Long term care insurance dilemma

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
seligsoj
Posts: 70
Joined: Mon Apr 25, 2016 11:44 am

Long term care insurance dilemma

Post by seligsoj »

My mother has had long term care insurance with genworth since she was 65. She is now 78 and pays $2,800 a year for it. She received a notice from a class action lawsuits that her premiums may go up 250 percent over the next 3-6 years in order to maintain her current level of benefits- which are around $500,000 worth of care if she needed it. They gave her a variety of other options including much reduced benefits i.e. $25,000 worth of care with a 9,000 cash payout and no premium; $65,000 worth of care, no premium, and no cash payout.

My mom is very upset and isn't sure of what to do. Any ideas from the smart folks here? She is currently in good health. I'm not sure if any other long term care insurances would offer her insurance given her age. I'm wondering if she should just plan to self-pay for any care needed in the future? She currently has 2 million in assets and owns her home. She also gets around $8,000 a year for a pension along with social security. Just doing a quick search online, I'm not sure if genworth is in great financial standing.
User avatar
GerryL
Posts: 3184
Joined: Fri Sep 20, 2013 11:40 pm

Re: Long term care insurance dilemma

Post by GerryL »

I took out my plan (different company) before age 55. I'm now 72. Although my premium has gone up, it's lower than hers is and has never gone up so dramatically. (I hold my breath each year when I open my invoice from them.)

Two thoughts:
My plan has been to reduce my benefits as I get older (into my 80s) as a way to manage the premium. If I and my portfolio are still hale and hearty as I get closer to my expiry date, a smaller LTC benefit would suffice. Its a decision I will make each time I am faced with an increase.

Understand that when they list options available to you to mitigate the increase, these are likely just some of your options. Think about what is most important given her financial situation, which looks pretty solid, and what she might need if down the road her health makes her eligible to file a claim. Then talk to her broker (if she has one) or someone at the company to discuss what other options there are. How much coverage will she need at this stage of her life, and how much is she prepared to pay for it?
User avatar
Watty
Posts: 22696
Joined: Wed Oct 10, 2007 3:55 pm

Re: Long term care insurance dilemma

Post by Watty »

seligsoj wrote: Sat May 08, 2021 8:40 pm She received a notice from a class action lawsuits that her premiums may go up 250 percent over the next 3-6 years in order.....
The way that you said "She received a notice from a class action lawsuits.." is odd, was this something from Genworth or someone else?

It sounds like scare tactics. Are you sure that this is not some scammy sales pitch?
Makefile
Posts: 866
Joined: Fri Apr 22, 2016 11:03 pm

Re: Long term care insurance dilemma

Post by Makefile »

Watty wrote: Sat May 08, 2021 10:58 pm
seligsoj wrote: Sat May 08, 2021 8:40 pm She received a notice from a class action lawsuits that her premiums may go up 250 percent over the next 3-6 years in order.....
The way that you said "She received a notice from a class action lawsuits.." is odd, was this something from Genworth or someone else?

It sounds like scare tactics. Are you sure that this is not some scammy sales pitch?
If you google around for it, it does appear there is some legitimate class action going on and something about a "special election letter," so it seemed somewhat legitimate.
HereToLearn
Posts: 791
Joined: Sat Mar 17, 2018 5:53 pm

Re: Long term care insurance dilemma

Post by HereToLearn »

Does she own her home in addition to having $2 million in assets + SS & $8K/year pension as a single person? If so, I think she can forego LTC. I understand the anger and frustration with Genworth.
Topic Author
seligsoj
Posts: 70
Joined: Mon Apr 25, 2016 11:44 am

Re: Long term care insurance dilemma

Post by seligsoj »

Yes, she does own her own home in addition to the 2 million in assets as a single person. I googled the lawsuit/settlement and it appears to be legitimate but I can certainly have her call the company directly just to double check the information.

I was thinking that the possible $7,000 premium they may be charging her yearly, if invested over the next 22 years at 6 percent interest would amount to $350,000..... Of course she could need the skilled nursing on the day she dropped the policy and would be out the money. Should she try other companies? Other models of long term care insurance? Just self-pay as someone else had suggested?
User avatar
willthrill81
Posts: 25278
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Long term care insurance dilemma

Post by willthrill81 »

If she owns her home and has $2 million besides, she doesn't need LTC insurance. She can very comfortably self-insure.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
Katietsu
Posts: 4970
Joined: Sun Sep 22, 2013 1:48 am

Re: Long term care insurance dilemma

Post by Katietsu »

At this point, the LTC insurance is not serving a need. Explain to Mom that she is in great financial shape with or without the insurance. It seems that the only difference is how much she leaves in her estate. And you have no way of knowing whether that will be more with or without the LTC insurance.

