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Another article extolling the virtues of this very expensive, high commission insurance product.

http://online.wsj.com/article/SB1000142405270230407200457732...

Ken Kacenga, a 65-year-old doctor in Sierra Vista, Ariz., who plans to retire later this year, got hit with a 23% premium increase recently on the long-term-care insurance he and his wife bought several years ago. The couple struggled with whether to drop the coverage, he says, before finally deciding to keep it for another year while shopping around for other options.

"My fear is…it could become unaffordable as I get into the fixed-income stage of my life," Dr. Kacenga says.

Costs vary widely, even for coverage that is basically identical, according to a March study by the long-term-care insurance group. For example, a $150 daily benefit, lasting three years for a married couple aged 65 in "standard" health, ranges in price from $3,815 a year to $7,129.

A decade ago, the conventional advice was to spring for unlimited lifetime coverage.
That option has become so expensive and so unpredictable for insurers that some have dropped it altogether. Instead, for most people, it is best to choose a "short and fat" policy, with fewer years' coverage and a larger daily benefit. Most people buy three years' coverage, as the average nursing-home stay lasts about that long—though that could follow years of other care.

</snip>


I think most well-to-do retirees could probably fund 2 or 3 years in a nursing home themselves. The bankruptcy scenario would be an otherwise healthy spouse spending 10 or 20 years in an Alzheimer's facility. If an insurer won't protect you against that, there's little reason to let them suck away a good portion of your wealth in catastrophically escalating premiums.

intercst
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I keep reading about insurance companies getting out of LTC. Most took a shot in the dark when they priced initally it and got it wrong. Too many buyers paid for several years only to find premiums became unaffordable just when they were getting close to using it.

I applied several years ago and got turned down because I wasn't seeing a physician at the time. I even had a physical at the insurance company's expense that showed everything was normal but they still would only cover me at a premium far above their advertised price. Even the agent advised against accepting that reaming.

Glad now that I didn't get the coverage. I'm better off funding my own care.
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billjam writes,

I applied several years ago and got turned down because I wasn't seeing a physician at the time. I even had a physical at the insurance company's expense that showed everything was normal but they still would only cover me at a premium far above their advertised price. Even the agent advised against accepting that reaming.

</snip>


Astonishing. What we're they going to use? A telephone pole?

intercst
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I purchased LTC back when I was around 52 (now 67), through AARP (MetLife), and chose the coverage which was not automatic inflation protection, and does not cover home care, but it does cover me for life, rather than the normal 3 years. Being without children, I would much rather be in a more social environment than being alone at home. Right now, my premiums are a little over $63.00 per month, as I have added the offered inflation protection every two years. Once the premiums go up to $80.00 per month, I will no longer add the inflationary provision.

So far, so good.

Donna
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My mother and I will be meeting with her financial advisor to look at the estimates he received for LTC insurance for her (I requested he check into it). His company doesn't sell it, but he can connect with 3 companies to get us estimates.

My mother has about 1,000,000 in retirement accounts and her advisor told us that this puts her right at the point where she could go either way (get it or not get it). She doesn't access the above accounts, but she just started having to take distributions from her 401k (which she is reinvesting). She lives off of social security and my father's pension.

Although we haven't met with the advisor yet, there was some discussion about if you choose to pay the full amount up front (150k in her case), then if not used, your beneficiaries would get the money back (or you will if you decide to pull out..it looks like they use some sort of cash surrender value system where you would get the full amount back after 10 years). The 150K would give her 3 years at $7,000 per month (or longer based on how much she uses). I don't know how much of it is crap, but I figure we might as well check it out.

I suppose part of the cost/benefit analysis will include any kind of piece of mind it may give her. My mother was the typical homemaker and is brand new to anything financial (my father passed away two years ago), and in general, any financial discussion makes her very anxious. I do think that she has some fears around "having enough".

Would love to hear others thoughts on this.
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My company full of engineers had several LTC seminars, and being engineers we had a lot of detailed questions. One of the first things we did was compute the total premiums we would pay and compare that to the caps of the LTC insurance.


