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Actually, they’re not. Several LTC carriers have gotten out of the business recently because they were losing a fortune and couldn’t raise premiums high enough to recoup both the losses and the lousy investment returns. (You’d be surprised about how much of an insurer’s profit is due to the investment returns on premiums, as opposed to the premiums themselves.</p>
<p>John Hancock comes to mind.</p>
<p>I think that ALL of an insurer’s profit comes from investments.</p>
<p>I think there is a lot of variability among LTC insurers. Of the many people we know who have died recently, many would NOT have qualified for benefits when they needed help because they could STILL do their ADLs–slowly and painfully, but that would make them NOT qualify for nearly all policies.</p>
<p>Force savings allows the saver to have more control over when benefits are paid out (think Christmas Savings Account). LTC can be a BIG bargain if your loved one ends up qualifying and needing it but a bad deal if she or he needs held that is NOT covered or dies shortly after qualifying for benefits.</p>
<p>Costs of long term care CAN really add up, but many folks living needing help with ADLs do NOT live all that many months. Insurance is a gamble, by nature.</p>
<p>Average “long term” stay in nursing home is 2.5 years.</p>
<p>As my high school math teacher said: Insurance is a bet where if you win you lose, and if you lose you win. </p>
<p>Consumer Reports said in an article that if you have liquid assets of $2.5 million, you can probably pay out of pocket for care. If you have less than $500,000 you probably can’t afford the premium. It’s for all of us in between who have an issue, and this will vary by state–both in terms of LTC costs, and premium costs. </p>
<p>CR, and others, recommend a fee-only financial planner, who will charge you only for his or her services, and not receive a commission on products they sell you–reducing the possibility of a conflict of interest. You can find such an advisor here: [Fee-Only</a> Financial Advisors Home - NAPFA - The National Association of Personal Financial Advisors](<a href=“http://napfa.org/]Fee-Only”>http://napfa.org/)</p>
<p>As an alternative to LTC insurance, I often recommend considering a continuing care (sometimes called a life care) facility. Typically, they have in one place, independent living, assisted living, and a nursing home. When you enter, you buy-in with, usually, a six figure lump sum (often the equity from selling your home). Your monthly nut, say $2.5K, will stay constant and pay for whatever level of care you need. Assuming you can afford this, a downside is that you have to age in that one place, but they tend to be pretty nice. You are taking a risk on the financial viability of your institution, but in my area I can think of several thst have been around for decades–with no frail elderly kicked to the curb. In contrast, i do no several nursing homes who have gone oit of business. At death, depending on the facility’s particulars, your estate will receive back a portion of your buy-in fee. </p>
<p>Couple of decent overviews:</p>
<p>[Caregiving</a> Resource Center: Continuing Care Retirement Communities - AARP](<a href=“http://www.aarp.org/relationships/caregiving-resource-center/info-09-2010/ho_continuing_care_retirement_communities.html]Caregiving”>Learn About Continuing Care Retirement Communities)</p>
<p>[Continuing</a> Care Retirement Communities & Fee-For-Service Continuing Care Retirement Communities](<a href=“http://www.health.ny.gov/facilities/long_term_care/retirement_communities/continuing_care/]Continuing”>Continuing Care Retirement Communities & Fee-For-Service Continuing Care Retirement Communities)</p>
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<p>True of auto insurance, homeowners, even health insurance. But with LTC, you could pay exorbitant premiums for decades, become quite sick or debilitated for years, but as HImom says, if you can still tie your shoes, you don’t qualify. Lose-lose.</p>
<p>Not everyone loses. My parents hit the jackpot. But it wasn’t as much of a gamble; the premiums were reasonable and the insurers weren’t as strict. These days, it’s harder to get a claim approved.</p>
<p>Most of the folks I know with my chronic condition can slloooowwwwwllllllllyyyyy perform nearly all their ADLs until they die, and though they could benefit from transportation or other aid would only be able to afford it if they REALLY saved and set aside funds for this eventuality rather than relying on being MAYBE able to qualify for some benefits from insurer. </p>
