I looked into it for my parents twice, but the first time my mother's financial advisor convinced her that it was not worth the money, and because of that she didn't take me seriously the second time. The second time I looked into a program open to federal employees and their relatives, and it looked like the coverage was good (but the premium for my mom would have been $400 a month). Premiums increased substantially with age, so I suspect the key is figuring out a good age at which to sign up (not so young that you're paying premiums for such a long time that it cancels out the benefit, but not so old that premiums are beyond reach). I wish that my mom hadn't listened to her financial advisor, and that she'd been open to a LTC policy, because I know that I am the one who would end up filing the financial gap if one or both of them needed long term care at a level and length of time that would deplete their savings and investments. For the peace of mind, it would have been worth the high premiums, which I offered to pay myself. At her current age, 69, I doubt she'd qualify for anything that we could afford, and my dad wouldn't qualify at all because he has cancer. A LTC policy for my parents would ease my mind because I know how illnesses that require full time care over a long time period can eviscerate savings. My grandfather had alzheimers for 15 years, and spent the last 10 of them in an assisted living facility. My grandmother kept him at home as long as possible (longer than made sense, to be perfectly frank), but the reality is, given his strength, his diminished mental capacity, and later health complications, he needed the kind of care that only a LTC facility or a full time live-in nurse could provide. This was in the 80s and 90s but it cost thousands a month. Despite being hardworking, a saver, living a frugal lifestyle (to the point of growing their own produce in the summer and freezing and canning it for winter), and having a pension, paying for care for that many years took all of my grandmother's retirement savings. So once the money, inevitably, ran out, they had to go on medicaid and my mom helped with living expenses. I am very worried about facing a similar situation with my parents, particularly since costs are higher now, and I live in an area with an extremely high cost of living. Just think about stories you read about people who have a major illness with medical costs that cause bankruptcy, then multiply that financial impact across multiple years. Planning for an emergency, or even setting aside money for a comfortable retirement, is not going to cover full time care for years. As I understand the costs, it would be like sending a child to an elite private college --- and few people can afford that for more than 4 years even if they have been putting money aside since the child's infancy. Paying that annually, indefinitely, can make a mockery of even the best laid financial plans. The odds are that most people will not need that kind of care, but if you do the financial costs are devastating.

Smart Money magazine published an article several years ago that argued against buying LTC in your 50s or earlier because the standard 5% inflation protection coverage would not keep up with the average 7% increase in nursing home costs. Basically, the earlier you buy the policy, the larger the gap that you will have between what your policy pays out and what the actual costs will be. Here are a couple of quotes from the article: "The 5% inflation adjustment is the industry standard, adopted by the National Association of Insurance Commissioners (NAIC) in the early 1990s. If the insurance industry were to adopt the 7% inflation figure that some predict, 'the cost would be prohibitive', says Tom Foley, an actuary with the North Dakota Insurance Department who chairs the NAIC's long-term care rate stabilization woking group." "The average age at which people buy long-term-care insurance is now about 65, and given the effects of inflation on your coverage, not to mention the uncertainty of health care costs and public policy 20 or 30 years from now, why buy it earlier than that? 'If there's a liklihood you might develop a health problem that makes long-term-care insurance expensive, you might want to buy it sooner', says Chuck Mondin of the United Seniors Health Cooperative, a nonprofit advocacy group. Otherwise, wait."

chisue, insurance companies don't make money strictly off policy premiums. AIG's current headline news is a perfect example of this. When I worked at CIGNA (formerly Connecticut General, then they bought INA and changed their name), each of their 5 separate divisions was given an annual profit margin target to hit. This was called a "zero margin plus xx%". Note this was not a sales number, it was a "quick and dirty" percentage of how much revenue minus division expenses they made annually. My boss (one of the regional VPs with a shot at the division presidency) got interested in exactly where this target number came from. He learned that what CIGNA called "zero margin" was actually a base 15% profit margin. CIGNA could earn 15% off its money, through investments and such things as real estate development (for instance they bankrolled Foster City, a landfill development in the SF Bay Area that was considered risky at the time, but is now a desirable mixed-use suburb, selling it after a few years for a hefty profit), without ever writing another insurance policy. Therefore, their divisions had to earn OVER that 15% profit margin, to be worth expending corporate funds for. This is why insurance companies go in and out of market niches - they tend to keep a fairly conservative eye on what their profit margins are on each line of business. When people are discussing the stock market, the majority of money in it is institutional. Insurance companies are a very large part of that. They are even better than banks at leveraging their money. We used to make jokes about actuaries, but insurance companies realistically suvive on the number-crunching abilities of their actuaries. Like developers in a software company, they are what actually drives the financial corporate engines.

gibby -- There was a reduced-benefit clause in the LTC policies we took, too. I was wrong when I wrote that we took them 15 years ago. It was 20! Also, we had to pay in for TEN years, not TWO, to (possibly) get something back. We'd paid in $11,000 in premiums at the end of ten years. This was a group LTC policy from Hancock, offered to us by my DH's then-employer. After ten years we became eligible for reduced-amount benefits. Each policy will pay $45/day for *skilled nursing care*, to a lifetime max of $82,000. The verbiage on any other type of care is obscure with lots of hoops and mazes. Looking at it now, I think we will have aided tbe taxpayer -- seems to me these benefits would reduce the cost of our care to Medicare. If I'd had any doubts about problems collecting on the policies, they were sustained when it took me six months to get a letter from Hancock stating that each of us had actually qualified for this reduced-benefit coverage. We eventually received single-page letters, undated and without signatures, with a lot of 'may qualify' and 'could be' phrasing. Their legal department could send us packing without breaking a sweat. Our situation is different than yours as to probable need for the policy. I'm glad you'll take that opt-out clause. You might want to see a letter stating exactly what YOUR reduced benefits will be, specific to YOUR policy and YOUR premiums, before you sign up.