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Author: FAEZ Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19224  
Subject: Long term care insurance Date: 7/21/2005 12:41 AM
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Is there somewhere I can go for good information about long term care insurance?

I've read the threads here but it seems like there are no good answers; for example, people get coverage that increases at a 5% rate straight versus compounded. And some policies say they can't increase the premiums unless they increase it for the age group.

Both of these options sound to me like, in 20 years, when you need the insurance to pay off, it'll only pay about half what you thought it would. And that's only if you haven't been outpriced by the premium increases over the years.

Sounds like there should be a list of things to look out for and and things to insist on.

I've sent off for the AARP booklet. I'll have to see what that says.

Andy
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Author: wcfenton Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 9936 of 19224
Subject: Re: Long term care insurance Date: 7/21/2005 12:59 PM
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Is there somewhere I can go for good information about long term care insurance?

I've read the threads here but it seems like there are no good answers; for example, people get coverage that increases at a 5% rate straight versus compounded. And some policies say they can't increase the premiums unless they increase it for the age group.

Both of these options sound to me like, in 20 years, when you need the insurance to pay off, it'll only pay about half what you thought it would. And that's only if you haven't been outpriced by the premium increases over the years.

Sounds like there should be a list of things to look out for and and things to insist on.

I've sent off for the AARP booklet. I'll have to see what that says.

------------

Hi Andy...

There is some information on Long-Term Care on the government site "Federal Long Term Care Insurance Program":

http://www.ltcfeds.com/

They have calculators to determine about how much it would cost a person based on several different senarios. Not everyone qualifies under this program, but it still has some potentially useful information.

I'll have to admit that this is not my favorite subject as I know it must not be for most mature adults. As such, I personally haven't done anything to ensure that I'm not a burden to my family in the future.

I keep hoping and praying that I will keep my senses in old age as well as enough mobility to maintain some measure of independence. I know that this is not the best way to approach this situation, but I find it hard to think about paying out all those thousands and thousands of dollars in insurance premiums with really no idea of how many years it will be necessary to do so. Also...there really is not much in the way of guarantees as far as how much you will finally need in the end to have satisfactory care or whether the premiums will remain stable or your insurance company will still be around to pay those benefits.

I wish you good luck in finding a solution to your particular situation Andy. If you wouldn't mind, let us know what you find.

Best regards,
Bill



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Author: FAEZ Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 9937 of 19224
Subject: Re: Long term care insurance Date: 7/21/2005 1:22 PM
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I find it hard to think about paying out all those thousands and thousands of dollars in insurance premiums with really no idea of how many years it will be necessary to do so. Also...there really is not much in the way of guarantees as far as how much you will finally need in the end to have satisfactory care or whether the premiums will remain stable or your insurance company will still be around to pay those benefits.


Ahhh.... you put it so well!

Those are exactly my concerns. The long term care insurance business seems to be in it's infancy, unfortunately. In another 30 years, they'll have a track record to look back on but right now they've probably only paid out on some small percentage of the policies they've written. And because of that, they don't have a good idea of their costs.

We were born too soon. ;-)

Thanks for the reply. I will post back if I learn anything of value.

Andy


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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: 9938 of 19224
Subject: Re: Long term care insurance Date: 7/22/2005 9:07 AM
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Andy I don't know your age, but that is a factor. Here is one link within TMF. Pixy (aka David Braze) has written a lot of articles on this subject -- do some searching.

http://www.fool.com/retirement/retireeport/2000/retireeport000131.htm

A few items --

Rates for insurance do not go up greatly until people get certainly over 50 and maybe even 60. Now as we get older, we are more likely to have illnesses/conditions that either preclude coverage or will raise the costs. For example the insurance I have has a 10% higher premium if a person has high blood pressure or takes prescription medications to control blood pressure.

The people selling insurance offer "facts" and "statistics" showing the need which at best are biased and in some cases may be just plain wrong. In the link above you will see lots of data form insurance groups which look like our odds of "needing" Long Term Care (LTC) are very high. Well I did some digging and found data showing 90% of the people who enter a nursing home (Skill care facility) are out in less then 30 months. When I asked about the conflict I was told people die or leave. It seems fairly obvious to me that some of the statements in the link must be wrong or else there would be at least as many nursing homes as motels or hotels -- we have a lot of people over age 65.

Generally males don't get to nursing homes -- they tend to die rather then degenerate as compared to females. A good part of this is the increased cardio vascular and lung cancer rates in males historically.

My wife and I are responsible for a friend who is in a nursing home. This person purchased a "gold plated" policy in about 1990 which at that time would pay a daily rate equal to her local nursing home costs. This policy had the 5% compound coverage increase. Today she gets payments equal to about 60% of her nursing homes costs. Social security and her pension make up the difference. What I am suggesting is cost will go up faster then 5% compounded, so if you can't afford the extra cost of the compounded coverage increases, maybe you are going to be out on the street anyway.