<p>Folks I know who have died of cancer and other terminal conditions were only qualified to receive benefits in the very last month of their life, tho they needed a lot of help long before then to get thru the day. </p>
<p>It can be worthwhile for folks who can afford the premiums, Especially if they have strokes/paralysis/dementia running in their family. Depending on the individual, I believe many receive good care for far less than $500K, which seems a huge sum for 2 1/2 years of care. I know friends who have cared and gotten good care for loved ones. None have spent anywhere near that amount.</p>
<p>As an insurance general agent, I handle many long term care policies, with quite a few on claim. It’s simple. If you cannot do two ADL’s by yourself, and need to hire someone to help, your policy will pay subject to its terms. If you don’t yet need such help, it won’t pay. Overall, claim denials are quite rare. Most people filing claims really do need the help. My mother’s boyfriend is one. He has a massive stroke last year, and will likely be in assisted living or nursing home for the rest of his life. It happens. That’s why we buy insurance. His policy will end up paying out several hundred thousand dollars, and allow his family to provide decent care without going bankrupt.</p>
<p>Insurers have lost money on LTC because they didn’t expect so many claims. They had no idea how to price the product properly. Some still don’t, thus have stopped selling it. That doesn’t change the fact that there is a big need, perhaps more than ever, to insure against this risk. Not being able to tie your shoes, or needing someone to do your shopping, is not the kind of financial catastrophe requiring insurance.</p>
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<p>Chardo, one of the ADLs that qualified my mom for benefits was dressing – specifically, that she couldn’t bend over to put on her shoes and socks or take them off. If her claim were being filed today, it would be denied?</p>
<p>I get insurance is a bad buy but I am not understanding the posts being really harsh about LTC insurance. </p>
<p>Examples have give about folks who paid in and didn’t use it which are examples of why it isn’t needed. Mom3ToGo and I have been paying both car insurance and home owner’s insurance for over 25 years and haven’t used them. Does that mean it was a bad idea to have car and home owner’s insurance? (OK, to be totally honest, we made a home owner’s claim once that was denied)</p>
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Why do you think that? That certainly has not been my parents experience. They purchased TLC insurance at 70 and my Mom developed Alzheimers within a few years … she is in assisted living now … but the time her LTC insurance runs out it will have paid out at least 10 times what they paid in. How is that forced savings and not classic insurance? The companies made money off the folks HIMom knows who didn’t need it and paid out to folks to my Mom … actuaries make their money trying to balance the odds of folks ending up in one of those two situations.</p>
<p>Part of it depends when you start paying premiums, for how long and what benefits you ever collect, if any. I have collected on medical, homeowners and auto policies. It gets increasingly expensive and difficult to qualify for LTC insurance as one ages, but I think many agree it is helpful for the some or many folks who can afford the premiums. </p>
<p>For folks (like those in my family) with extreme longevity in their genes, premiums may be paid through until incapacity or death, which can be when the person turns 100 or later. This can be many, many decades.</p>
<p>LasMa, your mom would also need assistance with a second ADL to be eligible for claim. If it was just inability to get dressed, someone could be hired to stop by and help, at little cost. It’s when you need someone around to help all day that costs add up.</p>
<p>Here’s a booklet with info about LTC insurance. You can also go to the Federal LTC website to calculate sample premiums after plugging in birthdate and desired benefits, assuming you qualify for coverage.</p>
<p><a href=“http://www.aaltci.org/subpages/resources/claimsreport.pdf[/url]”>http://www.aaltci.org/subpages/resources/claimsreport.pdf</a></p>
<p>I have also been researching LTC insurance as the opportunity to purchase LTC under a group policy offered to state employees expired Jun 30th. (through Prudential) We filled out the paperwork to at least find out if we are eligible and then can take it from there. During my research, I have read about LTC Partnership policies that protect more of your assets (as much as the benefits paid) before Medicaid kicks in. Does anyone know much about the Partnership policies? I do know that our state group policy is not a partnership policy. Thanks for any info!</p>
