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Author: MTBer One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76398  
Subject: Long Term Care Date: 3/27/2011 12:00 PM
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Hi, folks. I am coming here to ask this question b/c I only ever frequent this board and don't know where else to ask.

I am wondering if there is an area on this site that talks about long term care insurance. When I did a search, articles from 2004 came up and a 2007 article. I was hoping for up to date information.

I couldn't find a discussion board on it, either.

I am thinking this would be a hot topic for some, so I figure there has to be something about it on this site?

If not, could someone suggest a recently published book on the subject? I know nothing about it and want to see if it makes sense for me. I am 41 years old and I am thinking that if may be cheaper to buy when young.

Thanks.
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Author: drippinfool Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68727 of 76398
Subject: Re: Long Term Care Date: 3/27/2011 12:05 PM
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Take a look at this discussion:

http://www.bogleheads.org/forum/viewtopic.php?t=66258

-drip

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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68728 of 76398
Subject: Re: Long Term Care Date: 3/27/2011 1:10 PM
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The risk that you will give up most/all of your assets to long term care, and have nothing available to leave to heirs, is a household risk How would you handle this risk? Some will say "so what", as they view their assets to be used to pay for their lifestyle, even if this is in an assisted care center, and they feel no need to leave assets to heirs. Others are frightened of this risk and would like to have an insurer pay all or part of this cost if they end up in a long term care facility.

Assuming you are in the latter group and would like to 'transfer' this risk to an insurance company, you'll be a candidate for buying a LTCI policy.

But now the challange begins: how to find an insurer who, if you meet the minimum 'trigger' to initiate payments from the insurer (referred to as activities of daily living or ADLs) in future years, will actually pay without stonewalling and delays, and who will not gradually increase premiums over the years ahead until you can no longer afford the insurance and you allow the policy to lapse.

This is probably one of the most complicated and opaque areas of personal financial management. There are a few skeptics who will write about the risks of throwing away premiums on LTCI vs. a much larger marketing arm of the insurance industry who firmly believes every individual should carry LTCI.

Good luck

BruceM

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68729 of 76398
Subject: Re: Long Term Care Date: 3/27/2011 1:40 PM
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I think a recently published book could already be out of date since medicare changed the way they deal with hospice at the beginning of this year.
http://www.medicare.gov/Publications/Pubs/pdf/11361.pdf

Inpatient care is only covered as respite for your caregiver.

It's not a particularly hot topic - it's similar to many other types of insurance - what can you afford to cover without insurance vs the cost of the insurance.

Also, carefully check what your health insurance currently covers in terms of both skilled nursing and hospice care as well as what happens if you are covered by short term and long term disability insurance.

If you don't have LT disability insurance, I'd worry about that first, particularly at your age.

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68731 of 76398
Subject: Re: Long Term Care Date: 3/27/2011 3:55 PM
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When we got a presentation at work about LTCI---to a bunch of engineers--there were a lot of detailed questions. One was "since the premiums are so high, wouldn't it be smarter to put the amount I'd be paying in premiums into a savings account?"

The presenter said that if you had about $1M of assets (excluding your house) when you retired, that you'd be just as well off without a LTCI, jusr self-insure instead.

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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68735 of 76398
Subject: Re: Long Term Care Date: 3/27/2011 5:04 PM
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The presenter said that if you had about $1M of assets (excluding your house) when you retired, that you'd be just as well off without a LTCI, jusr self-insure instead.

This is almost exactly what Consumer Reports has been saying for years, including it's most recent update ofn LTCI. If you want to read a balanced analysis of LTCI, I would strongly recommend the series of articles in CR. You can access them at no charge at almost any public library.

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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68737 of 76398
Subject: Re: Long Term Care Date: 3/27/2011 7:09 PM
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The presenter said that if you had about $1M of assets (excluding your house) when you retired, that you'd be just as well off without a LTCI, jusr self-insure instead.

Does this assume that you will receive a pension?

Having $1M in assets that you can tap to fund your retirement is only about $40k per year if you use a 4% SWR. What happens to the other spouse if you then need to use this nest egg to for one spouse's long term care?