One benefit to forgoing the insurance is that she can use the money saved from not paying premiums however she wants and whenever she wants. She does not need to prove her need or move from her home.
prd1982
Posts: 548
Joined: Sun Jan 08, 2017 4:43 pm

Re: Long term care insurance dilemma

Post by prd1982 »

Assuming she could afford the increase without impacting her lifestyle if it happened, I would continue paying. My assumption is that the policy has no max on the total amount or years it would pay out. This adds a lot to the cost and would be very expensive to buy today. I’m pretty sure getting a policy from another company would be more expensive assuming she could get one at all. You are basically insuring against a really big event. If the policy does have a max on the number of years covered, then taking one of the other options is a reasonable choice.

I too am suspicious about the lawsuit statement. While the potential premium increase is real, this doesn’t sound like a letter from Genworth.

I know a lot of folks vote for “self insure”. Most times that probably wins. But it also can lose big time. That is true for all insurance.
User avatar
JoeRetire
Posts: 8316
Joined: Tue Jan 16, 2018 2:44 pm

Re: Long term care insurance dilemma

Post by JoeRetire »

seligsoj wrote: Sat May 08, 2021 8:40 pm My mother has had long term care insurance with genworth since she was 65. She is now 78 and pays $2,800 a year for it. She received a notice from a class action lawsuits that her premiums may go up 250 percent over the next 3-6 years in order to maintain her current level of benefits- which are around $500,000 worth of care if she needed it. They gave her a variety of other options including much reduced benefits i.e. $25,000 worth of care with a 9,000 cash payout and no premium; $65,000 worth of care, no premium, and no cash payout.

My mom is very upset and isn't sure of what to do. Any ideas from the smart folks here? She is currently in good health. I'm not sure if any other long term care insurances would offer her insurance given her age. I'm wondering if she should just plan to self-pay for any care needed in the future? She currently has 2 million in assets and owns her home. She also gets around $8,000 a year for a pension along with social security. Just doing a quick search online, I'm not sure if genworth is in great financial standing.
First make sure this class action lawsuit applies to her and her specific policy.

With $2M in assets, she can easily afford the annual premiums - even if they do eventually go up 250% over the next 3-6 years.

If she felt she needed this insurance at this level, I don't see how it would make any sense to cancel now. I'm assuming her desire to be covered by LTCi hasn't changed over the past 13 years.

Tell mom not to be upset.
Just remember: it's not a lie if you believe it.
Ron
Posts: 6763
Joined: Fri Feb 23, 2007 7:46 pm
Location: Allentown–Bethlehem–Easton, PA-NJ Metropolitan Statistical Area

Re: Long term care insurance dilemma

Post by Ron »

willthrill81 wrote: Sat May 08, 2021 11:34 pm If she owns her home and has $2 million besides, she doesn't need LTC insurance. She can very comfortably self-insure.
This was recommended by our elder law attorney many years ago and the course we selected in our "journey".

FWIW,

- Ron
Glomar
Posts: 71
Joined: Sun Oct 19, 2014 1:27 pm

Re: Long term care insurance dilemma

Post by Glomar »

I don't have LTCI or any insider knowledge; just weighing in as someone who has thought about the pros and cons of these policies before.

Premium increases are upsetting and seem to be a big issue with LTCI - but keep in mind they would have happened anyway, and any decision she makes here is not going to change that.

So it's really a matter of her personal preferences and financial situation.

She's in good financial shape - terrific! This means that she will likely continue to be OK financially, regardless of whatever she chooses now. But to weigh the pros and cons:

As others have said, she might not need LTCI at all, and could take one of the buyout options and plan to self-insure LTC costs.

The flip side of being in good financial shape is that this means she can afford the premiums. Yes, they will rise in future. But I would expect when that happens, she would again be given some option of lowering her coverage level to offset the premium increase (though perhaps not as good as the offer she's getting now).

Some people would gladly spend $7-10K per year for peace of mind of not worrying about depleting their assets on care.