<p>Remember ALL insurance is CONTRaCTS. Read the policy carefully so you understand WHAT is being offered, how many ADLs must need assistance, where the person can use benefits–only nursing home vs in home help vs AL or other option. These differences really matter! It can be a useful part of a financial plan, as long as the buyer knows what is being purchased and does homework.</p>
<p>Now that I’ve gone through the process of moving an elderly friend from her apartment into assisted living after a stroke, I’m much more motivated to research LTC insurance. DH and I had a quote from an agent a couple of years ago, so I plugged some numbers using that quote into a spreadsheet just for a start.</p>
<p>Assumptions are:</p>
<ul>
<li>pay premiums for 20 years, then receive the full benefit of $200/day</li>
<li>premium increases 2%/year</li>
<li>benefit increases 5%/year (compound inflation protection)</li>
</ul>
<p>Total cost of insurance over 20 years: $132,650
Inflation-adjusted daily benefit in year 21: $531
Total benefits in year 1: ($531 * 365) = $193,691</p>
<p>If I change the inflation rate to 5% on the premium, I get a total cost of $180,474. </p>
<p>In both cases, if we’re eligible for benefits after 20 years then the insurance more than pays for itself the first year. I also ran the numbers for receiving benefits in year 11 and they’re even more advantageous. This particular policy has a 5-year benefit period and a cap of $584,000 in today’s dollars.</p>
<p>Anyone else do the math? Am I missing anything, other than the opportunity cost of the premium?</p>
<p>Yes, you are assuming that the person owning the policy will meet criteria for benefits to be paid. Also assuming that person will go to nursing home after x years rather than other, lower cost options and that insured qualifies for the insurance. </p>
<p>If things were as cut and dried as you lay them out, insurers would have to raise premiums much more or go out of business.</p>
<p>Yes, I was assuming that at least one of us would meet the criteria for being paid 100% of the daily benefit. If only half of the daily benefit is paid, then either the payback period is longer or, if the end of 5-year benefit period is reached, then the numbers don’t look as favorable.</p>
<p>By this:<br>
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<p>do you mean that I’m assuming that DH and I qualify for the insurance to begin with? Or do you mean that the ultimate expenses fall within what the plan covers?</p>
<p>The downside is that if we both die in a car crash, then the entire premium is lost.</p>
<p>With so many unknowns, it’s hard to figure out if this is worth it…</p>
<p>Yea, insured has to qualify to purchase insurance AND has to qualify for benefits. Many die, fully able to do all or most ADLs until the end, they don’t qualify for benefits, so understand the terms of any policy you consider.</p>
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Yup … and the odds are in the insurer’s favor … or they wouldn’t see the policies. So it really comes down to a couple things. </p>
<p>First, a decision tree of what are the odds you die directly from something like a heart attack, a quick cancer case, etc … or instead you develop Alzheimeir’s or have a stroke. As HImom points out family history can help this analysis … in her family she has lots of healthy longevity … my and my wife’s family shares the longevity but typically with complicating factors like Alzheimer’s, Parkinsons, strokes, and diabities. Two different family backgrounds … two different rational decisions.</p>
<p>Second, and just as important … your risk tolerance. Mom3ToGo and I could have afforded to self-insure but we have VERY risk adverse financially and were not willing to risk not being able to pay for our kid’s college education (really small odds of that being an issue but the worst outcome IMP) or wiping out our assets (our kids inheritance) in our old age.</p>
<p>Also, vballmom, throw out that quote you received a couple years ago. Today’s plans and rates are radically different.</p>
<p>LTC is not something to be analyzed or purchased based on return on investment. Fact is that almost everyone who ends up on claim will receive way more in benefits than they paid in premiums. Of course, many will never go on claim. That’s the nature of insurance. </p>
<p>I’m a vballdad, btw.</p>