Thoughts on long term care insurance?

This seems to be a huge area of confusion for almost everyone, even many CFPs! Defining what it is is easy, determining who needs it and how much is not so simple.

I've been wondering if my wife and I (45, 50) should buy LTC insurance now or if we should self insure. The cost now would seem to be about $75-$100 per month each for a policy that pays $150 a day for 2 years, with a 4% annual inflation adjustment - not a whole lot when compared to the cost of long term care though. The total lifetime benefit would be only about $110000 maximum per person not counting the inflation adjustment.

We could allocate about $80000 total of our portfolio, invest it to grow at 4% over inflation (which is a mix of stocks and bonds), and be ahead if we do not need the LTC insurance for 25 years. We are both very healthy so this seems like a good bet. And we are not insuring for health, we are insuring for nursing home care.

I don't know...it doesn't seem like the math makes LTC insurance a good deal. And the 2-5 year restriction on collecting benefits means it is pretty useless for the feared 10-20 years in a nursing home that is often raised as a scare tactic.

Has anyone looked into this and come to any conclusions? I have never done much research on it and am basically open-minded. But what little I have read recently is not very encouraging.

Greetings. I suggest you check daveramsey.com on this question. He says the actuarial tables don't support buying LTC insurance until age 60. Upon turning 60, buy it immediately, he says.

Since you both are in good health, this might be a good plan. It allows you to keep more of your money invested for another 10 years or so. Run the numbers and see how buying now compares in cost to buying then.

Robert Pitts
Freedom Personal Finance
http://www.freedompersonalfinance.com

It's probably a good idea to get it but also put back your own nest egg just for long term care also.


If I were in your shoes, I'd wait a few years to purchase this if you decide to do it especially if you both are in good health.

As a disclaimer, I don't like insurance companies. At all. I know they're necessary but too many of them are in the business of leaving their insureds high-n-dry when the manure hits the fan & the chips are down. Their policies are laced with so many 'gotchas' that they make banks look good. As luck would have it, I married an insurance agent. Go figure.


Very true. Have you considered the cost increase of nursing home care in the future in your computation? It's expensive now & I don't see it going down anytime soon no matter how much the Gov't might stick their nose in it.


I believe that is an insurance industry scare tactic too just to sell policies. As a rule of thumb though, many of these same people that do die a slow, horrible death in nursing homes for a couple of decades...excluding those with catastrophic illnesses...never took care of themselves during their lifetimes. They never dieted, exercised, or tended to their health while smoking two packs a day then woke up at 60 years old in a nursing home with no insurance, no money, & wondering how their family is gonna pay for it.

I think Dave Ramsey is pretty much an idiot so I don't see myself consulting him. I doubt he actually knows what an actuarial table looks like and has probably not done any actual analysis to support what he says, like most of what he says.

Wow Tightwad, I could have written that myself! We think alike.

I guess that gym membership is a better investment than long term care insurance.

To be honest, my calculations are based on a lot that is hard to get good information for. The other post suggests Dave Ramsey has some sort of actuarial table. But if these exist I have never found them. I'm sure the insurance companies have them but they are not published like mortality tables.

And I have about the same opinion of insurance companies as you do.

Long term care insurance seems to be an aspect of finance that no one knowledgable addresses in anything but a hand-waving fashion.

Well thanks..it's just an honest opinion. And I agree that there's a serious lack of objective information on the subject.

But I really think LTC insurance (and that goes for any type of insurance) has it's place in the financial toolbox if someone chooses to get it. And some people will. Especially the elderly crowd who are usually over insured to begin with since that's the only financial plan they've ever known their whole life. And most people that have to rely on insurance as a last resort to sustain life, as an investment, etc are the ones who insurance agents prey on. These same people balk at owing stocks, investing, or even a emergency fund but they're gonna have plenty of insurance.

But someone like you that has the knowledge & desire to set aside money in leiu of or in addition to a LTC policy is way ahead of the curve. You give your future self options which is worth it's weight in gold.

In my view, Dave Ramsey is a one trick pony. He does debt reduction & behavior change regarding spending & budgeting pretty well for his target audience. Other than that, his information is very basic...sometimes almost deterimental to long term wealth.

I do watch his show sometimes since it has a certain entainment value for me. It's amazing how many financial idiots there are in the world.

dave ramsey...puke! i believe the actuarial tables say LTC insurance from 50 to before 60

Do you have a reference for this? Seriously, I'm not questioning you, I have just never found those tables.

I am actually looking into LTC insurance right now, even though I'm still just early 30's/late twenties.

What I'm thinking is that my parents are older and maybe have just enough savings for retirement. If anything were to happen to me I do not want to add that much stress and anxiety to the end of their lives. As life has recently reminded me, accidents happen.

Maybe in the next year or two I will be married. My SO have had discussions about end of life care, if indeed anything bad should happen. I no more want him being saddled with the financial and other stress of my care should anything bad happen than I want my parents to be.

