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Or so says Consumer Reports in their Nov 2003 issue:

A CR investigation, for which we reviewed 47 policies, reveals that for most people, long-term-care insurance is too risky and too expensive. As with health insurance, you must keep paying to keep it in force. If premiums rise, you may have to drop the coverage, possibly losing everything that you've paid. The policy's benefits may cover only a portion of the total expense. Many policies are packed with catches that can keep you from collecting. Finally, there's no guarantee that long-term-care insurers, some of which have weak balance sheets, will be around 20, 30, or 40 years from now

Nick
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I was almost ready to take the step of buying a LTC policy, when someone pointed me to this CR article, so I didn't. I also spoke with a friend of mine who is a financial advisor, and she pointed out that if you have big bucks put aside for retirement (i.e. > 1.5 mill) you're probably better off self-insuring. Others should wait until they're at least 65 to consider buying a policy, to avoid as many of those premium increases as possible. And you're right, there are benefit limits--most policies don't pay anywhere near 100% of the cost, and most have a maximum benefit period.

I understand however that there are some states which will allow you to collect Medicaid without being destitute if you had a LTC policy, but its benefits have all been used up.

So, I guess what I'm saying is that there are a lot of things to investigate, and a lot of things to analyze before buying a LTC policy.

2old


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Article in Kiplinger's Magazine within the last couple months said insurance companies are re-assessing LTC insurance. Some are cutting back coverage in their policies or no longer offering it at all. As CR warns, some companies won't be around by the time you need to collect.

My feeling is that insurance companies got into this as a way to collect premiums but have limited claims experience for setting premiums. It's probably good coverage to have for some people but stick with the very largest providers and be sure you understand what is and is not covered.
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Nick (a.k.a. yobria) quotes Consumer Reports:

<< ”A CR investigation, for which we reviewed 47 policies, reveals that for most people, long-term-care insurance is too risky and too expensive. As with health insurance, you must keep paying to keep it in force. If premiums rise, you may have to drop the coverage, possibly losing everything that you've paid.” >>

I feel this is most probably true . . . . since “most people” tend to live and retire at a poverty level and depend mostly on government entitlements.

<< ” The policy's benefits may cover only a portion of the total expense. Many policies are packed with catches that can keep you from collecting. Finally, there's no guarantee that long-term-care insurers, some of which have weak balance sheets, will be around 20, 30, or 40 years from now “ >>

I find the use of “packed with catches” as very revealing about the author's view. All insurances have “catches.” And the way this is phrased, “keep you from collecting” implies some form of treachery. Any insurance contract has to set limits as to what it will or will not cover, otherwise no insurance company would be able to stay in business. If one doesn't like the limits set with a contract, then find a contract that's acceptable. But don't expect an insurance company to do things outside of what the contract obligates it to do.

And I would agree that there's no guarantee that any long-term-carrier will be around indefinitely. This is true for any business. However, for insurance such as this, the contracts like this simply tend to migrate to another company and sometimes do so with some changes in pricing and some coverage's.

2old4bs, writes:

<< I was almost ready to take the step of buying a LTC policy, when someone pointed me to this CR article, so I didn't. I also spoke with a friend of mine who is a financial advisor, and she pointed out that if you have big bucks put aside for retirement (i.e. > 1.5 mill) you're probably better off self-insuring. >>

I would tend to agree with this financial advisor. And I might add that if one has less than about $300,000 they most likely should consider alternatives other than buying LTC coverage and make plans for going on Medicaid. It's the people caught in between that really have the dilemma as to when to buy and how much they can afford.

<< Others should wait until they're at least 65 to consider buying a policy, to avoid as many of those premium increases as possible. >>

Hmmmm??? You mean there's not going to be any premium increases unit then??? <VBG> Oh, you mean to avoid paying for any coverage until then? And never mind that one might not be able to qualify to get it or not be able to get it at a standard or preferred rate by then . . . ????

Personally, I feel that around age 55 is probably an optimum age to seriously consider LTC coverage, which seems to be the consensus among most planners.

<< And you're right, there are benefit limits--most policies don't pay anywhere near 100% of the cost, and most have a maximum benefit period. >>

I wonder what such coverage would cost if it did pay 100% of everything?

<< I understand however that there are some states which will allow you to collect Medicaid without being destitute if you had a LTC policy, but its benefits have all been used up. >>

I don't think so since it IS a federal government program run by the states and funded by both the states and the Feds. I think what you might be referring to are the rules surrounding a married couple.