I don't think the premium savings from taking a buyout would add up to $500,000 (under the worst-case scenario where one needs care for years). But of course, one cannot predict whether one will need the policy at all. Just like car or house insurance - one has it in hopes it is never needed.

Lastly I would not bother to shop around for other policies. If she would like to keep a decent level of LTCI coverage, keep the current policy. Unlikely one could find any cost-effective replacement at this point (given age and issues with LTCI industry in general).

Again, she's in good financial shape, and anything she does here is not likely to change that. Good luck!
yohac
Posts: 437
Joined: Sat Sep 01, 2018 1:42 pm

Re: Long term care insurance dilemma

Post by yohac »

She can afford this increase, of course. But how about the next one. The whole LTC insurance industry seems shady to me. I've heard too many stories of companies exiting the business, not to mention people having to fight for benefits at the time when they are most vulnerable.
MikeG62
Posts: 3725
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: Long term care insurance dilemma

Post by MikeG62 »

yohac wrote: Sun May 09, 2021 7:38 am She can afford this increase, of course. But how about the next one.
This sums up how I feel. It's one of the many reasons I have so far passed on LTCi.
Real Knowledge Comes Only From Experience
prd1982
Posts: 548
Joined: Sun Jan 08, 2017 4:43 pm

Re: Long term care insurance dilemma

Post by prd1982 »

MikeG62 wrote: Sun May 09, 2021 7:53 am
yohac wrote: Sun May 09, 2021 7:38 am She can afford this increase, of course. But how about the next one.
This sums up how I feel. It's one of the many reasons I have so far passed on LTCi.
I got a similar notice, minus the lawsuit comment, from Genworth a year ago. It also mentioned a large multi-step increase expected over the next 5-6 years. Note that the original poster talked about increases over numerous years. I actually considered this a good thing so that people who were reaching the amount they could pay would have an idea of what to expect. If I thought I couldn’t pay the additional costs, I could look at the other choices. The mother is just reaching the point where the odds of needing LTC starts to go up.
Mr.BB
Posts: 1633
Joined: Sun May 08, 2016 10:10 am

Re: Long term care insurance dilemma

Post by Mr.BB »

"We are what we repeatedly do. Excellence, then, is not an act, but a habit."
User avatar
JoeRetire
Posts: 8316
Joined: Tue Jan 16, 2018 2:44 pm

Re: Long term care insurance dilemma

Post by JoeRetire »

yohac wrote: Sun May 09, 2021 7:38 am She can afford this increase, of course. But how about the next one.
With $2M worth of assets, she won't have any trouble affording the next one either.
Just remember: it's not a lie if you believe it.
KansasDoc
Posts: 29
Joined: Sun Jul 21, 2019 7:44 pm

Re: Long term care insurance dilemma

Post by KansasDoc »

Physician here.

If you can self-insure do it.

I don’t have long-term care insurance

When people ask my professional opinion I told them to be wary

In my medical practice, I see long-term care insurance is trying to pull benefits from people that deserve them

So even if you need the benefit, good luck getting it

This has nothing to do with the rising price, but I feel insurance companies are like casinos: the house always wins.
User avatar
Nestegg_User
Posts: 1698
Joined: Wed Aug 05, 2009 1:26 pm

Re: Long term care insurance dilemma

Post by Nestegg_User »

seligsoj wrote: Sat May 08, 2021 11:17 pm Yes, she does own her own home in addition to the 2 million in assets as a single person. I googled the lawsuit/settlement and it appears to be legitimate but I can certainly have her call the company directly just to double check the information.

I was thinking that the possible $7,000 premium they may be charging her yearly, if invested over the next 22 years at 6 percent interest would amount to $350,000..... Of course she could need the skilled nursing on the day she dropped the policy and would be out the money. Should she try other companies? Other models of long term care insurance? Just self-pay as someone else had suggested?
...hmmm, you need to think of her timeframe not yours. 22 years hence would put her at 100- - while possible it's unlikely.
As noted by others, she could afford the (postulated) increase to $7 k (but, as others have said, what about others that might come). At 82, she's already at the age where LTC is a more likely requirement {...and I use 92 as the likely longevity as it's two std deviations above the mean for population longevity. That she has reached 82 already might extend that, maybe, two years... so I would use the question: "Is it likely that she would have a need for the coverage in the next fourteen years, and would it provide peace of mind, given the outlay? (which she could afford) of 7k (+, assuming some future increases in future (five plus?) years, as state insurance commissions that have to approve those requests might be averse to having constant increases (which sort of defeats the purpose of insurance in the first place)). If I didn't want to pay those premiums (which she could afford), I would be more likely to take the $65k of coverage with no future premiums and no refund (... as then you are getting something of value for your sunk costs over the prior years) }
WyomingFIRE
Posts: 92
Joined: Wed Sep 12, 2018 10:44 am

