would have a lower premium. Presumably such a plan also does not exist, but I will look around.

Our DI policies have a $5000 catastrophic rider (in addition to the $10,000 monthly benefit). Presumably any disability that caused one to need LTC would be eligible for this rider. I would think that if LTC was needed prior to age 65, the $15,000 from DI would cover the cost of LTC plus the other spouse would having his/her earnings hopefully. After age 65 if care was still needed it would be financially problematic, since retirement savings would not be as robust due to disability.

I'm beginning to think there is no great solution to insure against truly catastrophic LTC need that doesn't cost a ton of money.

I'm leaning towards waiting at least 15 years to revisit this.
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Re: Should we purchase LTC insurance at age 40?

Post by cabfranc »

Also it's kind of ironic that these policies are called LTC insurance, because most of them don't actually cover true "long-term" care.
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Re: Should we purchase LTC insurance at age 40?

Post by nisiprius »

crefwatch wrote: Mon Oct 26, 2020 9:47 am The ten year plan "sounds" good, but I'd like to know if it is actually "Universal Life with LTC Rider."
No. It is NOT. It is a "John Hancock Long-Term Care Insurance Policy." The so-called LTC riders which merely allow you invade the death benefit always say clearly "this is not long-term care insurance." And it says
Important notice. You have selected the Ten-Year Premium Payment Option. This means that Your Policy is fully paid up and no further premiums will be due at the end of your tenth Policy Year.
But it does say "we reserve the right to increase your premium" during the ten-year period, so we were luck with that.

I don't know if ten-year payment plans are still available.

It was an important deciding factor in choosing to buy the policy, because even then I was concerned about the possibility of letting the policy lapse because of being unable to pay premiums. And I had no idea at the time that insurance companies counted on people letting policies lapse--thus paying premiums without getting anything in return--and that it was an essential part of their business model.
Many, probably most, on this forum should be able to self-insure LTC with relative ease. For those with $2 million portfolios or more in their 60s and a paid-off home, it should be a breeze.
We can afford to take the risk of the average nursing home stay of about two years. We can't afford to take the risk of a six- or eight-year stay.
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Re: Should we purchase LTC insurance at age 40?

Post by IowaFarmBoy »

cabfranc wrote: Mon Oct 26, 2020 10:48 am
A plan that had a 2 or even 3 year elimination period but provided unlimited or several years of benefits after that would be ideal. It would allow us to save to self-insure for an average length of stay, but the policy would insure against the catastrophic long-term stay. Presumably such a plan would have a lower premium. Presumably such a plan also does not exist, but I will look around.

.......

I'm beginning to think there is no great solution to insure against truly catastrophic LTC need that doesn't cost a ton of money.

I'm leaning towards waiting at least 15 years to revisit this.
I couldn't find anything like that 15 years ago and I think there is probably less selection now. This was one of the hardest financial decisions I've tried to sort out- not enough good info, projecting 30-40 years into the future with a lot of unknowns- what will life expectancy be at that point, what will LTC look like (robots?), etc.

Good luck!
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Re: Should we purchase LTC insurance at age 40?

Post by JoeRetire »

racy wrote: Mon Oct 26, 2020 7:58 amself insuring, which I'll also do for long term care if needed.
How old are you?
How much have you put aside for your LTC self-insurance?
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Re: Should we purchase LTC insurance at age 40?

Post by phinanciallyfit »

Raybo wrote: Sun Oct 25, 2020 2:51 pm I bought LTC when I was that age as I had a long commute over a dangerous highway and was concerned about being maimed in a car accident. My logic was that it also was something I could keep as I got older. I don't recall the cost, but it wasn't all that onerous.
This was part of our logic at getting an Accidental Death and Dismemberment plan through work... we figured at our ages (34 when I started at this company), the biggest risk to our health was an accident. And ADD insurance is a lot cheaper than most other insurance plans (at least through my employer it is) and we can consider other options like LTC whenever I leave this job.

Note, we do have life insurance too, but not short-term disability, long-term disability or care coverage.
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Re: Should we purchase LTC insurance at age 40?

Post by JS-Elcano »

cabfranc wrote: Sun Oct 25, 2020 2:18 pm We have been looking at our various insurances due to the birth of a second child. First, life then disability. Now we are looking at LTC insurance. We worked with a broker who provided several options.