Like homeowner's insurance that I pay in case the house burns down, but I hope I never need it, I have LTC in case we need that, but I'd rather never need it. In my case, if we need it for one spouse, that will help to preserve the assets for the other spouse. Once one of us is gone, I don't see it as being as big of a risk and would most likely see the surviving spouse cancel it, but only after looking at the entire picture to see what makes sense at the time.

We got our LTC when I was 45 and DH was 46. I don't consider the cost prohibitive, we have not seen any increases, and it has the coverage that we want. We also have no pension, so have to self-fund our retirement although there will be some social security for us, probably even with means testing.

For us, LTC was the last brick I wanted to have in our financial foundation.

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68738 of 76398
Subject: Re: Long Term Care Date: 3/27/2011 7:23 PM
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ResNullius writes,

<<<The presenter said that if you had about $1M of assets (excluding your house) when you retired, that you'd be just as well off without a LTCI, jusr self-insure instead.>>>

This is almost exactly what Consumer Reports has been saying for years, including it's most recent update ofn LTCI. If you want to read a balanced analysis of LTCI, I would strongly recommend the series of articles in CR. You can access them at no charge at almost any public library.

</snip>


I second the recommendation of the Consumer Reports article.

On the other side of the coin, if you have less than $300,000 in assets, a long stay in a nursing home would likely still bankrupt you even if you have LTCI. So why bother with the insurance?

intercst

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68739 of 76398
Subject: Re: Long Term Care Date: 3/27/2011 7:27 PM
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2gifts writes,

We got our LTC when I was 45 and DH was 46.

Given what happened to AIG, I'm not confident that I could pick an insurance company that would still be around in 30 or 40 years when I need to file a claim on the LTC policy.

intercst

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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68740 of 76398
Subject: Re: Long Term Care Date: 3/27/2011 7:35 PM
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Given what happened to AIG, I'm not confident that I could pick an insurance company that would still be around in 30 or 40 years when I need to file a claim on the LTC policy.


I'd rather take my chances on that than fly with no LTC at all.

We fall into that middle group that has enough assets to need to protect them, but not so much that it won't matter if one of us needs nursing home care.

The premiums are not prohibitive, and like all insurance, I hope to never need it, but I'd still prefer to have it.

None of us has a crystal ball to know what will happen in the future, but we all make our best guesses and plan accordingly. For me, this is something I absolutely wanted to have in place, and I am not sorry that I did it.

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Author: Donna405 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68741 of 76398
Subject: Re: Long Term Care Date: 3/27/2011 10:54 PM
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I purchased when I was 52 (I am now going on 67). I chose to purchase a policy for which I had control of whether I wanted to add inflation coverage every two years. So every two years, I decide in the inflation coverage is worth it. If I take the additional coverage, my premiums increase. I will say, however, that they have not increased substantially. My premiums began at around $27.00 per month and are now $61.68, as I have chosen to increase the coverage over the years. It now pays about $146.00 per day. Here in SC, the costs of assisted living and nursing home care are not as high as in other parts of the country. I will have to pass a litmus test, i.e., can I correctly take my own medications, dress myself, etc. Two doctors must affirm that I need assisted or nursing home care. If, and when, I do need such care, my premiums will continue to be taken from my checking account, but that's OK, too.

Donna (who figures when the premiums go to $80.00 per month, I'll put a lid on it.)

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68742 of 76398
Subject: Re: Long Term Care Date: 3/27/2011 11:01 PM
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Having $1M in assets that you can tap to fund your retirement is only about $40k per year if you use a 4% SWR. What happens to the other spouse if you then need to use this nest egg to for one spouse's long term care?
I guess you'd have to read the detailed analysis in CR. I'm assuming that they *do* show such.

Just as a S.W.A.G.: $5000/mo for Alzheimers ward (we paid $4000/mo in 3005 for my Mom). is $60K/yr. The delta is less than that, because some of the 5K is for food, etc. But even ignoring that...

That's 6% of $1M or 4% of $1.5M. A tad high, but the life expectancy of someone in that condition is not going to be more than a few years.
If they were using the entire $40K to live on, that will drop to maybe $30K, for a total of 90K, or 9% of 1M or 6% of 1.5M or 4.5% of 2M.
High, yes.

But the 4% SWR is computed for a 30 year survival period. To be blunt, nobody is going to live in a nursing home for 30 years.

