LTC vs self insurance

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rich126
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LTC vs self insurance

Post by rich126 »

I'm guessing this has been discussed before but at what level do you consider just self insuring vs. getting a LTC policy?

For example, if you have $250K and are 60 (or pick an age) would you usually try to get a policy or figure that $250K would be sufficient in most cases?

If I knew a policy would cost $x and provide "y" services/benefits then I would be more inclined to get one but from things I've read, policies seem to go up frequently and with sizable increases. Then you get into a tough situation where you've paid tens of thousands in premium and don't want to throw it away so you have to continue to pay.

From what I've seen, many plans may have a max benefit of $150K or so. Once you factor in the premiums you paid (maybe $60K+ from 60 to 80), that means you might have paid $60K+ for $150K benefit or a net of less than 90K?

Am I missing anything here?

(My father is currently in a hospice and does have a plan although I'm guessing older plans were most likely much more generous.)

Just adding that I found stuff like:
Your premium will not change because you get older or your health changes or for any other reason related solely to you. However, your premium may increase if you are among a group of enrollees whose premium is determined to be inadequate.
I suppose I could take the money that I would self insure with and instead just put it into a conservative investment account and use that to pay for the premiums. I'd think the key thing is once you get into your 80s, and have been paying premiums for a long time, you don't want to bail at the point you'd be more likely to need it?
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Re: LTC vs self insurance

Post by Silk McCue »

Yes they we do have many threads on this subject where every angle and consideration has been explored, argued ad nauseam.

Using the search box on this page yields numerous threads. Search “Self insure long term care”.

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delamer
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Re: LTC vs self insurance

Post by delamer »

It makes a big difference whether you 1) are married or single and 2) own a home with substantial equity.

A policy that’s capped at $150,000 lifetime benefit is pretty useless. A $250,000 nest egg isn’t going to last very long, especially if you need skilled nursing care. And for most people, if they’ve accumulated just $250,000 then they won’t be able to afford a good LTC policy.
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Re: LTC vs self insurance

Post by Sandtrap »

Here's just one realistic scenario that may or may not apply:
(An Example)

Age 90. (my MIL recently passed) Needs at home full time care. Unable to be in a facility.
Cost: 10-12,000/month.
Duration: 8 years until passing.

Would you be able to pay for this out of pocket for yourself?

We were not able to get LTC ins prior so all of this was out of pocket.
So, it's tough to predict these things for everyone. (dis laimer)
j :D
Last edited by Sandtrap on Sun Dec 05, 2021 8:40 pm, edited 2 times in total.
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delamer
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Re: LTC vs self insurance

Post by delamer »

Sandtrap wrote: Sun Dec 05, 2021 5:39 pm Here's a realistic scenario:

Age 90. Needs at home full time care. Unable to be in a facility.
Cost: 10-12,000/month.
Duration: 8 years until passing.

Would you be able to pay for this out of pocket for yourself?

j :D
Maybe realistic, but not probable: https://www.aaltci.org/long-term-care-i ... m-care.php

(And yes, I realize the linked numbers are for nursing home care.)
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Re: LTC vs self insurance

Post by willthrill81 »

delamer wrote: Sun Dec 05, 2021 5:46 pm
Sandtrap wrote: Sun Dec 05, 2021 5:39 pm Here's a realistic scenario:

Age 90. Needs at home full time care. Unable to be in a facility.
Cost: 10-12,000/month.
Duration: 8 years until passing.

Would you be able to pay for this out of pocket for yourself?

j :D
Maybe realistic, but not probable: https://www.aaltci.org/long-term-care-i ... m-care.php

(And yes, I realize the linked numbers are for nursing home care.)
Roughly 75% of those who need such care need full-time care need it for fewer than 3 years. Exceptionally few 90 year olds would need it for 8 years.
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Re: LTC vs self insurance

Post by Sandtrap »

delamer wrote: Sun Dec 05, 2021 5:46 pm
Sandtrap wrote: Sun Dec 05, 2021 5:39 pm Here's a realistic scenario:

Age 90. Needs at home full time care. Unable to be in a facility.
Cost: 10-12,000/month.
Duration: 8 years until passing.

Would you be able to pay for this out of pocket for yourself?

j :D
Maybe realistic, but not probable: https://www.aaltci.org/long-term-care-i ... m-care.php

(And yes, I realize the linked numbers are for nursing home care.)
great link and info.
thanks!

The above example was from my MIL recently passed. LTC ins. was not there.
j :D
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Sandtrap
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Re: LTC vs self insurance

Post by Sandtrap »

willthrill81 wrote: Sun Dec 05, 2021 6:24 pm
delamer wrote: Sun Dec 05, 2021 5:46 pm
Sandtrap wrote: Sun Dec 05, 2021 5:39 pm Here's a realistic scenario:

Age 90. Needs at home full time care. Unable to be in a facility.
Cost: 10-12,000/month.
Duration: 8 years until passing.

Would you be able to pay for this out of pocket for yourself?

j :D
Maybe realistic, but not probable: https://www.aaltci.org/long-term-care-i ... m-care.php

(And yes, I realize the linked numbers are for nursing home care.)
Roughly 75% of those who need such care need full-time care need it for fewer than 3 years. Exceptionally few 90 year olds would need it for 8 years.
Yes. You're right.

Example from MIL recently passed. LTC ins was not in place.
Good points.

So mamy ways of looking at these things of life.
thanks!
j
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JoeRetire
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Re: LTC vs self insurance

Post by JoeRetire »

rich126 wrote: Sun Dec 05, 2021 5:19 pm I'm guessing this has been discussed before but at what level do you consider just self insuring vs. getting a LTC policy?

For example, if you have $250K and are 60 (or pick an age) would you usually try to get a policy or figure that $250K would be sufficient in most cases?
If you mean you have $250k in your entire portfolio, that amount is nowhere near "sufficient". It's so low, that you should probably plan on Medicaid if long term care is needed.
If I knew a policy would cost $x and provide "y" services/benefits then I would be more inclined to get one but from things I've read, policies seem to go up frequently and with sizable increases.
Newer policies not so much.

My wife and I have had policies for a bit over 7 years. They have not gone up at all.
From what I've seen, many plans may have a max benefit of $150K or so. Once you factor in the premiums you paid (maybe $60K+ from 60 to 80), that means you might have paid $60K+ for $150K benefit or a net of less than 90K?