Unlike life and DI, I find deciding how much LTC insurance to purchase to have a lot of uncertainty. If you die tomorrow, you know how much income you need or want to replace for your family and for how long. Likewise, if you become disabled, you know how much monthly income you need to replace and for how long. With LTC insurance, there is more uncertainty for two reasons. First, you have no idea how long you may be in a nursing home or when you may be admitted. Second, when you are relatively young, you have no idea what your finances will be in retirement and whether you will be able to self-insure or not. And the cost differences between modest and Cadillac policies to cover these extreme scenarios is large.

I have an issue with the fact that most of the policies do not protect against the catastrophic, which I view as the purpose of insurance. For example, a $2000/year policy only covers $150/day for up to 2-3 years. I have no idea what my finances will be in retirement, but if we are fortunate enough to continue our jobs and current rate of savings, I think we would be able to self-insure against that type of expense for both of us. But being in a nursing home for a decade would be financially devastating, especially if one suffered an injury relatively young. Yet most of the policies don't protect against that. A $6000/month policy would provide unlimited period of benefits of $200/day.

So I'm trying to decide between purchasing a policy now and waiting another 10-15 years to see what our finances look like. Of course, waiting to buy insurance always poses the risk one may be insurable in the future.

What do the Bogleheads think?
Yes, LTCi may pay you only 54k/year with such a policy, which most likely you can stem yourself. BUT, this would be on top of what you can contribute yourself from your own savings, and this may make a difference between the type, quality, level and duration of care you can afford. So, view it as supplemental funds on top of what you can pay yourself when evaluating a policy, rather than looking for something that pays for your desired level of care 100%.

I am in my late 40s and have decided to not purchase LTCi until I am 59. I will also have a much better idea of my finances then and my overall health going into retirement.
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Re: Should we purchase LTC insurance at age 40?

Post by ncbill »

nisiprius wrote: Mon Oct 26, 2020 11:06 am
crefwatch wrote: Mon Oct 26, 2020 9:47 am The ten year plan "sounds" good, but I'd like to know if it is actually "Universal Life with LTC Rider."
No. It is NOT. It is a "John Hancock Long-Term Care Insurance Policy." The so-called LTC riders which merely allow you invade the death benefit always say clearly "this is not long-term care insurance." And it says
Important notice. You have selected the Ten-Year Premium Payment Option. This means that Your Policy is fully paid up and no further premiums will be due at the end of your tenth Policy Year.
But it does say "we reserve the right to increase your premium" during the ten-year period, so we were luck with that.

I don't know if ten-year payment plans are still available.

It was an important deciding factor in choosing to buy the policy, because even then I was concerned about the possibility of letting the policy lapse because of being unable to pay premiums. And I had no idea at the time that insurance companies counted on people letting policies lapse--thus paying premiums without getting anything in return--and that it was an essential part of their business model.
Many, probably most, on this forum should be able to self-insure LTC with relative ease. For those with $2 million portfolios or more in their 60s and a paid-off home, it should be a breeze.
We can afford to take the risk of the average nursing home stay of about two years. We can't afford to take the risk of a six- or eight-year stay.
IMHO, a health care POA with the proper language goes a long way to mitigating tail risk...e.g. palliative care only after diagnosis of a terminal illness, including dementia.

It's what I've done after watching a relatively young parent (diagnosed around age 50) spend the better part of a decade bed-ridden before their death from complications of dementia.
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Re: Should we purchase LTC insurance at age 40?

Post by TN_Boy »

ncbill wrote: Mon Oct 26, 2020 4:14 pm
nisiprius wrote: Mon Oct 26, 2020 11:06 am
crefwatch wrote: Mon Oct 26, 2020 9:47 am The ten year plan "sounds" good, but I'd like to know if it is actually "Universal Life with LTC Rider."
No. It is NOT. It is a "John Hancock Long-Term Care Insurance Policy." The so-called LTC riders which merely allow you invade the death benefit always say clearly "this is not long-term care insurance." And it says
Important notice. You have selected the Ten-Year Premium Payment Option. This means that Your Policy is fully paid up and no further premiums will be due at the end of your tenth Policy Year.
But it does say "we reserve the right to increase your premium" during the ten-year period, so we were luck with that.

I don't know if ten-year payment plans are still available.

It was an important deciding factor in choosing to buy the policy, because even then I was concerned about the possibility of letting the policy lapse because of being unable to pay premiums. And I had no idea at the time that insurance companies counted on people letting policies lapse--thus paying premiums without getting anything in return--and that it was an essential part of their business model.
Many, probably most, on this forum should be able to self-insure LTC with relative ease. For those with $2 million portfolios or more in their 60s and a paid-off home, it should be a breeze.
We can afford to take the risk of the average nursing home stay of about two years. We can't afford to take the risk of a six- or eight-year stay.
IMHO, a health care POA with the proper language goes a long way to mitigating tail risk...e.g. palliative care only after diagnosis of a terminal illness, including dementia.