But let's ignoring portfolio survival, and ignore growth, ignore earnings, say in this situation you'd hit the panic button and go to cash to ride out the storm.
A $1M portfolio where you take out 90K per year will last 11 years.

At 45 years old, you'll pay premiums for 20 years just to get to 65, and perhaps another 10 years before need.
That's a long time in which to build up your own portfolio to self-insure LT care.

I guess different people view things differently. Some people hear about LTHI and start paying premiums. We heard about it and decided to aim for a $2M retirement portfolio.

But I've always wondered---what if you die early? Is any of the premium returned? According to the SSA, only 75% of 45 year olds are still alive at 70.

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68743 of 76398
Subject: Re: Long Term Care Date: 3/27/2011 11:17 PM
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We fall into that middle group that has enough assets to need to protect them, but not so much that it won't matter if one of us needs nursing home care.

Yah, the middle ground is the worst case. It seemed to us questioning engineers that only a small percentage of people fall in that area.
Rich enough to be able to afford the premiums, but not rich enough to pay for the care themselves.

Troubling thing I've been reading is the premiums being increased. What happens if you've been paying for X years but then the premiums get jacked up and/or you can no longer afford the premiums? Do you lose everything?

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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68746 of 76398
Subject: Re: Long Term Care Date: 3/28/2011 8:56 AM
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ust as a S.W.A.G.: $5000/mo for Alzheimers ward (we paid $4000/mo in 3005 for my Mom). is $60K/yr. The delta is less than that, because some of the 5K is for food, etc. But even ignoring that...

I'm in MA where the average nursing home cost is about $200 per day, so that's $6000 per month now. Alzheimers patients can live for years [my step mother's first husband was in a nursing home for a good 10 years before he passed away], so that's $72k per year just for the patient care. What does the other spouse live on if they are only seeing $40k per year from their $1M nest egg that's supposed to last through their retirement?

But let's ignoring portfolio survival, and ignore growth, ignore earnings, say in this situation you'd hit the panic button and go to cash to ride out the storm.
A $1M portfolio where you take out 90K per year will last 11 years.


Exactly. So what does the surviving spouse live on after the first spouse has died? In my step-mother's case, she had to sell everything to afford her husband's care, and was allowed to keep the car and her own social security, but it essentially sent her to the poor house and left her with nothing from what they had saved over the years because it was needed for her husband's care. And they had nowhere near that $1M saved up.

At 45 years old, you'll pay premiums for 20 years just to get to 65, and perhaps another 10 years before need.
That's a long time in which to build up your own portfolio to self-insure LT care.


Let's say the total premium is $4k per year for both spouses [ours is less than that]. Over the 30 years you've used above, that's $120k paid over that time period. Assuming 8% rate of return over that period, that would be about $183k at the end of 30 years. At $72k per year for nursing home care, that would last long enough for one person to spend 2 1/2 years in a nursing home.

I guess different people view things differently. Some people hear about LTHI and start paying premiums. We heard about it and decided to aim for a $2M retirement portfolio.

Everyone plans differently for retirement, and has different targets. I'd have to work longer to save the extra needed to fully fund a nursing home for both of us. There are a few problems with that not the least of which is that I'd actually like to enjoy a few years of my retirement instead of spending longer in a nursing home with my golden years cut short if I end up with Alzheimers.

For us, I'd rather pay some money to insure for this than spend a bunch more years working.

But I've always wondered---what if you die early? Is any of the premium returned? According to the SSA, only 75% of 45 year olds are still alive at 70.

I wouldn't expect to get these premiums back. Do you get all your homeowners insurance back every year that the house doesn't burn down? What about your car insurance? Do you get that premium back if you never have an accident? And if you die early, then you're not paying those premiums for 30 years either. This point seems like a red herring to me.

I have to say that I am glad that I got the LTC policy. I can understand that it's not for everyone, but we can afford it, and I'd rather retire earlier than work longer to self-insure for this.

YMMV.

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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68747 of 76398
Subject: Re: Long Term Care Date: 3/28/2011 9:37 AM
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Yah, the middle ground is the worst case. It seemed to us questioning engineers that only a small percentage of people fall in that area.
Rich enough to be able to afford the premiums, but not rich enough to pay for the care themselves.

Troubling thing I've been reading is the premiums being increased. What happens if you've been paying for X years but then the premiums get jacked up and/or you can no longer afford the premiums? Do you lose everything?