Somewhere in one of Pixy's articles there are some numbers about who should consider LTC insurance. Clearly at some point it is smarter to be self insured. If you have investments of say $5 million, a 4% return is $200,000 a year. That will pay for a lot of nursing home coverage. If you have a house mortgage and income of say $50,000 a year, the cost of premiums may be just too much. These article were written some years ago, so the numbers will have changed, but the idea is valid.

Check out this link

http://www.fool.com/retirement/care/03.htm

There is a very interesting sentence, "About 50% of all policies lapsed before benefits were paid." -- People sign up for this coverage and then find out they can't afford it and cancel. They might just was well have burned hundred dollar bills in the front yard.

I am not suggesting people avoid LTC insurance, but I think it is very easy to have fear motivate one into making a purchase that is ill advised.

Gordon
Atlanta

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 9939 of 19224
Subject: Re: Long term care insurance Date: 7/22/2005 9:23 AM
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The people selling insurance offer "facts" and "statistics" showing the need which at best are biased and in some cases may be just plain wrong. In the link above you will see lots of data form insurance groups which look like our odds of "needing" Long Term Care (LTC) are very high. Well I did some digging and found data showing 90% of the people who enter a nursing home (Skill care facility) are out in less then 30 months. When I asked about the conflict I was told people die or leave. It seems fairly obvious to me that some of the statements in the link must be wrong or else there would be at least as many nursing homes as motels or hotels -- we have a lot of people over age 65.

Too true! I wrote a subsequent article in that series entitled "Those Dratted Statistics Made Easier" to help show the distortion in those "facts." Nothing has changed in the intervening years to change my mind. Here's a link to that piece:

http://www.fool.com/retirement/retireeport/2000/retireeport000222.htm

Regards ... Pixy



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Author: FAEZ Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 9961 of 19224
Subject: Re: Long term care insurance Date: 7/25/2005 12:28 PM
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Nothing has changed in the intervening years to change my mind

Hi Pixy,

Those are good articles and very helpful although I still don't have MY answer. I'm still studying.

One question... when were the original articles written? I think that everything that has to do with finances should have a date stamp. This stuff changes so much over the years.

Thanks.

Andy


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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: 9964 of 19224
Subject: Re: Long term care insurance Date: 7/25/2005 2:54 PM
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Andy they were written about 2000 as I recall. While date stamps would be useful, I am not sure in this specific as what you gain. Today the cost of Long Term Care differs by more then a factor of 2 between Nashville, TN and Long Island New York. It is not possible to look at costs generally - you have to look at your case.


What are the costs per day for a nursing home you would choose in your area? What are your assets? Would 5% or 4% of your assets pay the cost of a nursing home in your area?

The critical stuff in Pixy's artilces are general trends or ideas. Women tend to need/use it more then men. Few individuals use it for more then a couple of years (big exception is stroke victums). There is a level of financial assest below which getting insurance makes no sense. When buying keep in mind, medicade is welfare any way you slice it and you are not going to "save" your assets for your grandchildren by getting on welfare for your medical bills.

This is a complex subject. In my view a whole lot more complex then merely managing investments.

Gordon
Atlanta

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Author: FAEZ Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 9969 of 19224
Subject: Re: Long term care insurance Date: 7/26/2005 8:55 PM
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While date stamps would be useful, I am not sure in this specific as what you gain

I wasn't looking for actual numbers, just for an idea of how mature the long term care insurance industry was at the time of the articles.

I get the impression that they've been writing these policies for, maybe 20 years or even 30. And I get the impression that they don't really have a good handle on their costs as they do on, say life insurance.

And that's one of the things that makes them put in clauses where they can raise your premiums as the years go on.

So anyway, these articles were written when this industry was significantly younger than it is today.

I'm not sure if that makes a difference or not. I wonder how long the insurance companies have been paying out on these policies and how much.

Andy


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Author: BrerBear Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 9970 of 19224
Subject: Re: Long term care insurance Date: 7/26/2005 9:07 PM
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I get the impression that they've been writing these policies for, maybe 20 years or even 30.
Andy
=========================================
IIRC, GE Financial was the first to write these policies ~~~1976/1977...

GE Financial Long Term Care was spun out of Mother GE as of last year... new name: GenWorth*

They supposedly were the first to offer the policy...

To date, they have a record of not increasing the premium for a group... [*could still happen, but...]

We're paying ~$4800 per year, two youngster oldsters, >60 years... policies 3 years old now...

Managed care home fees around these parts [Orange County CA] ~~$3000 per month, depending on 'amenities'...

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Author: FAEZ Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 9971 of 19224
Subject: Re: Long term care insurance Date: 7/26/2005 9:58 PM
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IIRC, GE Financial was the first to write these policies ~~~1976/1977...


OK, so not very long (compared to, say, life insurance which the industry has been writing forever).

We're paying ~$4800 per year, two youngster oldsters, >60 years... policies 3 years old now

Does that include inflation adjustments?