It's what I've done after watching a relatively young parent (diagnosed around age 50) spend the better part of a decade bed-ridden before their death from complications of dementia.
Ncbill,

I know you were advocating this approach in another thread and I still have reservations about its effectiveness.

But I've not seen it tried, so I'm wondering if anyone has seen such an approach work in real life -- in particular patient physically healthy (could live a decade) with dementia diagnosis, and doctors do not treat even though the patient is not near dying (e.g. pneumonia, UTI, fall injury etc).
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Re: Should we purchase LTC insurance at age 40?

Post by nisiprius »

ncbill wrote: Mon Oct 26, 2020 4:14 pm...IMHO, a health care POA with the proper language goes a long way to mitigating tail risk...e.g. palliative care only after diagnosis of a terminal illness, including dementia...
Real example from my circle of acquaintances: a healthy woman in her late fifties suffered a spinal injury that put her into a nursing home for more than a decade, during which time she was mentally alert but unable to care for herself. How would a POA "mitigate" that?

Not everyone in a nursing home is in a situation where a third party might judge that their life is no longer worth living.

I have no connection with the insurance business other than as a policyholders. I am not saying LTCi as it exists today, or as it existed when we bought it, is "the answer." In my opinion it is an obvious, glaring, serious societal problem with no good solution at this time and place. I am not putting forth fantasies of how terrific it would be to be in a nursing home as long as you have insurance. When we had the decision to make we decided it we were willing to (please, let's hope) throw away the cost of about six months in a nursing home, in order to (please, never) get up to twelve years coverage if needed. (Six years, two people, "shared-care" option).

(I didn't know them well enough to quiz them on how they were handling it financially, but it was the result of a car accident in which the other driver was at fault, so possibly the other driver's insurance paid for it.)
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Re: Should we purchase LTC insurance at age 40?

Post by MDfan »

racy wrote: Mon Oct 26, 2020 7:58 am I won't advise what you should do. However, I won't purchase LTC insurance. I don't trust insurance companies now and certainly not what they promise to do in the future. I prefer to save money by using high deductibles, insuring only against catastrophe and self insuring, which I'll also do for long term care if needed.

That's where we're at with LTC. Purchased policies a couple of years ago at 57 and 55 from Mutual of Omaha. Decided a year or so in, based on advice of our FA, that we can self-insure if we need to so we dropped it. Saving about $4k/year.
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Re: Should we purchase LTC insurance at age 40?

Post by JoeRetire »

MDfan wrote: Tue Oct 27, 2020 6:49 am
racy wrote: Mon Oct 26, 2020 7:58 am I won't advise what you should do. However, I won't purchase LTC insurance. I don't trust insurance companies now and certainly not what they promise to do in the future. I prefer to save money by using high deductibles, insuring only against catastrophe and self insuring, which I'll also do for long term care if needed.

That's where we're at with LTC. Purchased policies a couple of years ago at 57 and 55 from Mutual of Omaha. Decided a year or so in, based on advice of our FA, that we can self-insure if we need to so we dropped it. Saving about $4k/year.
I assume you mean "fund your long term care" rather than "self-insure"?
How did your FA advise you to be prepared for that? Did you set aside a particular amount for your care? If so, how much?
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Re: Should we purchase LTC insurance at age 40?

Post by bluegill »

I'd wait. Lot's of thing can happen before you need LTC. [Political comment removed by admin LadyGeek] I admire that you bought Disability Income (DI) insurance. DI is more important, needed than Life insurance, but most people don't have DI insurance.
LTC is the same price irregardless of gender, but women have much higher use of LTC. If you visit a LTC facility you will see about 80% are women. (see that you wife has LTC insurance) The people who drop LTC insurance subsidize the people who maintain there LTC insurance. Overall LTC insurance is a good value. I bought mine when I was around 55 YO. LTC insurance premiums are a tax deduction in my state. LTCI has estate planning benefits, e.g. The amount of insurance paid is reserved to the spouse Medicaid eligibility (or something along that line).
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Re: Should we purchase LTC insurance at age 40?