According to Consumer Report, there is a middle ground wehre getting LTCI possibly might make sense, but CR says that you shouldn't buy until you're around 60. CR discussed the sales pitch about buying early, what with lower premiums, but they concluded that rate increases and other such issues makes it more sensible to buy around 60. The biggest issue is that there's a waiting period to collect anything, and most nursing home stays are less than the waiting period. As for at home care, newer policies do provide some help, assuming you fall within the middle ground and otherwise meet the policy conditions. One thing that I think about is the fact that everything is going to change within the healthcare field over the next 5 to 10 years, and it's impossible to predict what system we will have 10 to 20 years from now.

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Author: akck Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68756 of 76398
Subject: Re: Long Term Care Date: 3/28/2011 6:27 PM
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I probably wouldn't get LTCI if I was single. Being married, I see it as a way to protect your spouse from having to survive while paying for LTC at the same time.

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Author: TwoCybers Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68758 of 76398
Subject: Re: Long Term Care Date: 3/28/2011 6:42 PM
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There are arguments for and against LTCI - You will have to address and consider those. But your idea that buying LTCI at age 41 might be a good idea because the cost will be lower is flawed in my view. As far as I know the inflation factors for LTCI max out at 5% compounded. Costs of medical care are increasing at a rate will over 5%. What you care about is money when you need it. The general rule I have seen is purchase in your fifties.

We are responsible for a friend who had a stroke in 1998. Her care costs $6,500 a month and that is Assisted Living, not a nursing home. If a person is unlucky like our friend you could easily have 20 years. The averages however are surprising to most people. While the sales people like scare people with data like 50% or 70% or some high number will be in a nursing home, they fail to tell the whole story. On average nursing home patients are there less than 100 days. To be sure part of that is the limit on Medicare payment. But lets be honest -- people die in nursing homes. They do not go there because health is perfect. Another common reason for nursing home use is rehab. If you have a hip replacement and live alone, it is likely you will spend a week or two in a nursing home before returning to your residence. Nursing homes cost a whole lot less than a hospital.

Gordon
Atlanta

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68760 of 76398
Subject: Re: Long Term Care Date: 3/28/2011 7:10 PM
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Let's say the total premium is $4k per year for both spouses [ours is less than that]. Assuming 8% rate of return over that period, that would be about $183k at the end of 30 years.

The handy-dandy java savings calculator says that $4000 a year compounded annually at 8% grows to about $500K in 30 years. FWIW, at the long-lerm S&P average of 10.5%, the end value is $800K.

But I take your point.
Trying to self-insure for a worst-case scenario (decades of living in an Alzheimer's unit) is almost impossible. The saving grace is that this worst-case is very rare.

One problem is the opportunity cost. $4000 a year that you give to the insurance company is $4000 that is NOT growing your net worth.

Our view is that instead of trying to separate our potential retirement expenses into buckets and trying to fill each and every bucket, to work toward having one huge pot of money at retirement and divert it to whichever bucket needs money.
$1M is not enough.
$2M probably is.
$3M-$4M cetainly is.

I wouldn't expect to get these premiums back. Do you get all your homeowners insurance back every year that the house doesn't burn down? What about your car insurance? Do you get that premium back if you never have an accident? And if you die early, then you're not paying those premiums for 30 years either.

Yes, I agree with all these things. The one that would most concern me is slightly different. What if you've been paying the premium for X years, but then something bad happens--like you lose your job--and you can't afford to pay the premium for a couple of years.
Do you lose your policy? Do they let you make it up?

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68761 of 76398
Subject: Re: Long Term Care Date: 3/28/2011 7:41 PM
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What if you've been paying the premium for X years, but then something bad happens--like you lose your job

Not 2gifts but this has happened for one long period if not two for her and she's got a belt and suspenders on the financial front. But I'm sure she'll be back.

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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68763 of 76398
Subject: Re: Long Term Care Date: 3/28/2011 8:29 PM
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Yes, I agree with all these things. The one that would most concern me is slightly different. What if you've been paying the premium for X years, but then something bad happens--like you lose your job--and you can't afford to pay the premium for a couple of years.
Do you lose your policy? Do they let you make it up?