Managed care home fees around these parts [Orange County CA] ~~$3000 per month, depending on 'amenities'

Sounds pretty inexpensive. I'll have to price out the rates by me.

Thanks for the info.

Andy


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Author: BrerBear Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 9972 of 19224
Subject: Re: Long term care insurance Date: 7/26/2005 10:10 PM
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We're paying ~$4800 per year, two youngster oldsters, >60 years... policies 3 years old now
============
Does that include inflation adjustments?

Andy
========================================
As of right now, our premium remains 'permanent'... unadjusting...

We took the benefit of +5% per year option, NOT compounded...

[Year one = 105% benefit, year two = 110% benefit, three = 115%, etc...]

Did a very unscientific reality check of the 5% compounded benefit and concluded that the stiff premium for the compounded benefit "wasn't worth it"...

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Author: FAEZ Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 9973 of 19224
Subject: Re: Long term care insurance Date: 7/26/2005 10:22 PM
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Thanks for the quick reply.

Did a very unscientific reality check of the 5% compounded benefit and concluded that the stiff premium for the compounded benefit "wasn't worth it"...


Yup, I've heard that before. It's not affordable.

However, if long term care costs are going up at 8% compounded and your coverage is going up at 5% NOT compounded.....

This is not easy stuff.

Doncha just wish we all knew when we were going to check out? Wouldn't that make planning so much easier?

Andy


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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: 9975 of 19224
Subject: Re: Long term care insurance Date: 7/27/2005 7:10 AM
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I am very biased, but there are differences. We happen to have GE which in now known as Gennworth. I have read that the "profit" is from people who cancel/drop. That would say they break even on the actual insurance. While that may be roughly correct, I have no way of knowing.

Part of the reason for my bias is personal experience. My wife and I are responsible for a friend who happens to have GE insurance. Long story short there are essentially zero hassels. The closest thing to a hassel is every couple of years we have to get forms filled out by the doctor and the facilitiy she is at saying she needs care/help and the facility provides that care. She got the policy about 1990, had a stroke in 1998 and finally was forced into assisted living in 2002. Since then the premiums have ended and she has collected more then twice her total premiums.

My wife was offered LTC insurance through work. The actual insurance provider was offering combined item which would be an annuity or life insurance if one did not need LTC insurance. That appeals to people who are concerned about paying for insurance they never "use" -- well given our experience we had a basis to ask a lot of questions. There were lots of "little" items that we did not like. Also the actual cost was greater.

If you are not familiar with the product generally, I urge you to get quotes from at least 2 different companies. Unfortunately you can't call up and get quotes like auto insurance. The whole process is designed to put you into a relationship with the sales person. But if you get this it will be a major expenditure through out your retirement. Be certain.

Finally you should determine what medicare will and will not pay. That is important - you do not want to have double coverage. The biggest way to lower the cost is by being self insured. If you have a 180 day elimination period the premium drops a lot. Medicare would pay the first 100 days in a nursing home. Most, people will be in the hospital before the nursing home, so maybe another 10 or so days are "covered". Bottom line for a few days of payment you get smaller premiums. But here is where I found differences. When and how does that elimination day clock start counting. Some people won't start it until you apply for coverage. Other's will go back to the start of the hospitalization or date at which you hired help in you stayed at home instead of going into a hospital.

The GE product we have is for both my wife and I. The same coverage would be much more if we had two policies one for her and one for me. So if you are really buying only for one person it is a different market then we are in.

Gordon
Atlanta

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Author: BrerBear Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 9976 of 19224
Subject: Re: Long term care insurance Date: 7/27/2005 9:02 AM
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Doncha just wish we all knew when we were going to check out? Wouldn't that make planning so much easier?

Andy
==================================
Yep... we delayed many months in making our decision... [we pulled the trigger on THE DAY my premium would increment to the next level due to age increase...]

It reminds me of collision insurance on your car... I'll bet you've carried it just about every year of your driving, but used it very rarely if at all... expensive coverage, but you 'gotta have it'...

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Author: ibnana Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 9989 of 19224
Subject: Re: Long term care insurance Date: 7/31/2005 7:20 PM
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I got LT insurance about 18 mos. ago at age 70. I don't expect it to pay the full amt. for needed care since I do have other resources. DH is uninsurable so I thought at least one of us should be covered. I wanted to protect my inheritance from my parents to have something to pass on to my kids/grandkids.

Smart Money magazine has had several good articles about LT insurance. The first was about 2 years ago at the time I was looking into it. Once you decide to get it, one of the most important items to look into is the financial health of the company offering it. You want them to still be in business when/if you need it! I think there are only a few that are A++ rated. I went with John Hancock.

http://smartmoney.com/insurance/longtermcare/

Here is Clark Howard's LTC honor roll of insurance companies according to financial rating. He also has a bit on his web site about LTC, but the Smart Money article is more thorough.

http://clarkhoward.com/topics/LTC_list.html

Carol

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