Long term care insurance

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DoingHomework
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Re: Long term care insurance

Postby DoingHomework » Tue Jan 31, 2012 7:39 pm

njhealthinspro wrote:
babysteps wrote: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 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.


This just shows how insurance is sold by fear and emotions rather than rational thinking and evaluation of actuarial tables!

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Re: Long term care insurance

Postby njhealthinspro » Tue Jan 31, 2012 9:17 pm

DoingHomework wrote:
njhealthinspro wrote:
babysteps wrote: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 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.


This just shows how insurance is sold by fear and emotions rather than rational thinking and evaluation of actuarial tables!


If you buy long term care because you are afraid that you can't afford to pay for care at $7,000 a month, does that it make it a bad deal? If you buy life insurance when you have a baby because you are afraid of stranding your family, is that a bad deal? How about having fire insurance for fear of your house burning down and not having the money to rebuild?
Yes, people buy insurance to give them peace of mind and should something unfortunate happen, they will have a mechanism to pay for it. Some insurances are better deals than others. You have to decide for yourself what risks you are willing to take and how you would like to protect against that risk.

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Re: Long term care insurance

Postby DoingHomework » Wed Feb 01, 2012 6:35 am

njhealthinspro wrote:If you buy long term care because you are afraid that you can't afford to pay for care at $7,000 a month, does that it make it a bad deal?


Yes. If you know it will cost $7000 a month then you plan for it, either for paying the expense or for alternatives. Decisions made out of fear or other emotions are almost always bad ones.

njhealthinspro wrote:If you buy life insurance when you have a baby because you are afraid of stranding your family, is that a bad deal? How about having fire insurance for fear of your house burning down and not having the money to rebuild?

Those are different. No one should buy life insurance out of fear. One should have a plan for the unexpected and life insurance could be a part of that in the situation you described. As for fire insurance, again, it should never be bought out of fear. It should be viewed as an "investment." I'm not afraid that my house will burn down. But when I compute the present value of the insurance premiums and compare it to the probability of a catastrophic loss times the amount of the loss, the insurance turns out to be a good deal. I easily have the savings to cover the loss but would rather pay the premiums and not put the savings at risk. For that reason I also carry a very high deductible.

Personally, I am well insured and think most people should be. I'm not a big fan of life insurance because it is often sold to people should shouldn't buy it. But it is also a necessity for some.

I was investigating LTC because I thought it might be a reasonable thing to buy at this point in my life. I'm still on the fence. But it would have to make sense financially rather than sold to me based on fear. Scare tactics are a big red flag to me that the product does not make sense on its own. If it could stand up ti analytical scrutiny, emotional ploys would not be needed.

I do think you made some good points about LTC companies losing their shirts because they under priced. If someone could buy LTC at a bargain price right now then it might be worth it if it were from a strong company and if the policy were iron-clad. But the reality is, any company that underprices insurance will likely either not survive, in which case the policy is worthless, or will find a way to weasel out of paying.




njhealthinspro wrote:Yes, people buy insurance to give them peace of mind and should something unfortunate happen, they will have a mechanism to pay for it. Some insurances are better deals than others. You have to decide for yourself what risks you are willing to take and how you would like to protect against that risk.

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Re: Long term care insurance

Postby DoingHomework » Wed Feb 01, 2012 7:07 am

There is another issue with comparing LTC to life insurance.

But first, let's think about the business model on which insurance companies operate:
Insurance companies make money by collecting premiums, investing the money, and then eventually paying it out in claims. Their profit is from what they earn on the reserves (investments) during the "float" period. Since insurance companies have such a long lag between revenue (premium) and expense (claim), they are a natural way to implement a major tax dodge. For that reason, in most jurisdictions, they pay heavy taxes or other penalties on any reserves larger than what will be needed to pay off claims and they have to justify those reserves in complex ways.

The bottom line is, insurance companies do not make money from premiums. They make money from time delays and being experts at predicting events long in the future in a statistical sense.

Now, with life insurance, it's fairly easy actually to predict death rates during a certain time period. But LTC is different. How would a company know whether someone will need nursing care or not? People have a choice about it. It's fairly easy to price a policy that pays $100 a day for 5 years, for example. But it's also easy to save for that. The reality is, the premiums should approximately equal the amount needed to be saved. The only risk is WHEN you might need the money.