I don't know. What happens if you lose your job and you cannot pay your house insurance or your car insurance? I think you have to get a new policy, and I'd expect to have to do the same with LTC. I don't understand the insistence that the LTC insurance should operate under different rules than any other type of insurance.

Now, in my case, I just went back to work after being out of work for 51 weeks. This is the 3rd time in the past 12 years that I have been unemployed, and was also the longest. During that time, DH also had rotator cuff surgery and was not bringing in any money for about 4 months as he is self-employed. I also have twins in college who get virtually no financial aid [DS gets a very small merit scholarship], but since we moved their college money to cash when they were in high school, we continued to use that to pay their college expenses.

During that time, we didn't miss a beat, although I do admit to borrowing $5k from their (overfunded) college account to pay expenses during that time, but that's because that's where the cash was, and I didn't want to sell stock if I didn't have to.

I am not concerned that I will not be able to pay the premium in case of job loss, and that's because we've been saving forever for our retirement which we expect to completely self-fund, although some social security would be nice. So I do have this nice, big pot of money that I can tap for things like paying the mortgage, the house taxes, and even the LTC premiums in case of unemployment. We also expect to retire in a maximum of 5 years, so we're pretty close to having to tap our nest egg.

I also have the LTC premiums included in my written retirement budget that tracks our expected expenses and how much we need to have set aside to generate our required annual 'income' at a 4% withdrawal rate, so I'm not worried about not being able to afford the premiums. There are plenty of discretionary expenses in that budget that can be cut to pay for essentials if needed, and I do consider this an essential for us.

As I said before, everyone's situation is different, and yes, you need to plan for all of these things. I think I have done that, and will stay the course. I also realize that the things I consider retirement essentials (golf, dining out, LTC premiums, travel to see the kids) may not be the same things that other folks consider essentials.

Once again, YMMV.

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68765 of 76398
Subject: Re: Long Term Care Date: 3/28/2011 11:01 PM
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Do you lose your policy? Do they let you make it up?

I don't know. What happens if you lose your job and you cannot pay your house insurance or your car insurance? I think you have to get a new policy, and I'd expect to have to do the same with LTC. I don't understand the insistence that the LTC insurance should operate under different rules than any other type of insurance.


Well, I'd sure want to know!
I can't tell if you are being difficult or obstreperous or janking my chain or really don't see any difference or what.

Here's the difference.
If I don't pay my homeowners insurance or car insurance they cancel the policy. If 6 months later I restart the policy, no problem---the cost is the same. Moreover, I don't have to pay any additional money for the time I was not covered.

If I don't pay my LTCC premium they somehow cancel the policy, yes? But what happens 6 months later when I want to restart the policy. Do they say "Sure. But now your are 58 instead of 48 when you took out the previous policy. So your new premium is significantly higher. Oh, and by the way you have to take a medical test to prove that you are in good health."?

Or do they say, "Okay, we'll reinstate your policy, but you have to make up the premiums that you skipped."?

As I see it a LTHC policy is similar to whole-life insurance. Part of the premium is pure insurance and part of the premium goes to build up an internal cash-value to cover the eventual claim. Whole life insurance policies have a nonforfeiture clause so that you can get back some of this excess money if the policy lapses.

Do LTHC policies have such a clause? I'm thinking that you'd really really want to make sure yours does. And I'm thinking that you'd really want to ask some direct questions about what happens if you can't pay the premium for a year or two.

It would really suck to pay $4000/yr for 15-20 years and then get laid off and lose your LTHC policy that you had been counting on.

I can't see how someone would be so cavalier as to not get this nailed down before committing to a policy.

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68767 of 76398
Subject: Re: Long Term Care Date: 3/29/2011 12:20 AM
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Rayvt writes,

As I see it a LTHC policy is similar to whole-life insurance. Part of the premium is pure insurance and part of the premium goes to build up an internal cash-value to cover the eventual claim. Whole life insurance policies have a nonforfeiture clause so that you can get back some of this excess money if the policy lapses.

I believe that there are some LTC policies that are combined with whole-life coverage and allow you to pay the premium from the cash value. Don't know the details, but they may just be another way for the insurance company to skim off another large portion of the premium stream in overhead & profit.

intercst

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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68771 of 76398
Subject: Re: Long Term Care Date: 3/29/2011 2:30 PM
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If I don't pay my homeowners insurance or car insurance they cancel the policy. If 6 months later I restart the policy, no problem---the cost is the same. Moreover, I don't have to pay any additional money for the time I was not covered.