Am I missing anything here?
You seem to be missing that you might need the benefit at 60, rather than at 80.
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Re: LTC vs self insurance

Post by willthrill81 »

rich126 wrote: Sun Dec 05, 2021 5:19 pm I'm guessing this has been discussed before but at what level do you consider just self insuring vs. getting a LTC policy?
Here's how I think about it. Purportedly around half the population will need some type of LTC at some point, but the intensity and length of such care varies tremendously. Most of those who need LTC will receive it at home, and it's usually provided by a family member, though hiring part-time and maybe even full-time help is becoming more common. IIRC, only around 10% of those need any type of LTC need something like nursing home care, which is generally the most expensive form of LTC, and around 75% of them need it for fewer than three years, and over 90% will need it for fewer than five years. So there's only about a 1% probability that an adult will need something like nursing home care for more than 3 years and under 1% for more than 5 years during their lifetime. In our MCOL area, a private room in a nursing home costs about $100k/year. As such, $500k would cover over 99% of all LTC events in our area at least.

Given the above, about the 'worst realistic' event is that one of two spouses consumes $500k of LTC before passing away. If they can fund that care and leave the well spouse with enough resources to cover the remainder of his/her life, including that person's own potential LTC needs, then they likely have no objective need of LTC insurance. As suggested above, home equity can be used to fund either spouse's LTC needs, but it's generally easier to use it to fund the initially well spouse's LTC since the house can just be sold to pay for the care. IMHO, those with a net worth of $2m or more these days can easily self-insure in all but VHCOL areas, and potentially significantly less is needed.

Those with under $500k of assets will likely have to do what around two-thirds of those who need LTC do: spend their resources down until they are broke, at which point Medicaid steps in to pay for the remainder.

Those who don't have enough to self-insure but more than $500k or so of assets might be well-served by a LTC policy.

Michael Kitces wrote this excellent piece about LTC insurance that should be helpful to you in understanding the pros and cons of self-insuring vs. buying a policy.
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Re: LTC vs self insurance

Post by AnnetteLouisan »

Here’s an example of inflation protection in LTCI even when you don’t elect automatic inflation protection (to keep premiums low). It’s the future purchase option:

Age 54, time to accept or decline the future purchase option on my LTCi. Current benefit with John Hancock (through work) is $350/day for 3 years after 90 day waiting period for $63/mo premium. I can’t self insure and I don’t want to skip LTCI entirely.

They are asking me to accept or decline an increase to $373/day for $71/mo. Although I usually decline, I heard on this forum and from an LTCI salesperson recommended by someone whose judgement I trust that my coverage amount may not be enough and wondering if a $23/day increase is worth the extra $80. a year ($7x12 mos). I can afford it.

On what basis would I make this decision? What would you do?
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Re: LTC vs self insurance

Post by willthrill81 »

AnnetteLouisan wrote: Sun Dec 05, 2021 7:35 pm Here’s an example of inflation protection in LTCI even when you don’t elect automatic inflation protection (to keep premiums low). It’s the future purchase option:

Age 54, time to accept or decline the future purchase option on my LTCi. Current benefit with John Hancock (through work) is $350/day for 3 years after 90 day waiting period for $63/mo premium. I can’t self insure and I don’t want to skip LTCI entirely.

They are asking me to accept or decline an increase to $373/day for $71/mo. Although I usually decline, I heard on this forum and from an LTCI salesperson recommended by someone whose judgement I trust that my coverage amount may not be enough and wondering if a $23/day increase is worth the extra $80. a year ($7x12 mos). I can afford it.

On what basis would I make this decision? What would you do?
So the annual maximum is currently $127,750, and this could increase to $136,145, a 6.6% increase in the maximum annual benefit, for an increase in premiums of 12.7%. That seems like a bad deal to me (i.e., bigger increase in premium than benefit) unless you really need that additional $8,400 of coverage. It sounds to me like they're trying to persuade you to pay more in premiums voluntarily.
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Re: LTC vs self insurance

Post by Soon2BXProgrammer »

willthrill81 wrote: Sun Dec 05, 2021 6:24 pm
delamer wrote: Sun Dec 05, 2021 5:46 pm
Sandtrap wrote: Sun Dec 05, 2021 5:39 pm Here's a realistic scenario:

Age 90. Needs at home full time care. Unable to be in a facility.
Cost: 10-12,000/month.
Duration: 8 years until passing.

Would you be able to pay for this out of pocket for yourself?

j :D
Maybe realistic, but not probable: https://www.aaltci.org/long-term-care-i ... m-care.php

(And yes, I realize the linked numbers are for nursing home care.)
Roughly 75% of those who need such care need full-time care need it for fewer than 3 years. Exceptionally few 90 year olds would need it for 8 years.
My 99 year old great aunt has been in a home almost a decade. It happens more then you expect. at least it is really impactful yo those it happens to... That's my issue with LTCi it doesn't actually remove the tail risk.
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Re: LTC vs self insurance

Post by willthrill81 »

Soon2BXProgrammer wrote: Sun Dec 05, 2021 8:37 pm
willthrill81 wrote: Sun Dec 05, 2021 6:24 pm
delamer wrote: Sun Dec 05, 2021 5:46 pm
Sandtrap wrote: Sun Dec 05, 2021 5:39 pm Here's a realistic scenario:

Age 90. Needs at home full time care. Unable to be in a facility.
Cost: 10-12,000/month.
Duration: 8 years until passing.

Would you be able to pay for this out of pocket for yourself?

j :D
Maybe realistic, but not probable: https://www.aaltci.org/long-term-care-i ... m-care.php

(And yes, I realize the linked numbers are for nursing home care.)
Roughly 75% of those who need such care need full-time care need it for fewer than 3 years. Exceptionally few 90 year olds would need it for 8 years.
My 99 year old great aunt has been in a home almost a decade. It happens more then you expect. at least it is really impactful yo those it happens to... That's my issue with LTCi it doesn't actually remove the tail risk.
The numbers are what they are. Most never make it to 90 at all. To make it there and then survive another 10 years while receiving LTC is truly rare, though it does happen. And yes, LTCi does not remove the tail risk. Most policies limit benefits to 3 years. Policies with unlimited benefits are available, but I'm not sure what all of the 'catches' are. Even higher premiums are certainly one of them.
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Re: LTC vs self insurance

Post by TN_Boy »

JoeRetire wrote: Sun Dec 05, 2021 6:27 pm
rich126 wrote: Sun Dec 05, 2021 5:19 pm I'm guessing this has been discussed before but at what level do you consider just self insuring vs. getting a LTC policy?