In general, they said that LTC was only a good value if you had less than $1,000,000 in assets. At that level, it was cheaper to *not* get LTC insurance, just pay the costs out of your own money.

Even at $5000-$6000 per month for an Alzheimer's unit, a million dollars lasts a long time.
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MT
You might want to think about this, carefully (this post is a bit long, but it might be in your interst to read my thoughts)

Qualified LTCI is a result of HIPAA of 1996, with the first policies, as I recall, being sold in 1998. Prior to that, it was often called "Nursing Home" or "After Hospitalization" insurance, whose coverage varied widely between carriers. HIPAA standardized important provisions of LTCI, to include what may trigger benefits, offering inflation adjustors, tax treatment of premiums and future benefits, etc.

1. The concept of LTCI is like any other household catestrophic risks, such as property, liability (particularly auto), disability and life. However, it is the ONLY forms of insurance that you are paying premiums today for a benefit that, if ever triggered, will likely not happen for decades (permanent life insurance also collects premiums today for loss decades hence...but it can build cash value while QLTCI cannot, and death is inevitable, QLTC disability is not). This, IMHO, is the first source of problems for this form of insurance.

2. When first offered, insurers scrambled to get market share, heavily marketing this new product, with all manner of 'white papers', showing that many...if not most...individuals will spend time in assisted living and nursing homes, consuming huge amounts of their savings, which, of course, LTCI would alleviate or solve. This is the source of the second problem for this form of insurance.

The real problem with #1 is underpricing policies at the start. Because there is not a lot of actuarial data available yet for QLTCI (the inability to do 2 of 6 Activities of Daily Living or 'substantial' imparement from cognitive mental disorder (such as Alzheimers), so the insurance companies made up their own, most likely using future projections on loss (claims) whose present value would be as small as possible, including using an optimistic earnings (discount) rate on net premiums paid. This created artificially low premiums for the benefits defined in the policy...leading to sharply increasing rates over the years. We are seeing this begin to happen now.

The #2 problem with this form of insurance is that it is being marketed as a cost sharing scheme...not true insurance. This will result in a lower than 'expected' lapse rate, as policyholders consider what they've paid in as a kind of savings account...and individuals typically do not abandon savings plans. This exaccerbates the problem of underfunding to the insurers.

No one knows what the future holds, but based on what I've seen and the rough calculations I've done, most insurers will not have nearly enough in capital reserves to meet future claims. When this happens, insurers tend to go into 'crisis' mode, typically denying or delaying most claims. And because there are not clear cut standards for what constitutes the inability to perform an ADL, this is furtile ground for footdragging and stonewalling or just flat out denying of claims by the insurers.

One final note....when you or I get to the point that we can't function due to a cognative disorder or inability to do a second ADL, whose going to file our LTCI claim? Will you or I at this point be able to go to the mat with an insurer who has denied our claim? If not, who will? If your adult children, do they know all about the coverage and what should trigger benefits? Will they do battle with the insurer if they deny the claim?

QLTCI is bad juju. All the arrows are pointing in the wrong direction. The potential conflicts to the insurer and the risks involved with this form of very long period premium payments simply make this too risky.

And besides...aren't your savings supposed to be used to pay for your lifestyle, whereever that is? And remember, for many, going into assisted living may not cost very much more than maintaining their own household, depending on where you live. Skilled nursing, however, is typically much more expensive than maintaining a single family home.

This is only my assessment, based on my own research into this unique form of insurance. You need to do your own research.

BruceM
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Thanks so much for taking the time to respond, Ravvt and BruceM. The information you both presented makes me think it is better that my mother steer clear of getting this insurance.

I welcome hearing from more folks here and will do some more research on the subject, before making a final decision/recommendation to my mother.
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One other thing for you to read and understand is what medicare and her gap insurance will cover. Many people end up in skilled nursing care after a hospital stay which also needs to be considered.