If I don't pay my LTCC premium they somehow cancel the policy, yes? But what happens 6 months later when I want to restart the policy. Do they say "Sure. But now your are 58 instead of 48 when you took out the previous policy. So your new premium is significantly higher. Oh, and by the way you have to take a medical test to prove that you are in good health."?


I think a better comparison would be what happens if I don't pay the premium on my life insurance policy? I have term life insurance, and if I don't pay the premium, then the policy lapses. If I want to restart it, then I'm pretty sure that I have to reapply, take another physical, and will see rates in line with my current age and health. I would expect that I'd be getting a new policy, and not that the old one would be reinstated.

It would really suck to pay $4000/yr for 15-20 years and then get laid off and lose your LTHC policy that you had been counting on.

I suppose, but I've already planned for this in my case, and I don't consider this to be an issue.

I can't see how someone would be so cavalier as to not get this nailed down before committing to a policy.

I don't consider this being cavalier. I already responded earlier that I have the resources to keep this policy in place, so this particular issue wasn't of importance to me. Since it is of importance to you, it is a question you should ask if you ever consider LTC insurance, but I was under the impression that you had already dismissed it.

For me, I'm happy with the policy and with the provisions that it has, and I'm sure that it has different provisions than what someone else would want. I've opted for things like a 90 day elimination period and unlimited days covered to allow for an Alzheimers stay. These are all things that will drive the cost of the policy up, but again, those are my choices and may not be the same as someone else would make.

I've watched several relatives have to go to a nursing home, with some stays under a year, but most over several years, so I'd like to be prepared to do that and to provide for the remaining spouse.

If you have other plans in place to handle this, that is fine for you. For me, it is something I choose to insure for, and I am not unhappy that I have done so.

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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68773 of 76398
Subject: Re: Long Term Care Date: 3/29/2011 4:55 PM
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As I see it a LTHC policy is similar to whole-life insurance. Part of the premium is pure insurance and part of the premium goes to build up an internal cash-value to cover the eventual claim.

I think thats a good analogy.

Whole life insurance policies have a nonforfeiture clause so that you can get back some of this excess money if the policy lapses.

Do LTHC policies have such a clause? I'm thinking that you'd really really want to make sure yours does.


If you're speaking of qualified LTCI (and almost all LTCI policies sold today are of the 'qualified' type), then no, they may not accrue cash value. Rather, as you mention, the insurer must hold the [premium - that year's insurance cost (the costs paid out that year in claims to insureds) - administration and overhead] in long term capital reserve accounts to be used to pay future claims. It is this that has people like me worried and is the reason I won't insure through LTCI. QLTCI has only been around since 1998, and the insurance actuaries have not had the long term actuarial data on such factors as ADL trigger ages, survival period following the the second ADL or ADL recovery rates. These are crucial to determining future liability, required capital reserve and ultimately, current premium rates.

I don't know how insurers capital reserves are vis-a-vis' current premiums, and I doubt even state regulators have a good handle on this. But I do know that insurers have been incentivized to low-ball premiums up to this point to generate sales, and that over the past couple of years, many of the large insurers have been raising premiums. Of course, the big question mark on the horizon is what will premiums for a given level of coverage do over the next 20-30 years....will they climb until those future 80 year olds can no longer afford the premiums? Or, worse, will insurers capital be underfunded to the point that when elderly insured (or likely their children) start filing claims that the insurer turns their normal delays/stalling/stone walling into an artform? If so, will the denied claimants, or their children, be willing to begin the laborious process of 'fighting' the insurer?

I don't mean to sound overly pessimistic...just skeptical. And anytime you give someone with a profit motive a bunch of money each year for decades, with the promise that if certain conditions arise in those future years (inability to perform ADLs or severe cognitive disorders) they will pay you $X/month indefinitely, then I would think it prudent to be skeptical.

BruceM

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68774 of 76398
Subject: Re: Long Term Care Date: 3/29/2011 9:24 PM
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Of course, the big question mark on the horizon is what will premiums for a given level of coverage do over the next 20-30 years....will they climb until those future 80 year olds can no longer afford the premiums?