For example, if you have $250K and are 60 (or pick an age) would you usually try to get a policy or figure that $250K would be sufficient in most cases?
If you mean you have $250k in your entire portfolio, that amount is nowhere near "sufficient". It's so low, that you should probably plan on Medicaid if long term care is needed.
If I knew a policy would cost $x and provide "y" services/benefits then I would be more inclined to get one but from things I've read, policies seem to go up frequently and with sizable increases.
Newer policies not so much.

My wife and I have had policies for a bit over 7 years. They have not gone up at all.
From what I've seen, many plans may have a max benefit of $150K or so. Once you factor in the premiums you paid (maybe $60K+ from 60 to 80), that means you might have paid $60K+ for $150K benefit or a net of less than 90K?

Am I missing anything here?
You seem to be missing that you might need the benefit at 60, rather than at 80.
There is an excellent chance that 250k in today's dollars would be enough to cover LTC expenses for a single person. Excellent chance. Many people need $0 in LTC. The median time in assisted living -- if you actually need it -- is what, two or three years? Much less time in skilled nursing for a long term stay (versus a rehab stay which actually would usually be covered by health insurance). Now obviously if the only savings you have is the 250k, yeah, given that's for everything (retirement, any LTC costs, etc) that's a little light. Though if you have SS or a pension, that would cover some LTC costs.

And if you have a house and move to a care facility, well you sell the house.

Is it possible you'd need more than 250k in 2021 dollars for LTC? Sure. That's why people buy the insurance -- they are willing to take the likehood they'll spend 50k to 100k in premiums because they worry about the relatively unlikely long stays.

Is it possible you'll need LTC at age 60 instead of 80? Sure, it's pretty unlikely, but could happen. You might also need it at 59. Or 58, or ...

Incidentally, I would not set-aside a specific amount for LTC. I'd consider your existing retirement portfolio as dedicated for all retirement expenses, including LTC. If you are in assisted living, well, most of your expenses are for that. Incidentally, if you do have to move into a care facility, you should be able to zero out your federal taxes -- the care expenses are deductible.

As Silk McCue pointed out in the 2nd post in this thread, all these issues have been thrashed out before, at length. I'd suggest you search for and read those threads, then come back and ask questions you have after absorbing all that.
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Re: LTC vs self insurance

Post by softwaregeek »

Bear in mind that like all insurance, this has a profit margin built in and that on average, you will have less at the end of your life. If you can self insure, you should do so.
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Re: LTC vs self insurance

Post by willthrill81 »

TN_Boy wrote: Sun Dec 05, 2021 9:08 pm Is it possible you'll need LTC at age 60 instead of 80? Sure, it's pretty unlikely, but could happen. You might also need it at 59. Or 58, or ...
According to the American Association for Long-term Care Insurance, only .3% of LTCi claims are made by those under age 50. 1.9% are made by those age 50-59. So it seems that the likelihood of a claim at age 60 or lower is under 3%.
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Re: LTC vs self insurance

Post by delamer »

softwaregeek wrote: Sun Dec 05, 2021 9:16 pm Bear in mind that like all insurance, this has a profit margin built in and that on average, you will have less at the end of your life. If you can self insure, you should do so.
You’ll have less of what?
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Re: LTC vs self insurance

Post by softwaregeek »

delamer wrote: Sun Dec 05, 2021 10:08 pm
softwaregeek wrote: Sun Dec 05, 2021 9:16 pm Bear in mind that like all insurance, this has a profit margin built in and that on average, you will have less at the end of your life. If you can self insure, you should do so.
You’ll have less of what?
Cash. Insurance isn’t free.
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Re: LTC vs self insurance

Post by delamer »

softwaregeek wrote: Sun Dec 05, 2021 10:14 pm
delamer wrote: Sun Dec 05, 2021 10:08 pm
softwaregeek wrote: Sun Dec 05, 2021 9:16 pm Bear in mind that like all insurance, this has a profit margin built in and that on average, you will have less at the end of your life. If you can self insure, you should do so.
You’ll have less of what?
Cash. Insurance isn’t free.
Ah. True, as long as you are one of the people who doesn’t need the care that the insurance would have paid for.

Although I’m not sure what the insurance company’s profit have to do with anything.
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Re: LTC vs self insurance

Post by cacophony »

delamer wrote: Sun Dec 05, 2021 10:45 pm
softwaregeek wrote: Sun Dec 05, 2021 10:14 pm
delamer wrote: Sun Dec 05, 2021 10:08 pm
softwaregeek wrote: Sun Dec 05, 2021 9:16 pm Bear in mind that like all insurance, this has a profit margin built in and that on average, you will have less at the end of your life. If you can self insure, you should do so.
You’ll have less of what?
Cash. Insurance isn’t free.
Ah. True, as long as you are one of the people who doesn’t need the care that the insurance would have paid for.

Although I’m not sure what the insurance company’s profit have to do with anything.
The fact that an insurance company is profitable means that on average they pay out less than you would put in through premiums. That means that mathematically speaking, it's a poor bet to make, at least if you can afford to lose.
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Re: LTC vs self insurance

Post by dcabler »

willthrill81 wrote: Sun Dec 05, 2021 6:24 pm
delamer wrote: Sun Dec 05, 2021 5:46 pm
Sandtrap wrote: Sun Dec 05, 2021 5:39 pm Here's a realistic scenario:

Age 90. Needs at home full time care. Unable to be in a facility.
Cost: 10-12,000/month.
Duration: 8 years until passing.