Re: Long term care insurance dilemma

Post by WyomingFIRE »

deleted
Last edited by WyomingFIRE on Sun May 16, 2021 4:17 pm, edited 1 time in total.
gobsmacked
Posts: 12
Joined: Tue Sep 29, 2020 10:57 pm

Re: Long term care insurance dilemma

Post by gobsmacked »

I use to work at GE and was there when they IPOed and divested to become Genworth Financial.

The LTC side of the business is hard. What happened back around 2005 or 2006 was that internally we were seeing LTC costs rise dramatically. To the point where the actuaries got things pretty wrong. Because insurance is heavily regulated and they needed to raise rates past a certain threshold they needed regulatory approval. This obviously upset a lot of customers so they sued and there was some settlement.

LTC insurance is stupid hard to price. All the companies got it wrong and mispriced it initially. The premiums really are that high. That said you have enough assets to self insure at this point. However there is a sweet spot in which it does make sense. Also if you have some knowledge of family history it can also make sense.

If you are willing support your mother if she needs LTC eventually and she has assets you can really just self insure.
User avatar
willthrill81
Posts: 25278
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Long term care insurance dilemma

Post by willthrill81 »

prd1982 wrote: Sun May 09, 2021 6:54 am I know a lot of folks vote for “self insure”. Most times that probably wins. But it also can lose big time. That is true for all insurance.
Only a tiny proportion of people will ever need more than three years of LTC, and it is very rare (but obviously does happen) for anyone to need more than five years of LTC. And the vast majority of the LTC people receive is must less costly than a nursing home, which in our area runs around $100k/year. So with the OP's mother having $2 million plus her home, she is no danger whatsoever of 'losing' (i.e., being unable to pay for whatever LTC she might need).

If you frame 'losing' in terms of whatever option results in paying the least out of pocket, that is unknowable in advance.
Glomar wrote: Sun May 09, 2021 7:21 am I don't think the premium savings from taking a buyout would add up to $500,000 (under the worst-case scenario where one needs care for years). But of course, one cannot predict whether one will need the policy at all. Just like car or house insurance - one has it in hopes it is never needed.
No, the premium savings wouldn't add up to $500k. But the likelihood of the OP's mother needing $500k of LTC is also remote. If the LTC insurance only covered 'catastrophic' LTC events and not the much more likely 'minor' LTC events, it would be much more compelling. WoW2012 says that LTC insurance with a long elimination period is available, but I don't know if such policies are legal in all states, nor how much the premium difference can be.

LTC isn't really like auto or home insurance. It's more like a combination of traditional auto insurance and an auto maintenance product, paying for oil changes, new windshield wipers, etc., as well as major accidents and situations where you are liable to others. Michael Kitces described this issue well in the post cited in part below.
Insurance functions best when it is used to cover high-cost low-probability risks – the kind that aren’t likely to occur, but would be devastating if they did. Technically, paying insurance premiums on an ongoing basis has a slightly greater expected loss than just retaining the risk, but an appealing trade-off if it means converting a potential financial disaster into a manageable ongoing premium.

Yet when it comes to long-term care needs in today’s environment, what was perhaps once a higher-cost lower-probability event has now turned into a very high-probability event with an increasingly large volume of “lower-cost” claims. As a result, long-term care insurance has begun to morph from effective insurance, into something that looks more like just prepaying long-term care expenses in advance at a high premium rate and with little insurance leverage.
https://www.kitces.com/blog/can-increas ... ing-again/
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
HereToLearn
Posts: 791
Joined: Sat Mar 17, 2018 5:53 pm

Re: Long term care insurance dilemma

Post by HereToLearn »

My parents had LTC insurance and I managed the process of securing benefit authorization for both of them.

