Policy pricing has significantly increased based on underwriting knowledge today. A policy to fully cover worst case costs such as a 90 day elimination period, $300 day to cover a private nursing home room and two, 5-year periods with a 5% inflation rider is prohibitively expensive.
The same policy with a 90 day elimination period is 125% the premium price of a 180 day elimination period. A 30 day elimination period in the same policy 160% the premium price.
A 5% inflation rider is 167% the premium price of a 3% rider.
Going to 4 years or 5 years benefit period can add 118% and 130% premium pricing vs. a 3 year benefit period. Going to "lifetime" can raise the premium to 230% of a 3 year benefit period.
Going from $200/day to say $240/day raises the premium to 120% (basically, proportional). A $300/day premium for the same benefit period is 150% the premium price.
Looking at the Genworth 2021 survey, home health aides average $170/day, assisted living facilities $150/day and nursing homes are $260/day for a semi-private and $300/day for a private room.
Let's look 20-years in the future with a 5% compound inflation rate for purposes of illustration. Home health aides average $450/day, assisted living facilities $395/day and nursing homes are $690/day for a semi-private and $790/day for a private room. If one purchased $200/day coverage with a 3% inflation rider:
Home Health Aide - $360 of $450/day (~80%)
Assisted Living Facility - $360 of $395/day (~90%)
Semi-Private Nursing Home Room - $360 of $690/day (~50%)
Private Nursing Home Room - $360 of $790/day (~45%)
Considering that 73% of paid expenses are for home healthcare, 18% for assisted living and only 9% for a nursing home, a $200/day daily benefit with a 3% inflation rider will cover most of the home-based or assisted living costs within the chosen benefit period amount (minus elimination period) and about 1/2 of a nursing home should that occur. The former is the more likely need for the policy, while emotionally we think about the later.
We still need liquid reserves to cover a major expense such as a 180 day elimination period. That said, the 180 day elimination period unless it is a stroke of sudden debilitating event is likely to be fulfilled by lower cost per day home or assisted living.
For us, we believe that the income from our portfolio is 85% for discretionary expenses and 15% supplementing ou reliable income. If we have the worst case scenario 20-years from now, we will need $150k/year (5% scenario) or $65k/year (3% scenario) for at most likely a number of years (as someone else highlighted 22 months is the average). This will come from our income generating portfolio.
So it really comes down to how the LTCi is fitting into one's overall plan I suppose. For us, LTCi is not really going to fully cover LTC but will serve to cushion the blow a bit and provide some extra contingency reserves. It us easier to operationalize than a spouse in a crisis situation to liquidate assets. I guess what I am wrestling with is its purpose within our plan and how it and our reserves best work together.
Right now either a $200/day x 2 people each with a 730 day "pools" with a extra 730 day "pool" with a 3% inflation rider
a $200/day x 2 people each with a 1095 day "pools"with a 3% inflation rider
20-years from now these $432,000 policies cover $780,000 based on 3% compounding. It will cost about $110,000 over the same 20-years.
are my lead thoughts on coverage for our circumstance.
Regarding AM Best and S&P Insurance Ratings, while it is easy to say, go with the most financially sound company based on ratings; the products offered in terms of their price and coverage may be far from comparable. All things being equal, one would of course favor them. For example, I had two NY Life options presented: 1) had a CPI inflation rider were the premium goes up when the benefit goes up; 2) another where the 3% inflation rider was simple and NOT compounded. I also had a Northwestern Mutual quote where the premium goes up when the benefit went up. Great companies offering expensive products with less coverage but with the benefit of a higher probability of fulfilling the policy. So where the limit is > A, > A+ or > A++ is a difficult one.
From a product perspective, I liked the National Guardian Life product features. That said, it is a good question as to were it will be in 20+ years. It has been around since 1909 originally as Wisconsin State Life Insurance Co.
This is their annual report
https://www.nglic.com/Portals/0/2021%20 ... 122014-090