<< So, I guess what I'm saying is that there are a lot of things to investigate, and a lot of things to analyze before buying a LTC policy. >>

Indeed!

<< billjam writes:

<< Article in Kiplinger's Magazine within the last couple months said insurance companies are re-assessing LTC insurance. Some are cutting back coverage in their policies or no longer offering it at all. As CR warns, some companies won't be around by the time you need to collect. >>

LTC insurance is having much the same problems that medical insurance is having. Things are changing and costs are rising outside of the insurance company's actuarial expectations.

<< My feeling is that insurance companies got into this as a way to collect premiums but have limited claims experience for setting premiums. It's probably good coverage to have for some people but stick with the very largest providers and be sure you understand what is and is not covered. >>

No doubt they are very interested in getting into a hot market like LTC in order to turn a profit. After all, that's what businesses do. But as you suggest, when you don't have enough data/experience the insurance business is tough to make a profit in . . . particularly when future costs rise far beyond expectations.

Too bad, isn't it . . . .that insurance companies can't just pull money out of thin air??? ;-)
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I understand however that there are some states which will allow you to collect Medicaid without being destitute if you had a LTC policy, but its benefits have all been used up.

New York State is one of those states that will allow you to collect medicaid if you purchase your LTC policy from one of the states' 'Preferred Insurers' and exhaust your benefits. You do not need to spend down under those circumstances. My husband and I debated whether to go with the States offer of the Federal governments program. In the end, we went with the Feds offering through John Hancock.

Our intent, besides protecting our modest estate, was to also have more control over our future. Our policy does provide for in-home care. Also, because it is a Federal Program we can get care anywhere in the US.

Pat in NY
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Connecticut is also one of those states where you can buy a minimal LTC policy and still protect your life savings from exhaustion.

http://www.opm.state.ct.us/pdpd4/ltc/general.htm

You just need to buy a LTC policy that covers the first 3 years of care, then the state will put you on Medicaid if you're in a nursing home longer than that without coming after your assets.

intercst
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We were considering a policy through DH's work. It's an inflation-adjusted policy, so the rates don't go up, but the benefits do. So at age 38 our monthly premiums would be $38 each. And the policy has non-forfeiture (is that correct?) where you will still receive some benefits even if you quit paying the premiums. But we're torn because we're so young, but then they tell us that 1/3 of the LTC claims are from working-age people. If we buy the insurance now, the total amount that we would have paid in premiums by age 80 would be substantially less than if we wait until age 55. But the industry could change significantly over the next decade or two. So we're not sure what we'll do. Thoughts?
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Another friend advised me "Never buy LTC insurance to cover more than 5 years; that may reduce your premium."

Why?

Because, according to him (and as told him by an agent), by the time someone is so bad off that they NEED that insurance to cover a nursing home, they typically don't live more than 5 years, anyway!

I have no idea how accurate that is, but I do recall that when my late mother-in-law finally could no longer remain here (because of severe medical conditions and a level of care we truly could no longer handle), and went to a nursing home, she died just 9 months later. (Her own funds covered the huge costs for those 9 months, but there was little left at the end. Had she been alive longer, Medicaid would have helped, of course.)

I'd be interested in hearing more about whether or not that 5-year concept is true.

Vermonter
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New York State is one of those states that will allow you to collect medicaid if you purchase your LTC policy from one of the states' 'Preferred Insurers' and exhaust your benefits

I'm glad my info was correct; I got it from AARP. Thanks for your input Pat-I'm filing it in my 'future' file!

2old in NY
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Vermonter,

A financial advisor told me that the average stay in a nursing home is less than 2 years. The policy I looked into covered up to 2 years--I would imagine the premium would have been much higher if they covered longer than that. Some of these policies also cover 'in-home' care, but there are maximum time limits on that coverage also.

Her own funds covered the huge costs for those 9 months, but there was little left at the end

The same thing happened to my friend's father--first he was in a minimum care facility for one year, and then 10 months in a nursing home, between the two almost all of his assets were depleted. Here in NY nursing home care is really expensive, somewhere in the neighborhood of $100K/year.

2old
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2old:

Here in NY nursing home care is really expensive, somewhere in the neighborhood of $100K/year.

Yes, I can imagine that. It was $6,000/month PLUS medications (!) here and that was two years ago.

Vermonter
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