At my current age the few quotes I have looked at for unlimited, $150/day, with 5% inflation adjustment comes out to ~1% of my current income (and they can't increase the cost of that policy in the future as my health/age change. I can lock that in. With inflation that premium cost is going to effectively dwindle). That is substantial peace of mind I can buy for myself, knowing my loved ones can get help if we need it. My loved ones can continue to have a life if someone can take care of me in the home, an ASL, or nursing home.

Now, what if I did say a 5 year, $/day payout instead of unlimited? The state that I live in counts that towards my medicaid eligibility limit. So if I needed to have less than $2000 in assets for my family to get help with my care, then if I had purchased $270,000 work of care we would instead be eligible for government aid for my care at $272,000 instead. That means I wouldn't have to destitute or divorce (although depending on what assets we have accumulated, maybe divorce would still make sense) my spouse to get care/or I could leave some estate behind for my hypothetical kids.

At my current age the tables apparently say that I have a 1/10 chance of someday needing long term care.

At this point I am looking for quotes and specifics of what each policy cover. I am heavily disposed towards buying myself a long term care policy, and I am encouraging my SO to do the same because...if I end up married to someone that needs 24/7 care making me choose between work and doing it myself I seriously wouldn't stay married long. Not without in home help or an assisted living easing the financial and time commitment strain.

I started this discussion about a year and a half ago. Since then I have not learned too much more about LTC until very recently. On the Early Retirement forum there is an ongoing discussion about what has happened recently to these so-called "can't increase" LTC policies.

It seems the insurance companies grossly erred in their predictions of the costs. They were dead wrong, Dave Ramsey is dead wrong, the experts that structured these policies were dead wrong. People who have these policies that can never go up are being forced to pay double or triple or cancel.

How is this so? Apparently it was all in the fine print!

The bottom line is, if you are serious, I strongly suggest you have a lawyer look over the policy before buying. I do not normally say that about insurance policies but these LTC policies are turning out to be a serious problem so you want to make sure your policy is really what you think it is.

I'm not a bit surprised that this is happening. That "never increase" gimmick is just that a gimmick to sell policies to a generation of people who are gullible enough to believe it. Usually the word "Guaranteed" is also splashed all over it for extra marketability.

I think long term care is a good choice for people with assets to protect and for those that don't want to dig into the assets to pay for future long term care costs. Like many other insurance policies, it can buy you some peace of mind and of course some options should you need care.

For those that think they won't ever need care, you are crazy! If you look around in my part of the state, nursing homes and assisted living facilities are sprouting up everywhere with no shortage of patients. They are full of people who were "healthy". The "unhealthy" people have already died of some other disease caused by their poor health habits or bad luck. That's unfortunatley the way it is.

When insurance companies first started selling these, the policies were way underpriced and now companies have resorted to raising the premiums on existing policies to keep up with the claims. There are many insurance companies pulling out of the market, and most recently MetLife. What that tells me, is that it is a hugely unprofitable business to be in and that means there are HIGH claims. That being said, even if they do have "gotchas", insurance companies are losing their shirts on policies they have sold.

One thing to consider in needing one or not is the extra options it will create for you. If you save a few hundred thousand to self insure, what happens if you have to liquidate in a down market, or what if you have the money tied up elsewhere or what if you decide you want to leave it someone or who knows what. The insurance policy may at least buy you a few years to make some moves with the money.



I think the policies are definitely a worth a look and you have to decide for yourself how you would prefer to handle a potential need for care. Self insure, buy insurance, a combination of the two?

Would love to hear from anyone who has a story of an immediate family member for whom LTC was a positive (whether emotionally, $ or both).

I have to admit I'm biased against LTC for my own planning. To me it seems more like a way to buy peace of mind than a true financial planning tool. But there is usually some kernel of usefulness to most financial products - has anyone gathered case studies of folks for whom it made a difference? That would help me understand when LTC could make sense.

Behind my bias: I don't have huge assets (thank goodness for moving to a low cost of life area), my family tends to have short final illnesses, and I keep thinking about how we didn't used to have, much less use, nursing care facilities. If my great grandparents didn't need nursing care, maybe I don't need it either. So far of 8 total grandparents between me & my spouse, just 1 was in long term nursing care. Of their siblings that I know of, 2 of 14 were in long term nursing care. Of our parents, 3 of the 4 are still living (no long term nursing care, current ages 82, 86 and 88) and the fourth died with less than 2 weeks total in a nursing facility.

And if I do need long term nursing care, that would imply I'm very ill - so perhaps I won't notice the care or lack thereof based on my ability to pay??

I can't share any personal stories but check this site out for some real life stories.
http://www.lifehappens.org/cat-life-pro ... e-stories/

Life and Health Insurance Foundation for Education (LIFE) is a nonprofit organization dedicated to helping consumers make smart insurance decisions to safeguard their families’ financial futures.