Post by MDfan »

JoeRetire wrote: Tue Oct 27, 2020 7:09 am
MDfan wrote: Tue Oct 27, 2020 6:49 am
racy wrote: Mon Oct 26, 2020 7:58 am I won't advise what you should do. However, I won't purchase LTC insurance. I don't trust insurance companies now and certainly not what they promise to do in the future. I prefer to save money by using high deductibles, insuring only against catastrophe and self insuring, which I'll also do for long term care if needed.

That's where we're at with LTC. Purchased policies a couple of years ago at 57 and 55 from Mutual of Omaha. Decided a year or so in, based on advice of our FA, that we can self-insure if we need to so we dropped it. Saving about $4k/year.
I assume you mean "fund your long term care" rather than "self-insure"?
How did your FA advise you to be prepared for that? Did you set aside a particular amount for your care? If so, how much?
Yes, that's what I meant. I use those terms interchangeably. He basically just told us that with our level of assets, we really didn't need to pay for LTC insurance and we would have enough to weather any storm. We have not set aside a specific amount but would just pay it out of our assets if necessary.
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Re: Should we purchase LTC insurance at age 40?

Post by vinhodoporto »

OP - to give you a different perspective, I think I'm the only person on this thread who bought LTCI before late 50s. I bought it 11 years ago through an employer when I was in my 30s. It was (and still is) super cheap (~$40/mo), although this was when most plans were still mis-priced. I've since left that employer but I was grandfathered and able to take the plan with me. Of note, that employer as well as the two I have worked for since then no longer offer LTCI for new employees.

I think this decision, like all insurance decisions, comes down to the cost and your personal risk tolerance. In my case the cost was low, and I tend to err on the side of over-insuring against low probability but catastrophic events. In my case, I was also influenced by the fact that one of my parents ended up in a LTC facility on Medicaid in their early 60s and I didn't want to repeat that. YMMV.
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Re: Should we purchase LTC insurance at age 40?

Post by tj »

I pay $72/mo for 5 years of $450/day benefits from the Federal LTC plan. I bought it when I was 33. Hopefully I will never need to use it. Inflation will erode away some of the value, but I can't imagine an individual plan will be better in a couple decades. Though if it is, I'll simply switch.
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Re: Should we purchase LTC insurance at age 40?

Post by JoeRetire »

MDfan wrote: Tue Oct 27, 2020 9:06 am
JoeRetire wrote: Tue Oct 27, 2020 7:09 am
MDfan wrote: Tue Oct 27, 2020 6:49 am
racy wrote: Mon Oct 26, 2020 7:58 am I won't advise what you should do. However, I won't purchase LTC insurance. I don't trust insurance companies now and certainly not what they promise to do in the future. I prefer to save money by using high deductibles, insuring only against catastrophe and self insuring, which I'll also do for long term care if needed.

That's where we're at with LTC. Purchased policies a couple of years ago at 57 and 55 from Mutual of Omaha. Decided a year or so in, based on advice of our FA, that we can self-insure if we need to so we dropped it. Saving about $4k/year.
I assume you mean "fund your long term care" rather than "self-insure"?
How did your FA advise you to be prepared for that? Did you set aside a particular amount for your care? If so, how much?
Yes, that's what I meant. I use those terms interchangeably. He basically just told us that with our level of assets, we really didn't need to pay for LTC insurance and we would have enough to weather any storm. We have not set aside a specific amount but would just pay it out of our assets if necessary.
So the FA expects that you will have plenty of excess assets through the remainder of your lives. And you will either leave a large legacy, or spend it on long term care at some point. Okay.
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Re: Should we purchase LTC insurance at age 40?

Post by MDfan »

JoeRetire wrote: Tue Oct 27, 2020 11:26 am
MDfan wrote: Tue Oct 27, 2020 9:06 am
JoeRetire wrote: Tue Oct 27, 2020 7:09 am
MDfan wrote: Tue Oct 27, 2020 6:49 am
racy wrote: Mon Oct 26, 2020 7:58 am I won't advise what you should do. However, I won't purchase LTC insurance. I don't trust insurance companies now and certainly not what they promise to do in the future. I prefer to save money by using high deductibles, insuring only against catastrophe and self insuring, which I'll also do for long term care if needed.

That's where we're at with LTC. Purchased policies a couple of years ago at 57 and 55 from Mutual of Omaha. Decided a year or so in, based on advice of our FA, that we can self-insure if we need to so we dropped it. Saving about $4k/year.
I assume you mean "fund your long term care" rather than "self-insure"?
How did your FA advise you to be prepared for that? Did you set aside a particular amount for your care? If so, how much?
Yes, that's what I meant. I use those terms interchangeably. He basically just told us that with our level of assets, we really didn't need to pay for LTC insurance and we would have enough to weather any storm. We have not set aside a specific amount but would just pay it out of our assets if necessary.
So the FA expects that you will have plenty of excess assets through the remainder of your lives. And you will either leave a large legacy, or spend it on long term care at some point. Okay.