I ended up reading and understanding all of this after my mother ended up in the hospital(I was early 50s and really had not a reason to know much of it). I had urged her to get drug coverage. She ignored that advice and ended up paying about $1000 out of pocket until I got her signed up after she ended up in the hospital.

I will tell you that I had a spreadsheet and after the monthly bill was paid, I would recalculate how long her money would last. If and when you do this, remember to include income and not just assets ;)
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I've been torn about getting LTCI. I do have an advantage of getting a group policy through my retirement plan, which self-insures. So far there has not been a premium change over the past 8 years (period I've been looking), so their experience so far has been good. Of course, that can change as more baby boomers retire and age.

While we might have enough income to support 3-4 years of LTC, we don't have enough to also support the non-LTC spouse. This will likely be the reason why we get LTCI. When there is only one of us left, the LTCI policy will be evaluated and depending on assets available, income and health, it will be kept or dropped.
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While we might have enough income to support 3-4 years of LTC, we don't have enough to also support the non-LTC spouse. This will likely be the reason why we get LTCI. When there is only one of us left, the LTCI policy will be evaluated and depending on assets available, income and health, it will be kept or dropped.

We do have LTC policies, and it was mostly for this reason. Although we could probably afford to pay for the long-term care of one of us, that would likely leave the other one destitute and unable to provide for their own lifetime expenses. In that case, I prefer to have some insurance to cover us.

Once there is only one of us left, we may opt to drop the LTC because we will have enough assets to self-insure, but I'd prefer to reach that point first.

This is a lot like other insurances in my mind where you pay a premium and hope never to use it. I have homeowner's insurance, but would prefer not to have the house burn down just so I can use it. I have term life insurance which we plan to cancel about the time we retire in a few years because we will no longer need to cover missing income at that point, and we will have reached the point at which we are supporting ourselves from our own savings.

LTC is the same to me, and so I'd rather have it in case I need it rather than need it and not have it. I realize others have different preferences, but this is mine.
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In general, they said that LTC was only a good value if you had less than $1,000,000 in assets.

There is a sweet spot; usually more that $300,000 but less than $2 mil. If you don't have any assets, then there is no reason for insurance since medicaid kicks in.

Even at $5000-$6000 per month for an Alzheimer's unit, a million dollars lasts a long time.


You might want to reprice that. I don't have a single client paying that little for the care of their spouse. The most recent client I met has her husband in such a unit paying $9000 a month - in the midwest.
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IMO, LTC has gotten much better over the last decade; especially with many states now offering partnership coverage. More on that later.

LTC policies come in so many different formats that it can be really easy to tailor one to match your needs - even including return of premium. Many have inflation protection built in. Many will also cover in home care for those families that do not want to be forced to commit their loved ones to a facility.

Regarding partniship coverage - many states are now subsidizing LTC policies by allowing you to shelter some or all of your assets from Medicaid spend-down. The policies do not cost anything more - it is just a way for the state to encourage you to have some coverage in the hope that you never have to use medicaid. If you do, then you could protect hundreds of thousands up to millions from the requirement of spending them down before qualifying for medicaid. This provision can really go a long way to insuring the other spouse is protected...

And these, IMO, are really about protecting the other spouse more than anything else. Sure, they can also protect assets for heirs but life insurance does that better - and if you qualify for one, you likely can qualify for the other.

A new client I have (female) has an existing LTC policy bought years ago but her husband didn't get one at that time. His care now costs her $9000 a month and it is quickly burning through their life savings. They used to have about $500k. They are now down to about $300K. This horrible situation puts the wife in a position she never wished to be - where she would be better off if he died sooner rather than later.

I worked in this industry nearly a decade ago so obviously things have changed but the addition of partnership coverage is a very welcome addition.
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You might want to reprice that. I don't have a single client paying that little for the care of their spouse. The most recent client I met has her husband in such a unit paying $9000 a month - in the midwest.

