Have you used long term care insurance?

8 years ago

This perhaps should go over in Financial but if you are here you may have used it rather than just planned for it.

My husband is in a nursing home as a private pay patient. Because the cost of LTC insurance was so high if available in my 30's I opted out of finding a company that offered it. It is much easier to find a company now. I simply increased the amount going into savings instead. My family members keep telling me to purchase the insurance although I am almost 70 and should???? have enough in my savings to cover both mine and my husbands nursing home care for about ten years with a combination of income and savings. I am wondering if anyone that posts here have any comments about it. Over the years I have heard many comments that people have dropped it because the rates have increased so much that it was too expensive. I have also heard other comments that once it was needed what was actually received was much less than what the original policy stated. I need something I can show pro or con to my family besides that to me at my age it does not make sense.

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Comments (5)

bpath
8 years ago
I'm 60 and don't have LTC and have no idea what the premium would be. My parents are in their 90s and just about to move to a skilled nursing facility, Dad is already in respite care at one, following stroke rehab. I recall visiting an assisted living home several years ago with my mom, and one couple at our info session asked half a dozen times if they could use their LTC for assisted living, and the answer every time was "yes". So not just for nursing care, but assisted living, too, which is very attractive. How much does assisted living cost in your area?
User
Original Author
8 years ago
last modified: 8 years ago
Assisted living would depend on the type. Some you rent a room and share meals which can range from $895 to $2,750. Some are like an apartment with similar costs. Others you pay an entry fee normally $185,000 or larger. The average is around $225,000. All you have to pay extra for care. The one in Minneapolis the care started at $165 a day and went up plus food.

No one had told me either here, KCMO, or in Minneapolis that assisted living does not take people over 250 and then only if they can do everything for themselves. Above that weight it is assumed that they will need two or more people to safely help them do anything which makes them ineligible for assisted living and the only option is skilled care. Which was my husband. Because Medicaid sets a rate of $185.43 for patients who need Medicaid to pay for them many of the nursing homes in this area use that as the daily rate for all patients. For my husband the cost of a room in a skilled nursing facility is cheaper than being in an assisted living facility. With the $185.43 which includes everything a skilled facility is much cheaper than assisted living.

I am a retired federal employee and when I just looked at a $200 a day policy for a maximum of five years the rate per month is $523.30 a month but the maximum that could be paid is $365,000. The rates also increase every year until you start using it. Until recently, I do not know when it started being allowed, LTC was not able to be used for assisted living but only skilled nursing care.
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Here's the issue with any type of variable universal life policy - the agent's premium and company fees can be set up different ways. Surprise, surprise - the default on running a customer quote is set to the agent/company advantage, NOT the consumer. You can get them to change this - BUT you have to ASK. The agent should be willing to do this, but very few of them will volunteer (not surprisingly). This is a hybrid policy currently very "hot" in insurance circles because so many people think they might be "wasting" their premium dollars. Needless to say, you will pay more for such a hybrid policy, than you would if you just bought level term life insurance and a standard LTC policy. Unless you seriously need life insurance for estate reasons - I have it, but for a very specific reason - I can't see why anyone would buy these types of policies. You pay for auto insurance and homeowners insurance for years, with most people never making any serious claims. Is that money wasted? No - it is intended to mitigate risk in an emergency. LTC insurance is no different. If your life expectancy factors are good, you want to age "in place", and you can't afford to self-insure, then buying an LTC policy can help mitigate the risk of running out of money and being forced into only Medicaid facilities, rather than having a variety of choices open to you. LTC insurance is not for everyone, and there are many policy details needing prudent and careful review. It may indeed be true that a hybrid policy would work well for you...but I would carefully compare it with the standard policy and a level term life quote before making any decision. Good luck to you and others going forward. This is not an easy or simple decision to make. You will need the help of an ethical insurance salesman, and that's something you will need to find on your own. They do exist, so start searching and asking lots of questions.
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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.
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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."
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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.
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User
Original Author
8 years ago
I would really like someone who has used it or dropped it to post. Giving what you thought of it.
jakkom
8 years ago
I'm sorry to tell you, carriers don't write LTCi on anyone over age 69. I used to pull quotes for insurance from multiple carriers when I worked in an independent CFP's office, and that cut-off rule was across the board.

You'll hear different stories because many older LTCi policies were quite different from what is sold now. Many older policies were cheap to buy, but carried exclusions that were poorly explained to policyholders.

Very few of those policies were tax-qualified, either; meaning that benefits were counted by the IRS as regular income, reducing its value.

Modern policies are now more consistent in features, but it is expensive insurance.

In 2006 I pulled a quote for LTCi for a 61 yr old woman, very good health, for $250/day benefit, 90 day exclusion, 5% compounded inflation protection and 100% home healthcare option.

The quotes from major, stable, highly-rated LTCi carriers ranged from $19,000/yr to $26,000/yr. - in 2006!

As a comparison, some friends of ours just got a quote for $200/day, 90 day exclusion, 4% compounded inflation and 100% home healthcare. She is super-healthy and 55 yrs of age. She was quoted a premium of slightly over $300/month. That's a very competitive quote, slightly under market in fact.

LTCi is best purchased well before one needs it. I have been advising my niece and nephew to buy it now that they are in their 40's. We bought ours when I was age 48 and my DH age 46.

Have not had to use it, thankfully.
User
Original Author
8 years ago
Most sites state that companies will not sell policies to anyone over 84 not 69. I know that the companies I have looked at they will give quotes for over 69. If they will sell a policy to a person in their 80's without a long wait(exclusion) is another question.

Were you aware that most LTC premiums double about every 10 years? I am retired federal employee and the past couple of years the premium has been increasing on an average 20% a year. An article in Forbes magazine in August 2016 stated this: "Last week, the federal government announced that premiums for nearly all of its existing long-term care insurance policies will increase—by an average of 83 percent. In other words, they will almost double for federal employees and retirees." Many people that purchase policies do have trouble paying for them once they are retired. I had hoped that someone who assisted their loved one using this type of policy would respond.

Have you used long term care insurance?

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bpath

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Have you used long term care insurance?

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