Not sure of your point. I've read multiple times that there's a point (level of assets) at which LTC insurance doesn't really make sense. I think our FA is saying that we are at (or close to) that point. He's also a former insurance guy who is not a big fan of the traditional LTC policies.

And, yes, if the projections are correct, our kids will get a nice inheritance.
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Re: Should we purchase LTC insurance at age 40?

Post by JoeRetire »

MDfan wrote: Tue Oct 27, 2020 7:12 pmNot sure of your point. I've read multiple times that there's a point (level of assets) at which LTC insurance doesn't really make sense. I think our FA is saying that we are at (or close to) that point.
That was exactly my point.

What is that level of assets in your case?
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Re: Should we purchase LTC insurance at age 40?

Post by smitcat »

JoeRetire wrote: Wed Oct 28, 2020 6:34 am
MDfan wrote: Tue Oct 27, 2020 7:12 pmNot sure of your point. I've read multiple times that there's a point (level of assets) at which LTC insurance doesn't really make sense. I think our FA is saying that we are at (or close to) that point.
That was exactly my point.

What is that level of assets in your case?
Interesting - we can self insure and so far still believe our LTCi is worth keeping.
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Re: Should we purchase LTC insurance at age 40?

Post by ncbill »

nisiprius wrote: Tue Oct 27, 2020 6:09 am
ncbill wrote: Mon Oct 26, 2020 4:14 pm...IMHO, a health care POA with the proper language goes a long way to mitigating tail risk...e.g. palliative care only after diagnosis of a terminal illness, including dementia...
Real example from my circle of acquaintances: a healthy woman in her late fifties suffered a spinal injury that put her into a nursing home for more than a decade, during which time she was mentally alert but unable to care for herself. How would a POA "mitigate" that?

Not everyone in a nursing home is in a situation where a third party might judge that their life is no longer worth living.

I have no connection with the insurance business other than as a policyholders. I am not saying LTCi as it exists today, or as it existed when we bought it, is "the answer." In my opinion it is an obvious, glaring, serious societal problem with no good solution at this time and place. I am not putting forth fantasies of how terrific it would be to be in a nursing home as long as you have insurance. When we had the decision to make we decided it we were willing to (please, let's hope) throw away the cost of about six months in a nursing home, in order to (please, never) get up to twelve years coverage if needed. (Six years, two people, "shared-care" option).

(I didn't know them well enough to quiz them on how they were handling it financially, but it was the result of a car accident in which the other driver was at fault, so possibly the other driver's insurance paid for it.)
So they weren't terminal...though they still could have chosen to elect to forgo curative treatments, depending on quality of life issues.

I've had relatives on dialysis who, given the side effects, came close to discontinuing it in favor of Hospice.

From other comments here there seems to be a myth that people diagnosed with dementia remain able to go out and play pickleball every afternoon up until close to the end when the unfortunate reality is that they are much more likely to spend those final years bedridden, suffering from repeated infections like pneumonia or UTIs, as another poster mentioned.

That's a "tail risk" I can indeed at least attempt to mitigate by the proper language in my health care POA.

I would of course have had plenty of discussions with the health care agent as to my wishes.

I also plan on purchasing LTCi, but it would go a lot further for home and ALF care versus nursing home care.

And "third party might judge that their life is no longer worth living..." please tell me you're joking, right?

You name your own agent to carry out your wishes in your health care POA.
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Re: Should we purchase LTC insurance at age 40?

Post by MDfan »

JoeRetire wrote: Wed Oct 28, 2020 6:34 am
MDfan wrote: Tue Oct 27, 2020 7:12 pmNot sure of your point. I've read multiple times that there's a point (level of assets) at which LTC insurance doesn't really make sense. I think our FA is saying that we are at (or close to) that point.
That was exactly my point.

What is that level of assets in your case?
About $3 million at ages 59 and 57. Planning to retire next year at 60.
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Re: Should we purchase LTC insurance at age 40?

Post by bluegill »

There are 2 points where LTCI is not practicable. A poor person should not buy LTCI. A rich person does not need LTCI.
poor person Clarify: A person who's life style is strongly affected by paying the LTCI premiums should not buy LTCI.
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Re: Should we purchase LTC insurance at age 40?

