Long Term Care Insurance - Do I need it?

[pbharvey]

I guess the answer is "it depends."

 

My insurance guy says I should hedge my bet against long term care costs eroding my estate. He also said the application is 47 pages long and requires 15 signatures. When he told me that, it made me feel as if there are so many exclusions and loopholes that the insurance could be essentially worthless.

 

Anyone care to offer some insight?

 

(By the way, I'll turn 50 next year and can expense the premium costs through my business which is a C corporation)

[Kathy R]

I seriously considered buying one of these about 8 years ago. Ultimately, I decided that the restrictions all pointed to the favor of the insurer. In my case that was Northwestern Mutual. I decided to hold on to my money and roll the dice, managing my own elder years.

[Albert]

What I've read (and it's not extensive) seems to indicate anything before 65 (assuming reasonably good health) is a waste.

[pbharvey]

The carrot the insurance guy is dangling is to buy it now, while its less expensive, and retire with a paid up policy.

[Albert]

We're working with my mother's long term insurance company and her policy is a long winded litany of loopholes favoring the company. Seriously, these people had to have invented the concept of catch 22.

[Nice n Easy Rider]

I would look into it with a great deal of skepticism (even though my wife & I both have it). What has been happening is that the insurance companies have been finding that they underestimated the costs and now are discontinuing issuing new policies. I know that Met Life has and we just received notice that our insurer, Prudential, also has. They will continue with the existing policies but because no new policy holders are coming in, they are allowed to distribute the costs over the existing policies. Thus, as long as they do it for everyone, they can raise the annual costs as necessary and since the persons still covered are getting older & sicker the costs escalate rapidly. This forces many to drop out after years of paying into the system but before they get to collect.

 

My employer, when they announced several weeks ago that Prudential would no longer be issuing new policies, did say that our rates would be guaranteed until 2015 but after that, all bets were off (my words, not theirs).

 

Unfortunately, unless you need to use the policy in the next few years it will probably cost a bundle and go up in cost much faster than inflation. The alternative?: I wish I knew.

 

An article that might help get you started:

http://www.longmontweekly.com/money-talks/ci_21277284/five-things-know-about-long-term-care

[tallman]

My dad had a great policy, thankfully.

Decades of full time, 24 hour care, all the goodies, handicapped van etc.

 

You never know.

I'd ask questions, does it cover X, how much, how long, annual cap. etc.

 

In our case he had an early incident.

Roof collapsed on him, in a restaurant.

We lost everything.

Everything he worked for.

Real estate, his practice, etc.

Took years to get back together but nowhere near the previous

level.

Then another incident.

W/out the policy everything woulda gone bye bye again.

YMMV

[Alan D]

I have it for my wife and myself. Basically you are trying to protect your net worth for one of you or your kids.

I read a rule of thumb (forget the source or numbers, may have been consumer reports) but basically if you have little net worth it's not worth it and if your net worth is above approximately 4 million you should be able to self insure.

 

I ran the numbers and then called in my 2 kids. I showed them how much it cost and what it covers or can save the estate. The annual cost goes up each year. I'm guessing that either my wife or I will need it. I told my kids that I probably would not be able to afford the payments 15 years from now and I think that's what the insurance company is planning on. However, if they took over the payments then, they would be preserving their inheritance. They looked at the numbers and said that makes sense.

 

I was told by an insurance rep that insurance companies plan on policy cancellations. Most life insurance policies are never cashed, they are cancelled after a few years. Long Term Care policies were not being cancelled and it skewed all the previous calculations.

[Patallaire]

The question is not if you need it, it should be "Do I want it?" The transfeer of risk has two components to it,one of them is the financial consideration and the other is the question of dignity. The financial consideration is quite simple, do you want to set aside enough money to take care of those high probibility costs. These costs in New York are currently $220 per day or over $80,000 per year, Home health care is $20+ per hour, if you needed round the clock care that would be over $175,000 per year. The average stay in a facility is 2.5 years, if you develop alzheimers it can be more than 8.5 years. So doing the math is easy, do you feel lucky?

In the insurance side of my practice it is the number 2 claim, right behind disability claims. I have clients who have recieved payments now for over 5 years, no hoops, no small print.

Another point on the risk transfer, I am positive that most of us have home owners insurance to pay replacement cost of our homes in the 1 in 12,000 chance that they will burn down, we have auto insurance in the unlikely event of having an accident, and yet, an expense like long term care, we want to roll the dice. To just put the expense of care in persepective it is like buying a new BMW 1200 RT every 3 months!

Then there is the dignity point of view, do you want your children to feed you, to help you get dressed and undressed, to help you go to the toilet, ect. By having a contract, they never need to see you like that or rememeber you like that, they can visit or not. Some of the most time lost from work is by caregivers, it stiffles their careers, it is a financial burden to them and it becomes undignified and a bad memeory.

As to some person telling you that there is a 15 page application, that person must not do much work in that field, the application has many pages, most are not applicabale!