The policy was written by Travelers in 1997, then sold to Genworth during the time my father was using the benefit in 2009, and to Brighthouse by the time my mother was using it in 2018. The benefits were excellent and the premium was not outrageous: Daily benefit of $420 by 2018, five year benefit period (but longer if the full daily benefit limit were not used), and annual premium of perhaps $2500 by 2018. Premium had tripled since issue but $2500/year for what could be $750K+ lifetime benefit, so very reasonable. (I didn't track premium increases annually, but it looks like 6% compounded, however, the daily & lifetime benefits increased 5% each year also.) My father had purchased a three year benefit period for himself and I no longer have records of his premium.

The process of obtaining approval can take a very long time and require a frustrating amount of paperwork. I realize that each person's experience will differ, and if either of my parents had lived a long time after benefit approval, then I would probably view LTC differently, but having been through this now twice, I will not be purchasing LTC. There is no way that either of my parents could have navigated the claim filing process alone.

My parents' plans had 100 day elimination periods. I believe the elimination period is a fairly common feature. Once the LTC carrier approved my parent as being benefit eligible (unable to perform two of the ADLs), the 100 day elimination period clock started ticking. In order for a day to count toward the 100 day elimination, a licensed care provider had to be paid to provide care to a parent. This could be PT or OT in the home, or a licensed home health aide who would only work for a minimum of four hours per shift. But realistically, when the patient is in need of four hours of care per day and considered benefit eligible by the LTC carrier, more than fours hours of care per day is generally needed and must be hired. All home care during this 100 day elimination period is paid out of pocket by the patient (except PT & OT, which were covered by Medicare and insurance).

If either parent had Parkinson's or MS, I think their policies would have paid off in spades, but for the more typical situation of declining health that does not leave one so debilitated as to be unable to perform two ADLs, the patient is not well enough to manage on his own, but not incapacitated enough to satisfy the LTC carrier's definition of benefit eligible. I admit that I am viewing this through the lens of my parents' experience. It would be interesting to see stats on how long benefits are paid on a typical insured.

Someone on this site posted asset ranges where LTC is worthwhile. I do not recall the figures, but $2 million of assets plus a home and other income is more than enough to allow her to pay her own way without having to satisfy the constraints of the LTC carrier's policy.
Last edited by HereToLearn on Sun May 09, 2021 10:48 am, edited 1 time in total.
WillRetire
Posts: 332
Joined: Mon Jun 05, 2017 10:01 am

Re: Long term care insurance dilemma

Post by WillRetire »

OP: Read the policy. It may cover in-home care (subject to meeting the policy's requirements) at home or at an independent living facility. It may also cover assisted living. At 78, the increased premiums may be well worth it. But read the policy. Carefully.

She seems well prepared to pay her own way *under most scenarios*, but then again, at this late stage, why not keep the policy if it has good benefits? She can afford it, it may give her many options (read the policy!), and it may help her preserve wealth for her legacy or heirs if that is important to her.
User avatar
CardinalRule
Posts: 694
Joined: Sun Jan 15, 2017 11:01 am
Location: United States

Re: Long term care insurance dilemma

Post by CardinalRule »

gobsmacked wrote: Sun May 09, 2021 9:57 am
LTC insurance is stupid hard to price. All the companies got it wrong and mispriced it initially. The premiums really are that high.
I've read that the companies underestimated the lengths of time for which care would be needed and then overestimated the percentage of people who would let their policies lapse before making claims. Is that your understanding?

My wife and I (mid-50s and early 60s, in good health) are planning to self-insure. We think we have enough assets (including perhaps $4 million in brokerage and retirement accounts), and charitable foundations would suffer the most pain if we are wrong, as we have no dependents or heirs. But I wish that the industry could come up with a profitable product that kicks in only when costs get truly ruinous, perhaps with a big deductible or elimination period.
prd1982
Posts: 548
Joined: Sun Jan 08, 2017 4:43 pm

Re: Long term care insurance dilemma

Post by prd1982 »

Do I read the settlement correctly —
* The policyholders get a letter saying the rates are going up.
* the lawyers get money; the amount unknown.
prd1982
Posts: 548
Joined: Sun Jan 08, 2017 4:43 pm

Re: Long term care insurance dilemma

Post by prd1982 »

This forum has lots of threads with people on both sides of the “Should I buy LTC insurance?”