The factor that has gotten LTC companies in trouble is not losing their shirts on claims. The problem is that too many people who signed up early on for cheap policies kept them. The companies were banking on many more policyholders dropping their policies early and losing their premiums and benefits. I suppose you could save that the scare tactics worked too well!

I am very definitely on the fence about LTC. But that does not mean I like the way it is sold. And I definitely have major concerns about the survivability of companies offering it and what teh coverage actually will be in the future. I'd worry about being force to live in a nursing home in some third world country for example - this kind of thing is already happening with health care.

Yes, I think I would want to pick that policy apart with a microscope!

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Re: Long term care insurance

Postby babysteps » Wed Feb 01, 2012 8:11 am

DoingHomework wrote:I am very definitely on the fence about LTC.


Would love to hear back if you come to any decisions or make headway in thinking about how to come to an informed LTC decision!

The other thing about me to mention is that the spouse & I have no kids (which is a huge factor in why my inlaws choose to have an LTC policy).

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Re: Long term care insurance

Postby DoingHomework » Wed Feb 01, 2012 10:14 am

babysteps wrote:
DoingHomework wrote:I am very definitely on the fence about LTC.

The other thing about me to mention is that the spouse & I have no kids (which is a huge factor in why my inlaws choose to have an LTC policy).


Same here - no kids.

Part of my thinking is that a typical policy pays $100 a day for a maximum of 10 years AFTER meeting a bunch of constraints. That's $36500 over 10 years starting long in the future for me. I think I can cover that with savings as part of my regular expense assumptions. I already have in excess of $25000 a year in health insurance expenses in retirement even after being eligible for medicare.

But like I said, still thinking through it.

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Re: Long term care insurance

Postby njhealthinspro » Wed Feb 01, 2012 9:27 pm

DoingHomework wrote:
Yes. If you know it will cost $7000 a month then you plan for it, either for paying the expense or for alternatives. Decisions made out of fear or other emotions are almost always bad ones.



You make an excellent point and I completely agree, however..... From my experience, even when a product makes perfect sense, people won't purchase it unless they are compelled to do so for some emotional reason. Especially in the case of insurance. This is not always but more often than not.

At any rate. Back to the point of needing the insurance.. This is a difficult decision to because of the unknowns in how much you will need and if and when you will need it. If you have the money, skillset and discipline to to properly self insure, I would do that. At the same time, I don't think you would be doing yourself any huge disservice by having a policy.

Good luck to all, whatever you decide to do.

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Wall Street Jounal Article

Postby VinTek » Sun Apr 08, 2012 8:35 am

It's not my intention to revive a dormant thread, but the Wall Street Journal just came out which an article on how to buy long-term care insurance, Don't Grow Old Without It. While a lot of posters here are savvy enough to already what to do, the article might provide new information for those who are still trying to figure some out some of it.

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Re: Long term care insurance

Postby DoingHomework » Sun Apr 08, 2012 11:22 am

Thanks Vintek. That's a very interesting article!

Based on the numbers presented in that article it's relatively easy to compute what a LTC policy should cost and my estimate is that the cost given for a 65 yr old married couple is actually a bit low. But starting at my age, mid 40s, LTC insurance is a horrible deal. It is relatively trivial to save in an ordinary account to fund the maximum a policy would pay. I guess that's why selling it based on emotion and fear is so important.

The more I analyze (overanalyze?) my own situation and try to plan, the more aware I become of the ridiculous health care situation we have in this country - and this has nothing to do with Obamacare or anything of the sort. By far our biggest expense in retirement is going to be health care - and we'll be living in a resort area with subsidize insurance provided by my wife's pension. And we are also very fit and healthy. Frankly, I don't see how the system can continue without collapse unless there is major reform.

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Re: Long term care insurance

Postby stannius » Mon Apr 09, 2012 9:28 am

Read an article today that you might not be able to get LTC insurance even if you wanted to:
http://www.cbsnews.com/8301-500395_162-57410258/why-long-term-care-insurance-may-become-extinct/

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Re: Long term care insurance

Postby VinTek » Wed May 16, 2012 8:53 am

New WSJ article, with arguments for pros and cons.

Should You Purchase Long-Term-Care Insurance?

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Re: Long term care insurance

Postby bill o » Wed May 16, 2012 5:00 pm

When you are in a nursing home and can't help yourself who is going to be your advocate with the insurance company?