Would you be able to pay for this out of pocket for yourself?

j :D
Maybe realistic, but not probable: https://www.aaltci.org/long-term-care-i ... m-care.php

(And yes, I realize the linked numbers are for nursing home care.)
Roughly 75% of those who need such care need full-time care need it for fewer than 3 years. Exceptionally few 90 year olds would need it for 8 years.
I realize that anecdotes aren't to be taken as proof of anything but... My MIL was diagnosed with Alzheimers and spent about 8 years in a nursing home. 7 years for her twin sister. 6 for their brother. Some unknown number of years for an aunt of theirs. So it seemed prudent to us to purchase LTCi for my wife. With that family history, we gave it the weight in our decisions vs the statistics of the general population. Also purchased for myself, though the only history was my great grandmother who was in a nursing home for a couple of years. There have been 2 substantial increases in premiums since we purchased our policies over 10 years ago. Each time, we made adjustments primarily to my policy to keep the total premium cost reasonable, again prmarily due to my wife's family history. With the last increase came a "no more increases" rider. So assuming solvency of the insurance company (NYL), inflation should diminish the burden of the premium costs over time.

Interestingly, my FIL did have LTCi which he cancelled a couple of years before MIL was diagnosed. While MIL did achieve good care, to say that it was a financial burden on them would be a gross understatement.

Cheers.
Last edited by dcabler on Mon Dec 06, 2021 6:29 am, edited 2 times in total.
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Re: LTC vs self insurance

Post by Blue456 »

Why not do both, purchase 150k policy and self insure. Most likely 150k won't be enough but will cover some of the bill. On the other hand if you don't need LTC at all then you won't feel as bed about 150k policy as opposed to much higher one.
Last edited by Blue456 on Mon Dec 06, 2021 6:12 am, edited 1 time in total.
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Re: LTC vs self insurance

Post by dcabler »

Blue456 wrote: Mon Dec 06, 2021 5:25 am Why not do both, purchase 150k policy and self insure. Most likely 150k won't be enough but will cover some of the bill. On the other hand if you don't need LTC at all then you won't feel as bed about 150k police as opposed to much higher one.
No proof, but I suspect a lot of people do something very much like this, either implicitly or explicitly.

Cheers.
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Re: LTC vs self insurance

Post by Blue456 »

dcabler wrote: Mon Dec 06, 2021 5:36 am
Blue456 wrote: Mon Dec 06, 2021 5:25 am Why not do both, purchase 150k policy and self insure. Most likely 150k won't be enough but will cover some of the bill. On the other hand if you don't need LTC at all then you won't feel as bed about 150k police as opposed to much higher one.
No proof, but I suspect a lot of people do something very much like this, either implicitly or explicitly.

Cheers.
That’s what we do. It also forces us to save by contributing towards the premiums.
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Re: LTC vs self insurance

Post by JoeRetire »

TN_Boy wrote: Sun Dec 05, 2021 9:08 pm And if you have a house and move to a care facility, well you sell the house.
And your spouse finds somewhere else to live.
If you are in assisted living, well, most of your expenses are for that.
Unless you have a spouse.
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rich126
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Re: LTC vs self insurance

Post by rich126 »

Thanks for the comments.

I guess it wasn't clear but I meant the $250K or whatever would be money in a separate "bucket" from your main portfolio you live off of.

Now that I'm in my late 50s and watching my father's situation, I will need to decide on the LTC. I will check some policies and see what I get for my money. I am married but we have no kids. My wife's side of the family is quite close and she is very close to her nephew/niece and most everyone lives in a close area.

My wife has always helped out the family and has been able to rely on them for help as well. Of course that gets harder as everyone ages.

I plan to buy a place that is single story and set up for retirement and any mobility issues that arise.

Thanks. Once I'm in a better place (after things are less painful with my dad) I will try to read the other threads and do more research.
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Re: LTC vs self insurance

Post by Artful Dodger »

AnnetteLouisan wrote: Sun Dec 05, 2021 7:35 pm Here’s an example of inflation protection in LTCI even when you don’t elect automatic inflation protection (to keep premiums low). It’s the future purchase option:

Age 54, time to accept or decline the future purchase option on my LTCi. Current benefit with John Hancock (through work) is $350/day for 3 years after 90 day waiting period for $63/mo premium. I can’t self insure and I don’t want to skip LTCI entirely.

They are asking me to accept or decline an increase to $373/day for $71/mo. Although I usually decline, I heard on this forum and from an LTCI salesperson recommended by someone whose judgement I trust that my coverage amount may not be enough and wondering if a $23/day increase is worth the extra $80. a year ($7x12 mos). I can afford it.

On what basis would I make this decision? What would you do?
I thought with John Hancock you were offered the Guaranteed Purchase Option for a limited number of times and if you declined more than X? Times they didn’t offer it again. You should find out. I might skip if I know they’ll continue to make the offers. But, on the other hand, $80 annual to increase your daily benefit $23 and your pool of money $25,185 is pretty inexpensive and you can afford it.

I would also check the cost of care in your area. If the average daily NH cost is already $300 or higher, I’d give more consideration to the increase.
Last edited by Artful Dodger on Mon Dec 06, 2021 6:51 am, edited 1 time in total.
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Re: LTC vs self insurance

Post by Watty »

Here is a post that I did in another thread, you might read that thread.

viewtopic.php?p=6342890#p6342890
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AnnetteLouisan
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Re: LTC vs self insurance

Post by AnnetteLouisan »

Artful Dodger wrote: Mon Dec 06, 2021 6:45 am
AnnetteLouisan wrote: Sun Dec 05, 2021 7:35 pm Here’s an example of inflation protection in LTCI even when you don’t elect automatic inflation protection (to keep premiums low). It’s the future purchase option:

Age 54, time to accept or decline the future purchase option on my LTCi. Current benefit with John Hancock (through work) is $350/day for 3 years after 90 day waiting period for $63/mo premium. I can’t self insure and I don’t want to skip LTCI entirely.

They are asking me to accept or decline an increase to $373/day for $71/mo. Although I usually decline, I heard on this forum and from an LTCI salesperson recommended by someone whose judgement I trust that my coverage amount may not be enough and wondering if a $23/day increase is worth the extra $80. a year ($7x12 mos). I can afford it.

On what basis would I make this decision? What would you do?
I thought with John Hancock you were offered the Guaranteed Purchase Option for a limited number of times and if you declined more than X? Times they didn’t offer it again. You should find out. I might skip if I know they’ll continue to make the offers. But, on the other hand, $80 annual to increase your daily benefit $23 and your pool of money $25,185 is pretty inexpensive and you can afford it.

I would also check the cost of care in your area. If the average daily NH cost is already $300 or higher, I’d give more consideration to the increase.
I had no idea they could stop offering the increases! I will ask. thank you so much.