There are a few companies left in the industry, interest rates in the 10 year note are a drain on the companies as they need to set up reserves almost equal to every policy they write,also they now have experience in the claims that they are paying, so they now understand how to price these policies. Remember, insurance is a privilage, not a right.

I know of no companies in NY that are allowed to raise premiums every year for a person, if there is a rate increase, and on policies 10 years old or more, I have only seen one rate increase, they need to increase every policy, not just a persons.

AS to small print favoring a company, that has not been my professional experience. The claims are paid, and paid as promised.

So, your question to yourself, is not if you need it, mathematically you can justify it, the question should be, why would I not want it?

[smiller]

So, your question to yourself, is not if you need it, mathematically you can justify it, the question should be, why would I not want it?

Well for one, if you can afford to pay for long-term care for a couple of years out-of-pocket then insurance may not be cost effective.

[Albert]

Interesting point/counterpoint on the topic here

 

The average stay in a facility is 2.5 years,

 

Again, according to one of the experts from the above link:

 

"The industry touts scary statistics about the probability of ending life in a nursing home. It's not uncommon to see ads claiming "50% of all seniors will go into a nursing home," or "the average stay is two and a half years."

 

It may be more useful to learn that 67% to 70% of seniors who do go into a nursing home are discharged within 90 days, and that after two years, less than 6% of those admitted will still be there. Actually, out of 40 million American seniors alive today, approximately 1.5 million currently live in nursing homes, about 3.7%."

 

 

AS to small print favoring a company, that has not been my professional experience. The claims are paid, and paid as promised.

 

As for the above comment. Not in my experience. The dozens of extra pages mentioned above may not need to be signed but they DO contain the small print. A mountain of it.

 

I won't claim to be an expert on the subject (although I'm becoming one without wanting to) and my experience is with one parent and one insurance company.

 

 

[Patallaire]

As for the above comment. Not in my experience. The dozens of extra pages mentioned above may not need to be signed but they DO contain the small print. A mountain of it.

It is an application, not the policy, which you have a right to ask for and contains all the small print, it is not a marketing piece which contains little small print, there is no small print, other than verifying that you are who you say you are, that the Doctors you saw can be written to and that the company will call you to verify some info about you and an HIV form and all the info you shared with the agent is accurate.

The Wall Streeet Journal article is the opinion of two people, it is not the experience of many. Like any insurance, anyone who has a legimate claim and gets paid for it, loves the fact that they had it in place, those who never use it lament it's purchase, like homeowners insurance, those who have a hassle with an insurance company have no good things to say, like the BMW spline issue.

The point that someone made about just paying LTC out of pocket is legimate if you think that a premium, lets assume 20 years at $3,000 per year {$60,000} can be less expensive than paying $80,000 for 2 years or less. Consider that Long Term care is rising at better than 7% per year, do that math for over 20 years.

All that being said, it is truely a personal choice, it, in my opinion, should not be mathematical, I believe it should be about dignity. For the record, and after seeing my clients experience and processing the claims, which by the way are mostly about health issues above the neck, I bought it, and feel great about it.

[Albert]

As for the above comment. Not in my experience. The dozens of extra pages mentioned above may not need to be signed but they DO contain the small print. A mountain of it.

It is an application, not the policy,

 

I guess I misunderstood the previous discussion. In my case I was definitely talking about the policy not the application. Unfortunately my mother started the policy long before I became involved with handling her affairs so reviewing anything in advance wasn't an option. Perhaps I would have done better or perhaps I would have been just as hoodwinked as she was.

[Patallaire]

 

Perhaps I would have done better or perhaps I would have been just as hoodwinked as she was.

 

Perhaps, I am sorry your claims experience is not what you expected. I am not sure how the agent set your expectations, but clearly they are not what you are experiencing. My experience with all the clients I have on claim is quite different. The families are quite happy with the outcome. I hope it works out for you.

[Shaman97]

Here's a link that is discussing the same issues:

 

Dave Ramsey LTC forum

[Alan D]

Average stay...

My mother-in law (passed 7 years ago) was in nursing homes several times. Two hip replacements, knee replacement, a couple of falls, and a stroke. All lasted until she could care for herself. The final time was a permanent placement. That only lasted about a month. She said i have had enough and stopped all her meds.

No price increase... I'm not in New York, my policy has the annual price increases and benefit increases spelled out in the contract. If I say stop the policy increases that stops the benefit increases also.

 

[Patallaire]

Yes, that is a different statement. What you have is an inflation protection policy, the benefits will go up and the premium will go up to cover the increased benefit. That is not how I read your original post, I interpreted your statement that your premiums were going up every year as just that, not that your benefits were going up to coincide with the premium increase. We do have those products and then some in NY. As to average stay, your mothers stay was below average, to get an average there needs to be measurable high and low metrics, then you have an average. Your mother made an intellegent choice as to what quality of life she would endure. Sorry for your loss, she sounds like she was a strong woman.