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Re: Long term care insurance

Postby DoingHomework » Wed May 16, 2012 8:04 pm

bill o wrote:When you are in a nursing home and can't help yourself who is going to be your advocate with the insurance company?


Actually, your kids could...or you could pay a lawyer.

Generally though, I'm getting more and more skeptical of LTC insurance. It is discussed often on an early retirement forum I read. There are very few good experiences with it. Even the companies selling it have done a miserable job analyzing it. If you think an average individual or an insurance agent stands half a chance of analyzing LTC correctly then I have a bridge you might be interested in.

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Re: Long term care insurance

Postby jaiko » Sat Jun 16, 2012 12:57 pm

Sooo...none of you have it, but you've all got opinions on it. That's good, actually, at least you've thought about it, which is better than ignoring your risk.

The question is, what IS your individual risk profile for morbidity/mortality, and are you able to accurately analyze it to define how much risk you have or don't have? I've worked in admin/operations in three segments of the financial services industry for over 20 yrs, and I don't know many non-FS people who are knowledgeable enough to accurately judge their true risk profile.

We have LTCi. We have had it since 1999, when I was 48 and my DH was 46. Because I have a general understanding of how insurers work with actuarial tables, I felt the statistics they were using at the time were flawed.

Their stats were based on WWII generation (still are, in fact). Longevity increases and medical advances were just beginning to show major impact. Families mostly took care of their elderly relatives until it absolutely couldn't be handled at home, leaving nursing facilities as "the place where you go to die". This created the blanket stat of "average stay in nursing facilities is only two years," which is still sometimes trotted out by consumers.

This isn't true any longer and hasn't been true in a while. The "average stay" is now three years and will continue to lengthen as life expectancy continues to increase (it goes up monthly, in fact, as acknowledged by US government statistics).

Also, the move to remain at home has created the fastest growing segment of healthcare: home healthcare services. Medicare does not cover this except for very limited periods, under doctor's authorization. Medicaid, paid 50-50 by state/federal funds, is slowly being gutted in states with budget shortfalls, which has always been true. Whenever times are hard, Medicaid gets cut back. That means only the very, very sick and very, very poor get any services, and what they get is minimal.

So why did we buy LTCi? Why do we still have it, despite four class-wide premium increases with possibly more to come?

1) We have increased morbidity/mortality risk. DH suffered a haemorrhagic stroke at age 50. Not even his doctor can tell that he had one, nowadays, but it doubled his risk of dying by heart attack and actuarially speaking, halved his remaining life expectancy. When/if he makes it to 70, every single hour past that will be a gift. If I were trying to buy him an LTCi policy now, it would cost at least DOUBLE what we currently pay, probably with less coverage permitted

2) We have no children, by choice. Few family members nearby, and they have their own family concerns. They can help, but not intensively. Nor do we want to have to intrude upon their lives, if we can manage in other ways. Also, we determined the disability of one spouse would have a seriously negative financial effect on the other spouse. LTCi was the solution for us.

3) LTCi policies are complex (like annuities) and need careful research. Insurance is risk mitigation, not risk elimination. We have unlimited benefits, 5% compounded inflation, and home healthcare coverage. Home healthcare, BTW, costs 30% more on a per-hour basis compared to nursing facility care.

Because we assumed there would be premium increases, we budgeted for them. As it turned out, the premium increases have been moderate. Our premiums were very low when we started, so a first increase of 20% came out to less than $50/mo. total for the two of us. Subsequent increases have ranged from 10%-15%. We now pay (total, for two separate policies), just under $4K/yr.

4) Some call it 'wasted money'. Maybe, maybe not. It gives us great peace of mind, and I said above, I doubt DH could have qualified for LTCi after his stroke. The benefit has increased to $96K/yr on each of us. We live in a high-labor, expensive area: "nice" facilities are easily in the $90K/yr range.

Our total premiums paid for the past 12 yrs on 2 policies: less than $50K. For us, the math works.

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Re: Long term care insurance

Postby stannius » Mon Jun 18, 2012 5:38 pm

It's one thing to see a niche/anomaly in a pricing scheme and exploit it. It's another to see that an entire industry is underpricing things; in that case you could lose your entire bet if the whole thing collapses. For instance, when the insurance companies (LTC or otherwise) run into trouble, they may go bankrupt, lower payouts, or possibly return the premiums of supposedly insured people and consider that as a satisfaction of all obligations.


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