Post by JoeRetire »

MDfan wrote: Wed Oct 28, 2020 6:00 pm
JoeRetire wrote: Wed Oct 28, 2020 6:34 am
MDfan wrote: Tue Oct 27, 2020 7:12 pmNot sure of your point. I've read multiple times that there's a point (level of assets) at which LTC insurance doesn't really make sense. I think our FA is saying that we are at (or close to) that point.
That was exactly my point.

What is that level of assets in your case?
About $3 million at ages 59 and 57. Planning to retire next year at 60.
Interesting. I would have expected a higher level. Perhaps your expenses are low.
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Re: Should we purchase LTC insurance at age 40?

Post by MDfan »

JoeRetire wrote: Thu Oct 29, 2020 6:02 am
MDfan wrote: Wed Oct 28, 2020 6:00 pm
JoeRetire wrote: Wed Oct 28, 2020 6:34 am
MDfan wrote: Tue Oct 27, 2020 7:12 pmNot sure of your point. I've read multiple times that there's a point (level of assets) at which LTC insurance doesn't really make sense. I think our FA is saying that we are at (or close to) that point.
That was exactly my point.

What is that level of assets in your case?
About $3 million at ages 59 and 57. Planning to retire next year at 60.
Interesting. I would have expected a higher level. Perhaps your expenses are low.

Not really. About $10-11k per month (including a mortgage for about 10 more years). I 've read various places that the sweet spot for "self-funding" LTC is around $2 million or so. We feel pretty comfortable with the advice we received and feel that we could handle a LTC event if it happens out of our assets. I should mention I will also have a FERS pension and, by about age 70, we should be covering the bulk of our expenses with the pension and SS.
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Re: Should we purchase LTC insurance at age 40?

Post by MDfan »

bluegill wrote: Thu Oct 29, 2020 4:49 am There are 2 points where LTCI is not practicable. A poor person should not buy LTCI. A rich person does not need LTCI.
poor person Clarify: A person who's life style is strongly affected by paying the LTCI premiums should not buy LTCI.
What do you consider "rich" for purposes of not needing to buy LTCI. Genuinely interested in other opinions. Like I said, our FA, who I will admit is a former insurance guy and is not a fan of traditional LTCI policies in part because of the very likely potential for significant rate increases, essentially told us we don't need it.
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Re: Should we purchase LTC insurance at age 40?

Post by JoeRetire »

MDfan wrote: Thu Oct 29, 2020 6:29 amWe feel pretty comfortable with the advice we received and feel that we could handle a LTC event if it happens out of our assets.
Could you handle it if it happened tomorrow?
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Re: Should we purchase LTC insurance at age 40?

Post by mmmodem »

JoeRetire wrote: Thu Oct 29, 2020 8:56 am
MDfan wrote: Thu Oct 29, 2020 6:29 amWe feel pretty comfortable with the advice we received and feel that we could handle a LTC event if it happens out of our assets.
Could you handle it if it happened tomorrow?
That's a good question. We know we can self insure in the future. But right now, I don't think we can.

We have life insurance right now because we cannot self insure. Sometime in the future we will no longer need it and will let it lapse.

So does that mean we need LTC while we are young? I want to say no because the likelihood of needing it while young is low but so is death. :confused
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Re: Should we purchase LTC insurance at age 40?

Post by MDfan »

I don't know. But, honestly, the policy we had (i think it paid $150/day with a max of three years) would probably not be sufficient if it happened tomorrow. We're pretty comfortable taking the risk that it won't happen tomorrow or any time soon. It's not like we didn't put a lot of thought into this. We just decided, after talking with our FA who we trust completely, to go without it.
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Re: Should we purchase LTC insurance at age 40?

Post by JoeRetire »

mmmodem wrote: Thu Oct 29, 2020 9:12 am
JoeRetire wrote: Thu Oct 29, 2020 8:56 am
MDfan wrote: Thu Oct 29, 2020 6:29 amWe feel pretty comfortable with the advice we received and feel that we could handle a LTC event if it happens out of our assets.
Could you handle it if it happened tomorrow?
That's a good question. We know we can self insure in the future. But right now, I don't think we can.

We have life insurance right now because we cannot self insure. Sometime in the future we will no longer need it and will let it lapse.
Yup. That's kind of the point about insurance.
So does that mean we need LTC while we are young? I want to say no because the likelihood of needing it while young is low but so is death. :confused
My feeling is that late 50s is the sweet spot. But your financial adviser should be able to discuss this with you.
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