But this thread is “Should I keep my LTC insurance?”. There is no going back to recover the premiums plus the gains from investing in the market over the years. She has paid thru the “unlikely to need” years. Let’s suppose she only needs 3 years of LTC. Compare the cost of 3 years with the premiums she will STILL pay. It seems like good insurance to me at this point.
User avatar
CardinalRule
Posts: 694
Joined: Sun Jan 15, 2017 11:01 am
Location: United States

Re: Long term care insurance dilemma

Post by CardinalRule »

prd1982 wrote: Sun May 09, 2021 11:20 am This forum has lots of threads with people on both sides of the “Should I buy LTC insurance?”

But this thread is “Should I keep my LTC insurance?”. There is no going back to recover the premiums plus the gains from investing in the market over the years. She has paid thru the “unlikely to need” years. Let’s suppose she only needs 3 years of LTC. Compare the cost of 3 years with the premiums she will STILL pay. It seems like good insurance to me at this point.
Good point, about the question actually being asked.
Topic Author
seligsoj
Posts: 70
Joined: Mon Apr 25, 2016 11:44 am

Re: Long term care insurance dilemma

Post by seligsoj »

prd1982 wrote: Sun May 09, 2021 11:07 am
Do I read the settlement correctly —
* The policyholders get a letter saying the rates are going up.
* the lawyers get money; the amount unknown.
Yes this is the lawsuit..
stan1
Posts: 10198
Joined: Mon Oct 08, 2007 4:35 pm

Re: Long term care insurance dilemma

Post by stan1 »

willthrill81 wrote: Sat May 08, 2021 11:34 pm If she owns her home and has $2 million besides, she doesn't need LTC insurance. She can very comfortably self-insure.
That's the conundrum with modern LTCI to begin with. Most of those who can afford the premiums can also afford to self insure. Likewise she can probably also afford to pay the increased premiums from her retirement account RMDs and dividend distributions.

Note I wrote "modern" -- turns out people who bought LTCI policies back in the 80s or 90s got a very good deal if their rates haven't adjusted or if they paid in full for a policy good for the rest of their lives. Not much point discussing those policies at this point. They can't be bought.

She's basically insuring her heirs' inheritance, and possibly the LTC payments would let the residence and other assets stay in the family and receive stepped up cost basis after she passes away if she has over $250K gains in the house.
HereToLearn
Posts: 791
Joined: Sat Mar 17, 2018 5:53 pm

Re: Long term care insurance dilemma

Post by HereToLearn »

stan1 wrote: Sun May 09, 2021 12:39 pm
willthrill81 wrote: Sat May 08, 2021 11:34 pm If she owns her home and has $2 million besides, she doesn't need LTC insurance. She can very comfortably self-insure.
That's the conundrum with modern LTCI to begin with. Most of those who can afford the premiums can also afford to self insure. Likewise she can probably also afford to pay the increased premiums from her retirement account RMDs and dividend distributions.

Note I wrote "modern" -- turns out people who bought LTCI policies back in the 80s or 90s got a very good deal if their rates haven't adjusted or if they paid in full for a policy good for the rest of their lives. Not much point discussing those policies at this point. They can't be bought.

She's basically insuring her heirs' inheritance, and possibly the LTC payments would let the residence stay in the family and receive stepped up cost basis after she passes away if she has over $250K gains in the house.
I don't disagree with what you wrote but wanted to add a comment to your last statement. If someone moves into AL or nursing home for a few years, she may not want to retain the home. I am going to assume here that the person is not in AL for so long as to be unable to satisfy the two years in past five primary residence requirement. The ongoing annual expenses can be significant for a home with more than $250K capital gains after the step-up for half of the home when the first spouse passed: property taxes, home insurance, electric, heat, landscaping & snow removal, alarm system, internet because the alarm was connected via internet, etc. (I am just rattling off the bills I had to pay on my mother's home after she passed until we could sell it.)
stan1
Posts: 10198
Joined: Mon Oct 08, 2007 4:35 pm

Re: Long term care insurance dilemma

Post by stan1 »

HereToLearn wrote: Sun May 09, 2021 12:46 pm
stan1 wrote: Sun May 09, 2021 12:39 pm
willthrill81 wrote: Sat May 08, 2021 11:34 pm If she owns her home and has $2 million besides, she doesn't need LTC insurance. She can very comfortably self-insure.
That's the conundrum with modern LTCI to begin with. Most of those who can afford the premiums can also afford to self insure. Likewise she can probably also afford to pay the increased premiums from her retirement account RMDs and dividend distributions.