My insurance rep/broker told me that taking the highest amount ($350/day) was built in inflation protection without the increases but I agree an extra $80/yr for 9k more a year in coverage isn’t expensive, and NY costs will be well over $350 in the future I assume. I’m with the other commenters that I’ll be partially self insuring. Another argument in favor of the HDHP/HSA.

UPDATE: I checked. on the policy I have, I can opt out of an increase every two years. If I don’t opt out, it increases automatically.
Last edited by AnnetteLouisan on Mon Dec 06, 2021 7:49 am, edited 1 time in total.
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Watty
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Re: LTC vs self insurance

Post by Watty »

One more thing. When thinking about LTC care insurance before you start shopping consider just what you would specifically need it for. This might be;

1) To not bankrupt a spouse if you are in LTC for a long time when they are alive.

2) To protect your estate for your heirs.

3) To make sure you are not broke and cannot get into LTC. (Many if not most places will let you stay on Medicare Medicaid but you may need to have several years expenses for them to originally admit you.)

Then figure out if they actually do what you want them to.
Last edited by Watty on Mon Dec 06, 2021 10:09 am, edited 1 time in total.
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Re: LTC vs self insurance

Post by ResearchMed »

Watty wrote: Mon Dec 06, 2021 7:00 am One more thing. When thinking about LTC care insurance before you start shopping consider just what you would specifically need it for. This might be;

1) To not bankrupt a spouse if you are in LTC for a long time when they are alive.

2) To protect your estate for your heirs.

3) To make sure you are not broke and cannot get into LTC. (Many if not most places will let you stay on Medicare but you may need to have several years expenses for them to originally admit you.)

Then figure out if they actually do what you want them to.
It's usually Medicaid, not Medicare, that would cover LTC expenses after one runs out of money.

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rich126
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Re: LTC vs self insurance

Post by rich126 »

We have no children so leaving money isn't that important.

I often think of this incorrectly. I kind of view it as a place where you go in your final days but unfortunately it can be a place where you may have to live long term because of the medical needs you have. The former is more of a hospice (I guess) the latter is more of a nursing center taking care of all of your medical needs.

Our family medical history is kind of weird (w/o going into too many details). Had 2 grandmothers, one lived to be just over 101 and the other was around 100 and did fairly well most of their lives until the last couple of years. My uncle took care of one grandmother and retired early (he could easily afford it) to help her out.

My one grandfather was older (in the sense he had my father in his 40s) and lived to be in upper 80s. He fought 4 years in WW1 from the British West Indies before settling in the NY/NJ area.

My mom had an exceptional rare disease and slowly declined over a decade. My father took care of her until the last year. I didn't handle that situation well at all.

Personally I've been very fortunate in health (last surgery was as a kid) but still don't anticipate a long life due to a few factors I'll leave out.

Lots to think about. I may call one local insurance person just to see what info they can provide and do some research online once things settle down.
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Re: LTC vs self insurance

Post by randomguy »

Blue456 wrote: Mon Dec 06, 2021 5:25 am Why not do both, purchase 150k policy and self insure. Most likely 150k won't be enough but will cover some of the bill. On the other hand if you don't need LTC at all then you won't feel as bed about 150k policy as opposed to much higher one.
The question is will the policy matter. If I am retiring with 2 million dollars, what difference does a 250k policy make? It isn't going to help with the risk I care about (10 years of long term care at 150k/year) and make is marginal difference (say I pay 50k of premiums and lose out on 100k of gains to get 250k policy that I will use 50% of the time and half the time I use it I will only get out 125k...)? It is a tough problem since the risk you really need to insurance against isn't really helped much by this product.

There is a small range where these products might make sense. Only have 500k? You can't afford it. Have 3 million? You don't need it. In between? Maybe depending on what you can buy and at what cost.
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Re: LTC vs self insurance

Post by jhawktx »

willthrill81 wrote: Sun Dec 05, 2021 6:24 pm
delamer wrote: Sun Dec 05, 2021 5:46 pm
Sandtrap wrote: Sun Dec 05, 2021 5:39 pm Here's a realistic scenario:

Age 90. Needs at home full time care. Unable to be in a facility.
Cost: 10-12,000/month.
Duration: 8 years until passing.

Would you be able to pay for this out of pocket for yourself?

j :D
Maybe realistic, but not probable: https://www.aaltci.org/long-term-care-i ... m-care.php

(And yes, I realize the linked numbers are for nursing home care.)
Roughly 75% of those who need such care need full-time care need it for fewer than 3 years. Exceptionally few 90 year olds would need it for 8 years.
Quite true. And not only that, a minority of people will even LIVE to age 90.
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Re: LTC vs self insurance

Post by Silk McCue »

rich126 wrote: Mon Dec 06, 2021 7:48 am
Lots to think about. I may call one local insurance person just to see what info they can provide and do some research online once things settle down.
Just prior to retiring this year we purchased our LTCi policies. We are 60/62 with no children. Having previously owned a Private Duty Home Health Agency we knew the benefit of having these policies in place. I can confidently recommend Scott Olson at Ltcshop.com. He has an expert level knowledge of these policies and can help guide and educate you.

Cheers
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Re: LTC vs self insurance

Post by jhawktx »

Sandtrap wrote: Sun Dec 05, 2021 5:39 pm Here's just one realistic scenario that may or may not apply:
(An Example)

Age 90. (my MIL recently passed) Needs at home full time care. Unable to be in a facility.
Cost: 10-12,000/month.
Duration: 8 years until passing.

Would you be able to pay for this out of pocket for yourself?

We were not able to get LTC ins prior so all of this was out of pocket.
So, it's tough to predict these things for everyone. (dis laimer)
j :D
This is actually an extreme edge case.
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Re: LTC vs self insurance

Post by willthrill81 »

rich126 wrote: Mon Dec 06, 2021 6:43 am I guess it wasn't clear but I meant the $250K or whatever would be money in a separate "bucket" from your main portfolio you live off of.
You could do so, but it would likely make more sense to use something like the ABW withdrawal method and set the terminal (i.e., ending) value to whatever amount you want to reserve for potential LTC expenses.
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Re: LTC vs self insurance

Post by willthrill81 »

randomguy wrote: Mon Dec 06, 2021 9:46 am
Blue456 wrote: Mon Dec 06, 2021 5:25 am Why not do both, purchase 150k policy and self insure. Most likely 150k won't be enough but will cover some of the bill. On the other hand if you don't need LTC at all then you won't feel as bed about 150k policy as opposed to much higher one.
The question is will the policy matter. If I am retiring with 2 million dollars, what difference does a 250k policy make? It isn't going to help with the risk I care about (10 years of long term care at 150k/year) and make is marginal difference (say I pay 50k of premiums and lose out on 100k of gains to get 250k policy that I will use 50% of the time and half the time I use it I will only get out 125k...)? It is a tough problem since the risk you really need to insurance against isn't really helped much by this product.
WoW2012, a LTCi agent, has said that LTCi policies with unlimited benefits are available, but I'm not sure how the cost would compare to traditional policies with only 3 years of maximum benefits.