This is just the thing that would keep me awake at night. To buy an insurance policy that I have to pay premiums for the next 20-30 years, but the premiums can be increased by the company at any time and by any amount. ::shudder::

Heck, at least with an ARM mortgage you have limits and caps.

Google came up several links that don't give me a warm, fuzzy feeling.
"In 2002, ..purchased a long-term-care insurance policy ... with an annual cost of $3,305. The policyholders say they had thought their premiums would never change. In a letter dated July 17, 2010, the insurance company told couple that as of Sept. 24, their annual premium would jump to $4,868—a 47% increase."

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Author: TerryMcK Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68778 of 76398
Subject: Re: Long Term Care Date: 3/30/2011 3:45 PM
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I would offer that the best way to approach this is to talk to an (or more) expert(s) in the Financial planning and/or Insurance field; preferably someone who can address both. We all make our financial decisions based on a combination of what we can afford and what we think we need. I, like many others, was probably a bit penny-wise and pound-foolish at times.

As for my LTC, I waited until I was 64 to purchase ( a few years ago), mostly due to a bit of hounding by my daughter and Insurance/planner/friend. The premiums are higher than many of those mentioned by the younger folks posting here. However, they are also based on a number of variable factors such as: daily benefit, inflation rider, home care as well as facility care, alternative payment options, lifetime maximum benefits, etc.

a couple of years prior to this (when I was nearing retirement), I had some sessions with the planner/friend where he created a number of different scenarios of how my wife and I could live and spend our retirement including factors based on growth, death by me or my wife, long term illness, etc. Then we included scenarios with both additional life insurance and LTHC Insurance. It still took me another couple of years to finally take the LTHC insurance.

I subscribe to CR also, but sometimes they get stuck on repeating the same thing for a number of years. Most other general type statements I have seen on this say that if you have no assets to speak of or if you have over $2M to self-insure then maybe you skip the LTC. As has been mentioned, however, this depends on your sources of income. If the only source is the $2M and you need to draw from that for another 20 years, then maybe that won't do it.

There is no one answer, so I suggest you try to get some reputable help and run a number of scenarios. Even this is not foolproof since we did all of our scenarios based on my retirement income, assets, etc, and then the market crashed 2 years later.

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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68779 of 76398
Subject: Re: Long Term Care Date: 3/30/2011 4:10 PM
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I would listen to Consumer Reports before paying attention to insurance agents and financial planners, but that's just me. I don't agree that CR keeps repeating itself through habit, but I do agree that insurance agents and finacial planners steal you blind through thick and thin. Just my two cents, though.

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68781 of 76398
Subject: Re: Long Term Care Date: 3/30/2011 7:56 PM
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TerryMcK writes,

I subscribe to CR also, but sometimes they get stuck on repeating the same thing for a number of years. Most other general type statements I have seen on this say that if you have no assets to speak of or if you have over $2M to self-insure then maybe you skip the LTC. As has been mentioned, however, this depends on your sources of income. If the only source is the $2M and you need to draw from that for another 20 years, then maybe that won't do it.

There is no one answer, so I suggest you try to get some reputable help and run a number of scenarios. Even this is not foolproof since we did all of our scenarios based on my retirement income, assets, etc, and then the market crashed 2 years later.

</snip>


The stock market goes up and down. The money spent on LTC insurance premiums is gone forever.

intercst

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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68782 of 76398
Subject: Re: Long Term Care Date: 3/30/2011 8:51 PM
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The money spent on LTC insurance premiums is gone forever.

Well, the same can be said for a term life insurance policy if you outlive it.

We have term life for both DH and me. It's a 15-year level term policy, and we are planning on letting it lapse when we've reached that 15-year point, which is just after the kids graduate from college. At that point which is only 2 years away and assuming we are both still living and haven't collected on either policy, we fully intend to let them lapse as we will no longer need life insurance.

We opted years ago to buy term insurance and invest the difference that would have been used to buy a whole life policy. Do all you folks who think LTC is a bad investment feel the same about term life insurance? That's a similar product that you may pay on and never use, but I'd still rather have it to ensure that I have provided for my family. I do have an aunt and a cousin who were both widowed at a young age, each with 2 children under the age of 4, so I've had some family experience with why life insurance is good when you have a family counting on you.