My sole experience was paying for my mother's back in 2005, in Crystal Lake, Il. IIRC the Alzheimer's unit cost was $5000/mo.

Even at $9000/mo, a million dollars will last for 111 months -- 9+ years.
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http://www.genworth.com/content/non_navigable/corporate/abou...

Il. private room cost is just under $70,000. That goes to about $85,000 for private alzheimer units.

Even at $9000/mo, a million dollars will last for 111 months -- 9+ years.

No doubt you can pay for this OOP, but in my experience, if you worked all your life to get to a million on deposit, most are more than happy to insure that for a few thousand a year from the risk of spending it down.
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Even at $9000/mo, a million dollars will last for 111 months -- 9+ years.

What about the surviving spouse?

My step-mother's first husband died from Alzheimer's, and was in a nursing home for a ridiculous amount of time that I know was over 10 years. She ended up selling the house to pay for his care, and after he died, she had no savings and a very small social security check to cover her own living expenses.

My concerns are much more around how the surviving spouse would pay for their own living expenses if they've used everything that has been saved over the years to pay for the first spouse, and for that concern, I am willing to have LTC insurance.

If it is just one of us left, then I have no problems dropping the insurance and using all our assets for that one spouse to have full nursing home care, but I will not leave one destitute so that we can fund the nursing home care of the other.
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2gifts, it is for this reason that I have LTC insurance. More so since my spouse is 17 years younger than me. For my peace of mind.

BigOFool
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You might want to reprice that. I don't have a single client paying that little for the care of their spouse. The most recent client I met has her husband in such a unit paying $9000 a month - in the midwest.

My sole experience was paying for my mother's back in 2005, in Crystal Lake, Il. IIRC the Alzheimer's unit cost was $5000/mo.

Even at $9000/mo, a million dollars will last for 111 months -- 9+ years.


At 4% return on the $1,000,000 and $9,000 the money should last about 11 years
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If I'm diagnosed with Alzheimer's I plan to make sure I never make it to the care unit. That's not living, it's existing.
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No doubt you can pay for this OOP, but in my experience, if you worked all your life to get to a million on deposit, most are more than happy to insure that for a few thousand a year from the risk of spending it down.

Not me. Looking at my family history of women, the last 2 generations lived alone into the 80s and spent <3 years in any type of care. More than 30 years of paying or something to cover a few ? I don't think so.

30*$3000 = $90000. I'll keep it and pay when needed.
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If I'm diagnosed with Alzheimer's I plan to make sure I never make it to the care unit. That's not living, it's existing.


If it happens, you might not be in a position to make that decision or carry it out.
You better make provisions for it to happen ahead of time.

GK
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If I'm diagnosed with Alzheimer's I plan to make sure I never make it to the care unit. That's not living, it's existing.
Yup, me too.

We've already decided that if either of us is diagnosed, we'll tell our doctor we can't sleep and need a 90 nday supply of REALLY STRONG sleeping pills.
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A new client I have (female) has an existing LTC policy bought years ago but her husband didn't get one at that time. His care now costs her $9000 a month and it is quickly burning through their life savings. They used to have about $500k. They are now down to about $300K. This horrible situation puts the wife in a position she never wished to be - where she would be better off if he died sooner rather than later.

I'm guessing they did what my parents did. Mom had a LTC policy and dad didn't. The plan was mom would be the main caregiver should my dad need it and mom would be the one going into a LTC facility if she needed it. Turned out dad ended up going when mom and my sister could no longer lift him when he fell. LTC started to eat into their assets, but fortunately, dad was in for less than 6 months.

As a side note, mom never used her LTC policy, but I think she had peace of mind that it would have covered part of the cost. While I have no intention of ever being in a LTC facility (especially after visiting my dad), sometimes plans may not work out. For me, getting LTCI is to minimize any burden on my spouse.
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Thanks again everyone for the discussion.

I think that she is going to get the policy (with paying the 150K all up front). She would most likely pass if she was paying in monthly installments where the money would blow into the wind even if she didn't use it.
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