I would be very interested in a LTCi policy with a long elimination period (e.g., 3 years), unlimited benefits, and a guarantee of no premium increases. But I don't know if such a policy even exists.
randomguy wrote: Mon Dec 06, 2021 9:46 am There is a small range where these products might make sense. Only have 500k? You can't afford it. Have 3 million? You don't need it. In between? Maybe depending on what you can buy and at what cost.
At least with traditional LTCi policies, I agree.
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Re: LTC vs self insurance

Post by Sandtrap »

jhawktx wrote: Mon Dec 06, 2021 10:23 am
Sandtrap wrote: Sun Dec 05, 2021 5:39 pm Here's just one realistic scenario that may or may not apply:
(An Example)

Age 90. (my MIL recently passed) Needs at home full time care. Unable to be in a facility.
Cost: 10-12,000/month.
Duration: 8 years until passing.

Would you be able to pay for this out of pocket for yourself?

We were not able to get LTC ins prior so all of this was out of pocket.
So, it's tough to predict these things for everyone. (dis laimer)
j :D
This is actually an extreme edge case.
Yes
You are correct.

Per financial planning…caution and awareness.
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Re: LTC vs self insurance

Post by willthrill81 »

dcabler wrote: Mon Dec 06, 2021 5:11 am
willthrill81 wrote: Sun Dec 05, 2021 6:24 pm
delamer wrote: Sun Dec 05, 2021 5:46 pm
Sandtrap wrote: Sun Dec 05, 2021 5:39 pm Here's a realistic scenario:

Age 90. Needs at home full time care. Unable to be in a facility.
Cost: 10-12,000/month.
Duration: 8 years until passing.

Would you be able to pay for this out of pocket for yourself?

j :D
Maybe realistic, but not probable: https://www.aaltci.org/long-term-care-i ... m-care.php

(And yes, I realize the linked numbers are for nursing home care.)
Roughly 75% of those who need such care need full-time care need it for fewer than 3 years. Exceptionally few 90 year olds would need it for 8 years.
I realize that anecdotes aren't to be taken as proof of anything but... My MIL was diagnosed with Alzheimers and spent about 8 years in a nursing home. 7 years for her twin sister. 6 for their brother. Some unknown number of years for an aunt of theirs. So it seemed prudent to us to purchase LTCi for my wife. With that family history, we gave it the weight in our decisions vs the statistics of the general population. Also purchased for myself, though the only history was my great grandmother who was in a nursing home for a couple of years. There have been 2 substantial increases in premiums since we purchased our policies over 10 years ago. Each time, we made adjustments primarily to my policy to keep the total premium cost reasonable, again prmarily due to my wife's family history. With the last increase came a "no more increases" rider. So assuming solvency of the insurance company (NYL), inflation should diminish the burden of the premium costs over time.

Interestingly, my FIL did have LTCi which he cancelled a couple of years before MIL was diagnosed. While MIL did achieve good care, to say that it was a financial burden on them would be a gross understatement.

Cheers.
I can completely understand why you and your wife purchased LTCi policies. A family history of Alzheimer's or other debilitating illnesses resulting in very lengthy LTC needs could be a big risk, both in terms of likelihood and impact.

That being said, the data are what they are. Stays in a LTC facility greater than 5 years are relatively rare, though they clearly do happen. Some people get struck by lightning on pretty clear days. One of my dad's best friends was an apparently healthy tennis player who literally dropped dead of a heart attack right after a game in his early 50s.

One of our neighbors had Alzheimer's for about a decade, but he was able to remain at home for nearly all of that time, and his wife provided him most of his needed care. He was mobile enough that they took multiple walks through the neighborhood nearly every day until the last year or so. She hired a private home health agency to come by about once a week to look after him while she ran errands and took some 'time off'. They seemed to be financially comfortable, but she said that she couldn't bear the idea of 'putting him in a nursing home', though he needed a level of care the last few months of his life that she could not provide, and she had to allow him to go to a nursing home.

LTC is a multi-faceted problem, and some, though thankfully none in this thread so far it seems, seem to believe that buying a 'big' LTCi policy just solves the problem. I'm far from convinced that it is a good financial solution to the problem, and it may do nothing at all for the non-financial aspects of the issue.
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Re: LTC vs self insurance

Post by AnnetteLouisan »

Based on what I read about this extensively before signing up, plus a one hour in depth call with an LTCI expert, I agree it’s intended for that middle net worth group between 500k and 3MM, into which I currently fall. Also useful for singles w no dependents who have longevity in the family and for people with chronic conditions who get no or minimal underwriting offers through their employers. It is indeed for healthier people who are likelier to live into their 90s, although no one has a crystal ball of course.

LTCI in many cases also covers in home care, which is the current trend. Medicare doesn’t cover it. Medicaid is a fall back but most BHers will not qualify or want that level of care - state facilities etc. the principal issue is the wildly increasing premise late in life. I was told, and so far it’s been accurate in the case of my John Hancock policy, that buying a high daily amount policy without built in inflation protection minimizes premium increases. Instead you control the increases to some extent through this future purchase option process every two years.

Even with coverage it’s obvious I’d have to partially self insure but that’s ok, as long as it’s up on the radar screen.
Last edited by AnnetteLouisan on Mon Dec 06, 2021 11:06 am, edited 1 time in total.
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Re: LTC vs self insurance

Post by Watty »

jhawktx wrote: Mon Dec 06, 2021 10:23 am
Sandtrap wrote: Sun Dec 05, 2021 5:39 pm Here's just one realistic scenario that may or may not apply:
(An Example)

Age 90. (my MIL recently passed) Needs at home full time care. Unable to be in a facility.
Cost: 10-12,000/month.
Duration: 8 years until passing.