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68784 of 76398
Subject: Re: Long Term Care Date: 3/30/2011 10:44 PM
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2gifts asks,

Do all you folks who think LTC is a bad investment feel the same about term life insurance? That's a similar product that you may pay on and never use, but I'd still rather have it to ensure that I have provided for my family.

Making a claim on a term life insurance policy is pretty straightforward. Either you're dead, or your not.

There are lots more hoops to jump through with an LTC policy. (can you still perform 3 out of 5 "activities of daily living"?, who measures the performance? Can it be appealed?) Plenty of opportunity for the insurer to delay or deny the claim, even after paying premiums for decades.

intercst

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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68785 of 76398
Subject: Re: Long Term Care Date: 3/31/2011 10:14 AM
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Do all you folks who think LTC is a bad investment feel the same about term life insurance? That's a similar product that you may pay on and never use, but I'd still rather have it to ensure that I have provided for my family. I do have an aunt and a cousin who were both widowed at a young age, each with 2 children under the age of 4, so I've had some family experience with why life insurance is good when you have a family counting on you.

Personally, I think term life insurance is the only way to go in terms of having life insurance. I had term for about 20 years, then I figured that our portfolio would me more than sufficent to take care of the transition should I or my wife die. As for term life, you're either dead or you're not, so there's little to argue about. There's no waiting periods. There are no limitations on how long you can stay in the nursing home, and there are no limits. The premiums are dirt cheap, don't go up, and are easy to afford. LTCI is very, very different from term life insurance.

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68786 of 76398
Subject: Re: Long Term Care Date: 3/31/2011 10:22 AM
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I'm beginning to wonder if the views on LTCI differ by gender.

Men usually die first and married ones may consider themselves to have a built in caregiver.

As a woman who is soon to be single, I will work on the asset vs insurance calcs for LTCI because I think it's unfair to consider my kids as automatic caregivers and there won't be anyone else.

What will you do for care if you are incapacitated ?

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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68787 of 76398
Subject: Re: Long Term Care Date: 3/31/2011 4:20 PM
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Do all you folks who think LTC is a bad investment feel the same about term life insurance? That's a similar product that you may pay on and never use, but I'd still rather have it to ensure that I have provided for my family

Just my view, but....

With term life insurance, you pay as you go. Each year, most of your premium goes towards the "cost of insurance"...that is, the amount the insurer has to pay out in death claims for that year, while a much smaller part goes to the insurer for overhead and profit. But because this is such a simple concept, its easy to understand and therefore highly competative in the marketplace, hence, reasonably priced.

The exact opposit is the case for LTCI. Only a tiny part of your premium goes to the Cost of Insurance...at least in the early years. The bulk of your premiums, as I'd mentioned previously, goes into long term capital reserve accounts...where insurers have complete and essentially hidden control.

Also, LTCI is not at all like property, casualty (auto and home for consumers) and life insurance. With these, you hope you never have a catestrophic loss and the insurer hopes you don't either....its a shared interest. But this is not how LTCI is perceived. Insurers have gone to great lengths to show us, thru any number of "white papers", that most of us will spend out last days in some obscenely expensive nursing home, spending our estates to insolvency, etc, etc. Most buyers of LTCI accept this and see their policies as cost-sharing schemest they will most likely use...kinda like dental insurance.

And sorry to be a nitpicky stickler, but true insurance is not an investment....its a hedge....a transfer of the risk of a potentially catestrophic loss to an insurer in exchange for the "known loss" of the premium.

:-)

BruceM

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Author: TerryMcK Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68790 of 76398
Subject: Re: Long Term Care Date: 4/1/2011 3:43 PM
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intercst writes...

The stock market goes up and down. The money spent on LTC insurance premiums is gone forever

The stock market is a broad term, and includes levels of risk that range from high risk investments where you can lose all of your money to investments that are very safe and provide little return.

LTC insurance is just one type of insurance under the braoder umbrella of insurance to compare with the stock market. Just as with the stock market, people have to determine what level of risk they are willing to take and what level of comfort they need.

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Author: MTBer One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68809 of 76398
Subject: Re: Long Term Care Date: 4/3/2011 10:04 AM
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Thanks so much everyone for taking the time to reply. The information provided for further study (link, books, Consumer Reports suggestion) and the discussion itself is very helpful. I will definitely be following up on the information provided.

Thanks again!

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