Note I wrote "modern" -- turns out people who bought LTCI policies back in the 80s or 90s got a very good deal if their rates haven't adjusted or if they paid in full for a policy good for the rest of their lives. Not much point discussing those policies at this point. They can't be bought.

She's basically insuring her heirs' inheritance, and possibly the LTC payments would let the residence stay in the family and receive stepped up cost basis after she passes away if she has over $250K gains in the house.
I don't disagree with what you wrote but wanted to add a comment to your last statement. If someone moves into AL or nursing home for a few years, she may not want to retain the home. I am going to assume here that the person is not in AL for so long as to be unable to satisfy the two years in past five primary residence requirement. The ongoing annual expenses can be significant for a home with more than $250K capital gains after the step-up for half of the home when the first spouse passed: property taxes, home insurance, electric, heat, landscaping & snow removal, alarm system, internet because the alarm was connected via internet, etc. (I am just rattling off the bills I had to pay on my mother's home after she passed until we could sell it.)
I agree, at that point every situation is case by case. OP should read the policy carefully. Perhaps her gains on the house are much higher than $250K if she has owned it for decades. You are assuming she is widowed not divorced. It can get complicated fast if there is an intent to optimize and then no one can predict the future.
HereToLearn
Posts: 791
Joined: Sat Mar 17, 2018 5:53 pm

Re: Long term care insurance dilemma

Post by HereToLearn »

stan1 wrote: Sun May 09, 2021 12:50 pm
HereToLearn wrote: Sun May 09, 2021 12:46 pm
stan1 wrote: Sun May 09, 2021 12:39 pm
willthrill81 wrote: Sat May 08, 2021 11:34 pm If she owns her home and has $2 million besides, she doesn't need LTC insurance. She can very comfortably self-insure.
That's the conundrum with modern LTCI to begin with. Most of those who can afford the premiums can also afford to self insure. Likewise she can probably also afford to pay the increased premiums from her retirement account RMDs and dividend distributions.

Note I wrote "modern" -- turns out people who bought LTCI policies back in the 80s or 90s got a very good deal if their rates haven't adjusted or if they paid in full for a policy good for the rest of their lives. Not much point discussing those policies at this point. They can't be bought.

She's basically insuring her heirs' inheritance, and possibly the LTC payments would let the residence stay in the family and receive stepped up cost basis after she passes away if she has over $250K gains in the house.
I don't disagree with what you wrote but wanted to add a comment to your last statement. If someone moves into AL or nursing home for a few years, she may not want to retain the home. I am going to assume here that the person is not in AL for so long as to be unable to satisfy the two years in past five primary residence requirement. The ongoing annual expenses can be significant for a home with more than $250K capital gains after the step-up for half of the home when the first spouse passed: property taxes, home insurance, electric, heat, landscaping & snow removal, alarm system, internet because the alarm was connected via internet, etc. (I am just rattling off the bills I had to pay on my mother's home after she passed until we could sell it.)
I agree, at that point every situation is case by case. OP should read the policy carefully. Perhaps her gains on the house are much higher than $250K if she has owned it for decades. You are assuming she is widowed not divorced. It can get complicated fast if there is an intent to optimize and then no one can predict the future.
Absolutely correct!
Topic Author
seligsoj
Posts: 70
Joined: Mon Apr 25, 2016 11:44 am

Re: Long term care insurance dilemma

Post by seligsoj »

HereToLearn wrote: Sun May 09, 2021 12:46 pm
stan1 wrote: Sun May 09, 2021 12:39 pm
willthrill81 wrote: Sat May 08, 2021 11:34 pm If she owns her home and has $2 million besides, she doesn't need LTC insurance. She can very comfortably self-insure.
That's the conundrum with modern LTCI to begin with. Most of those who can afford the premiums can also afford to self insure. Likewise she can probably also afford to pay the increased premiums from her retirement account RMDs and dividend distributions.

Note I wrote "modern" -- turns out people who bought LTCI policies back in the 80s or 90s got a very good deal if their rates haven't adjusted or if they paid in full for a policy good for the rest of their lives. Not much point discussing those policies at this point. They can't be bought.