Would you be able to pay for this out of pocket for yourself?

We were not able to get LTC ins prior so all of this was out of pocket.
So, it's tough to predict these things for everyone. (dis laimer)
j :D
This is actually an extreme edge case.
It is also important to look at the details since in this case LTC insurance might not have as good as it would appear at first glance. A couple of things to keep in mind.

1) Most LTC policies being sold today have a limited coverage of five years of less. She would have outlived a policy like that.

2) If she was otherwise financially secure and had a retirement budget of $5,000 a month that would cover a good part of her LTC.

3) If she ran out of money she would still have had Social Security which would have covered part of the cost each month.

4) If she might had bought a long term care policy when she was 50 and paid into for 32 years until she needed to start LTC when she was 82, that would be 32 years worth of premiums. That money could have been invested and would have paid for a significant percentage of her LTC costs. If she was married they might have also paid for a LTC policy for her husband too and never used it.

If it takes several years to break even compared to investing your premium and your policy only covers you for five years then there is not a huge amount of possible payback if you do not need LTC until you are older.

LTC insurance pays off better when you need it when you are a relatively young retiree.
Last edited by Watty on Mon Dec 06, 2021 11:04 am, edited 2 times in total.
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Re: LTC vs self insurance

Post by sixtyforty »

If one wants to self-insure.... Is it feasible to model whatever dollar amount you think you would need (ie $250K, $500K etc) as a future expense in the retirement models such as FireCalc, Cfiresim, PV etc, to determine if your portfolio would handle such an expense ? This doesn't tell you how much you would need but it would tell you if your portfolio is sufficient and if you would need to make changes to your withdrawal rate. Would you trust it ?
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Re: LTC vs self insurance

Post by willthrill81 »

Watty wrote: Mon Dec 06, 2021 10:51 am
jhawktx wrote: Mon Dec 06, 2021 10:23 am
Sandtrap wrote: Sun Dec 05, 2021 5:39 pm Here's just one realistic scenario that may or may not apply:
(An Example)

Age 90. (my MIL recently passed) Needs at home full time care. Unable to be in a facility.
Cost: 10-12,000/month.
Duration: 8 years until passing.

Would you be able to pay for this out of pocket for yourself?

We were not able to get LTC ins prior so all of this was out of pocket.
So, it's tough to predict these things for everyone. (dis laimer)
j :D
This is actually an extreme edge case.
It is also important to look at the details since in this case LTC insurance might not have as good as it would appear at first glance. A couple of things to keep in mind.

1) Most LTC policies being sold today have a limited coverage of five years of less. She would have outlived a policy like that.
Correct. 77% of the new policies in 2019 had a benefit period of five years or fewer. 52% had a benefit period of three years or fewer.
Watty wrote: Mon Dec 06, 2021 10:51 am 2) If she was otherwise financially secure and had a retirement budget of $5,000 a month that would cover a good part of her LTC.

3) If she ran out of money she would still have had Social Security which would have covered part of the cost each month.
This is an excellent point, one that many lose sight of in these discussions. They act as though LTC expenses will be in addition to all other retirement expenses. That's not true for most retirees who are in a position to be able to afford LTCi premiums; the overwhelming majority have significant discretionary expenses that would generally plummet in the event that the retiree or the retiree's spouse needs LTC, even in a facility. Maybe some spouses would continue to trot the globe, dine out regularly in pricey restaurants, buy luxury vehicles, etc., but that does not seem true of most; it certainly hasn't been for those we know who have gone through LTC events.
Watty wrote: Mon Dec 06, 2021 10:51 am 4) If she might had bought a long term care policy when she was 50 and paid into for 32 years until she needed to start LTC when she was 82, that would be 32 years worth of premiums. That money could have been invested and would have paid for a significant percentage of her LTC costs. If she was married they might have also paid for a LTC policy for her husband too and never used it.

If it takes several years to break even compared to investing your premium and your policy only covers you for five years then there is not a huge amount of possible payback if you do not need LTC until you are older.
Another excellent point. The opportunity cost of LTCi policies can be very steep. Had the average LTCi premium of $225/month ($2,700/year), per the AALTCI, been invested in a 50/50 AA with global stocks over the last 32 years, the ending balance would have been $323k. That assumes no increases in premiums for 32 years, which has certainly not been the case for most LTC policies and may not be the case going forward even with state protections against 'most' premium increases. And had a lump sum been invested in 1989, in 1989 dollars, which is a more accurate way to model this scenario for most retirees considering LTCi, the ending balance in the above example would have been $395k in today's dollars. I believe that's more than the maximum benefit of the average LTCi policy.

And all of this assumes that she would have been able to buy a LTCi policy in the first place. A large proportion of those who apply for LTCi are denied.

Image
Watty wrote: Mon Dec 06, 2021 10:51 am LTC insurance pays off better when you need it when you are a relatively young retiree.
Correct. The biggest 'winners' from a financial standpoint are those experience a very long LTC event at a relatively young age, and those are the rarest of all LTC events.
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Re: LTC vs self insurance

Post by JackoC »

cacophony wrote: Sun Dec 05, 2021 11:09 pm
delamer wrote: Sun Dec 05, 2021 10:45 pm
softwaregeek wrote: Sun Dec 05, 2021 10:14 pm
delamer wrote: Sun Dec 05, 2021 10:08 pm
softwaregeek wrote: Sun Dec 05, 2021 9:16 pm Bear in mind that like all insurance, this has a profit margin built in and that on average, you will have less at the end of your life. If you can self insure, you should do so.
You’ll have less of what?
Cash. Insurance isn’t free.
Ah. True, as long as you are one of the people who doesn’t need the care that the insurance would have paid for.
Although I’m not sure what the insurance company’s profit have to do with anything.
The fact that an insurance company is profitable means that on average they pay out less than you would put in through premiums. That means that mathematically speaking, it's a poor bet to make, at least if you can afford to lose.
Yes the general idea is that insurance has to have negative expected value for the insured population on average, assuming no outside source of funding. But narrowly and technically it's not the insurance company's profit that matters, but % of premiums they pay out as benefits. A good deal of premium revenue will also be consumed by non-payout expenses*.

But if you combine the fact of LTCi like any other non-subsidized insurance having negative expected value but assuming the policies don't cover extreme tails (like a decade in LTC) then I agree with previous post, there seems a quite narrow range of situations where they are useful. Especially for a person who could afford to 'bucket' $250k just for future LTC expenses, which OP later clarified as the scenario, not a person with only $250k. That's not costless, because that $250k then could not be spent by the self insurer on other things, although that effect would be minimized if it was desired for heirs to get at least that much anyway. In such a case I don't see much use for real world LTCi policies. If there were LTCi policies which only kicked in after you'd spent $100ks/few years on LTC on own dime, but then did not have a max benefit, then maybe. If it's true the bad cases reported in the thread are very rare, the theoretical price of such insurance should be low. But such policies don't exist AFAIK and the real ones with low deductible but only few $100k/few years in nursing home max benefit are useful in a pretty narrow range of circumstances it would seem, are useless to us.

*I've seen this cause confusion on car collision insurance threads. Comp/collision doesn't look like such a bad deal on expected value basis if you look at car insurance co *profit*, but they incur very significant non-pay out expense so all in % of premiums paid back out as benefits is order of only 2/3's.
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Re: LTC vs self insurance

Post by TN_Boy »

JoeRetire wrote: Mon Dec 06, 2021 6:34 am
TN_Boy wrote: Sun Dec 05, 2021 9:08 pm And if you have a house and move to a care facility, well you sell the house.
And your spouse finds somewhere else to live.
If you are in assisted living, well, most of your expenses are for that.
Unless you have a spouse.
The OP added two data points to his original post -- one that he is married, the other that the 250k was not his only savings (I noted in another post I didn't like the idea of bucketing the 250k).

For the house, my point remains 100% valid. Yes, if both spouses are living, and one goes into LTC, the other probably doesn't want to sell the house to pay for the LTC -- though a reverse mortgage is clearly a possibility in some situations. Though, if their savings are low enough that they can't afford even a short stay in LTC for one spouse, they probably couldn't afford LTCi premiums for 20 years either ...

I've spent a lot of time in LTC facilities and there are a lot of widowed women in those facilities. I think most of them have sold their house......

A paid off house absolutely something that should be considered when thinking about how to pay for LTC, especially for the "last spouse."

To the OP: one reason I keep urging you to read the prior posts is that all these points have been gone over in great detail previously. People with similar experiences have different takes on the advisability of LTC insurance. You will not get the "correct" answer here, you will only get various facts and opinions.

I'll summarize my viewpoint as saying my experience across four parents (including my spouse's parents) was that two required NO LTC, 1 needed 18 months of LTC, the fourth needed 3 years. The two in LTC had LTCi insurance, but benefits were limited to 5k a month. While the insurance was "nice" it made no significant difference in the financial situations of those two parents. And the policies were a lot cheaper than you can get now.
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Re: LTC vs self insurance

Post by TN_Boy »

rich126 wrote: Mon Dec 06, 2021 7:48 am We have no children so leaving money isn't that important.

I often think of this incorrectly. I kind of view it as a place where you go in your final days but unfortunately it can be a place where you may have to live long term because of the medical needs you have. The former is more of a hospice (I guess) the latter is more of a nursing center taking care of all of your medical needs.

Our family medical history is kind of weird (w/o going into too many details). Had 2 grandmothers, one lived to be just over 101 and the other was around 100 and did fairly well most of their lives until the last couple of years. My uncle took care of one grandmother and retired early (he could easily afford it) to help her out.

My one grandfather was older (in the sense he had my father in his 40s) and lived to be in upper 80s. He fought 4 years in WW1 from the British West Indies before settling in the NY/NJ area.

My mom had an exceptional rare disease and slowly declined over a decade. My father took care of her until the last year. I didn't handle that situation well at all.

Personally I've been very fortunate in health (last surgery was as a kid) but still don't anticipate a long life due to a few factors I'll leave out.

Lots to think about. I may call one local insurance person just to see what info they can provide and do some research online once things settle down.
You probably want to refine your understanding of "independent living" versus "assisted living" versus "memory care" versus "skilled nursing" to be sure you understand the differences in care provided, median stays, and costs. It will help you understand the scenarios a bit better.
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Re: LTC vs self insurance

Post by Blue456 »

randomguy wrote: Mon Dec 06, 2021 9:46 am
Blue456 wrote: Mon Dec 06, 2021 5:25 am Why not do both, purchase 150k policy and self insure. Most likely 150k won't be enough but will cover some of the bill. On the other hand if you don't need LTC at all then you won't feel as bed about 150k policy as opposed to much higher one.
The question is will the policy matter. If I am retiring with 2 million dollars, what difference does a 250k policy make? It isn't going to help with the risk I care about (10 years of long term care at 150k/year) and make is marginal difference (say I pay 50k of premiums and lose out on 100k of gains to get 250k policy that I will use 50% of the time and half the time I use it I will only get out 125k...)? It is a tough problem since the risk you really need to insurance against isn't really helped much by this product.

There is a small range where these products might make sense. Only have 500k? You can't afford it. Have 3 million? You don't need it. In between? Maybe depending on what you can buy and at what cost.
If you are retiring at 2million dollars the 150k policy might not matter at that point. However for someone like me, relatively young, I am unsure if I will retire with 2 million, 1 million or 0.5 million dollars.
delamer
Posts: 17453
Joined: Tue Feb 08, 2011 5:13 pm

Re: LTC vs self insurance

Post by delamer »

cacophony wrote: Sun Dec 05, 2021 11:09 pm
delamer wrote: Sun Dec 05, 2021 10:45 pm
softwaregeek wrote: Sun Dec 05, 2021 10:14 pm
delamer wrote: Sun Dec 05, 2021 10:08 pm
softwaregeek wrote: Sun Dec 05, 2021 9:16 pm Bear in mind that like all insurance, this has a profit margin built in and that on average, you will have less at the end of your life. If you can self insure, you should do so.
You’ll have less of what?
Cash. Insurance isn’t free.
Ah. True, as long as you are one of the people who doesn’t need the care that the insurance would have paid for.

Although I’m not sure what the insurance company’s profit have to do with anything.
The fact that an insurance company is profitable means that on average they pay out less than you would put in through premiums. That means that mathematically speaking, it's a poor bet to make, at least if you can afford to lose.
I just don’t see why averages come into play in this decision. Either you think your risk level justifies the premium or you don’t.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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