She's basically insuring her heirs' inheritance, and possibly the LTC payments would let the residence stay in the family and receive stepped up cost basis after she passes away if she has over $250K gains in the house.
I don't disagree with what you wrote but wanted to add a comment to your last statement. If someone moves into AL or nursing home for a few years, she may not want to retain the home. I am going to assume here that the person is not in AL for so long as to be unable to satisfy the two years in past five primary residence requirement. The ongoing annual expenses can be significant for a home with more than $250K capital gains after the step-up for half of the home when the first spouse passed: property taxes, home insurance, electric, heat, landscaping & snow removal, alarm system, internet because the alarm was connected via internet, etc. (I am just rattling off the bills I had to pay on my mother's home after she passed until we could sell it.)
My mom is widowed as of 10 years ago. She sold her house that she had purchased with my father 6 years ago. She bought her new house for $180k and it is now worth about $325k
HereToLearn
Posts: 791
Joined: Sat Mar 17, 2018 5:53 pm

Re: Long term care insurance dilemma

Post by HereToLearn »

seligsoj wrote: Sun May 09, 2021 3:28 pm
HereToLearn wrote: Sun May 09, 2021 12:46 pm
stan1 wrote: Sun May 09, 2021 12:39 pm
willthrill81 wrote: Sat May 08, 2021 11:34 pm If she owns her home and has $2 million besides, she doesn't need LTC insurance. She can very comfortably self-insure.
That's the conundrum with modern LTCI to begin with. Most of those who can afford the premiums can also afford to self insure. Likewise she can probably also afford to pay the increased premiums from her retirement account RMDs and dividend distributions.

Note I wrote "modern" -- turns out people who bought LTCI policies back in the 80s or 90s got a very good deal if their rates haven't adjusted or if they paid in full for a policy good for the rest of their lives. Not much point discussing those policies at this point. They can't be bought.

She's basically insuring her heirs' inheritance, and possibly the LTC payments would let the residence stay in the family and receive stepped up cost basis after she passes away if she has over $250K gains in the house.
I don't disagree with what you wrote but wanted to add a comment to your last statement. If someone moves into AL or nursing home for a few years, she may not want to retain the home. I am going to assume here that the person is not in AL for so long as to be unable to satisfy the two years in past five primary residence requirement. The ongoing annual expenses can be significant for a home with more than $250K capital gains after the step-up for half of the home when the first spouse passed: property taxes, home insurance, electric, heat, landscaping & snow removal, alarm system, internet because the alarm was connected via internet, etc. (I am just rattling off the bills I had to pay on my mother's home after she passed until we could sell it.)
My mom is widowed as of 10 years ago. She sold her house that she had purchased with my father 6 years ago. She bought her new house for $180k and it is now worth about $325k
Then she doesn't need to worry about keeping the house in order to preserve the family inheritance. She could sell the house to pay for AL/nursing home, if desired.
Topic Author
seligsoj
Posts: 70
Joined: Mon Apr 25, 2016 11:44 am

Re: Long term care insurance dilemma

Post by seligsoj »

OP here- just to add further complexity to this, I found this recent article about the company- should I be worried about their ability to actually stay afloat and be able to pay for my mother's LTC if she decides to continue with the policy?

https://www.spglobal.com/marketintellig ... r-62000319
User avatar
willthrill81
Posts: 25278
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Long term care insurance dilemma

Post by willthrill81 »

seligsoj wrote: Sun May 09, 2021 8:16 pm OP here- just to add further complexity to this, I found this recent article about the company- should I be worried about their ability to actually stay afloat and be able to pay for my mother's LTC if she decides to continue with the policy?

https://www.spglobal.com/marketintellig ... r-62000319
Her state's guaranty association is supposed to step in to cover the existing obligations of any insurance company that goes broke, but there are no guarantees (no pun intended) that that will happen, especially if the insurer is large with many obligations. So yes, it's possible that if your mother files a LTC insurance claim in the future that it won't be paid in full. I wouldn't worry about such things (because I don't think that worrying about anything is productive), but it would have an impact on my decision making if I were in her shoes.

Again, your mom just doesn't need LTC insurance in her existing financial condition. There's no need to throw good money (i.e., the cost of premiums that your mom hasn't paid yet) after bad (i.e., the premiums your mom has already paid) in this situation.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
printer86
Posts: 282
Joined: Mon Apr 25, 2016 8:45 am

Re: Long term care insurance dilemma

Post by printer86 »

OP,

Until you get a notice from the insurance company there is nothing to do. If the company plans of changing rates, or modifying benefits, you will get a formal notice with the available options. I already had to manage this matter once from my Mom's policy. We chose the best option for her at the time. It is not the end of the world.
Post Reply