My wife made me buy them. We bought policies for each of us in 2001. The first annual premium was just over $2000/year. Today (age 78), my policy premium is $8,400/year.
The initial coverage was $200/day, with a 5% yearly increase. Today, the daily rate is $614/day.
My wife is on a premium waiver as she is receiving benefits.
She fell in our home in April 2020 (age 73) and suffered a TBI. Medicare paid for hospitalizations and the rehab facility. It was a full six months before she came home.
Here’s the math. Out-of-pocket cost for the first 100 days of 24-7 care in the sub-acute rehab facility during COVID-19 was $72,000.00
When she came home, she needed 24-7 care as she could not do one ADL. TLCI paid for that, with me paying the shortfall.
To date (48 months), LTCI has laid out just over $400,000.00. Our policies have no limits other than $224,000 annually, which increases at the compounded rate of 5% annually.
Policies like ours are no longer offered. Both are unlimited in LIFETIME MAX and REMAINING BALANCE.
Her current care is 58 hours a week.
She has improved as much as she can. The caregiver is here 58 hours (@$34/hour) a week, and I care for her the other 110 hours per week. Her care plan calls for 24-hour care. Currently, LTCI pays just under $2000/week. Her coverage will never end, assuming the insurance company stays in business.
If you’re lucky, you can do without it. Costs are skyrocketing for in-home care if you can find it. We did everything we could to keep our parents out of nursing homes (warehousing for old people).
We expect, depending on my health, that she will eventually need 24-hour care again. Assuming rates are as they are today would result in out-of-pocket costs of about $75,000/year to make up the shortfall.
Long-term care facilities, such as group homes, nursing homes, or relatives, are options. They are cheaper than non-medical in-home care. We lived through the experience of having a parent in a nursing home for 4 weeks. It was awful. We didn’t want it for them and certainly don’t want it for ourselves.
I hope you find this “case” useful in determining whether or not LTCI makes sense for you.
I hear discussions on various retirement podcasts on buying LTC. Most the “experts” are salesman that give you little real information. My husband and I have a shared benefit rider on our policy and a 5% annual coverage increase. It is pretty robust coverage since we live in CT where care is very high compared to other places. But my question is not “Should I buy LTC?” (since I have it) it is “Should I keep my LTC policy?”. No one even discusses that. One thing no one mentioned here was that in order to self insure you have to set aside the money to cover LTC and that money should not be invested in any variable assets since you never know when you will need it. That does not appeal to me, so I tend to want to keep the policy even though the premiums continue to rise.
I think if you can afford it, then self-insuring is the way to go. The downside would be the downside, i.e., if your LTC costs exceed the actuarial expectations, then you’d be on the hook for possibly way more than what it would have cost for the LTCI in the first place.
However, whichever you choose, it’s not the only thing you need to do; you need to minimize your risks of needing LTC, so not just being “active” but actually regaining lost physical activities and range of performance that happened during your sedentary career. There is a slow decline in physical ability, such as with sarcopenia, but you can potentially shape the shape of the decline curve so that your “slow-go” years are minimized and you have a higher quality of life during those years. Once you start down that slippery slope, it can be hard to arrest that degradation, so the earlier you start to work on physicality and weight training, etc., the better off you will be.
My wife and I decided to self-insure. We were unwilling to pay into something with no idea where the premiums could go. Plus the fact is LTC insurance does not pay 100%. We have no children or close relatives and plan to leave whatever is left when we die to charity. We think we should be able to cash flow any issues and plan to stay in our home with home health care as long as possible. The main problem we have is making sure we have someone who is trustworthy when we can no longer manage our assets. Of course, children or relatives have no guarantee of being trustworthy either.
We bought LTC policies in our early 40s and also were able to have our mothers get them. We were both working for the State of California at the time, and the group rates were good. Over time they’ve become less good. My mother-in-law is about to use hers because she now has Alzheimer’s. This is a good thing, but as it turns out, it may not have been necessary—they have plenty of money and could absolutely have self-insured. But it seemed like a good deal at the time—It WAS a good deal. It’s just not so much anymore. My mom is 81 and hasn’t needed it yet, but that could change, and she has a lot fewer resources than my in-laws do.
As for ours, our premiums have gone up to a combined total of just under $500/month. That’s a lot. We can afford it, and having already paid into it for 20 years…we’ll keep it. I’d say we’re in a gray area where we probably could self-insure but the uncertainty of it all would be stressful. But if we were to receive a sizable inheritance a few years down the road that added to our own nest egg, we might feel secure enough to drop the LTC policies.
LTCI offered by TIAA, now administered by MetLife, was a good (and lucky) choice for me. Just before turning 51 in 2001, I purchased a 5-year policy with fixed premium $2580 per year, covering $200 per day, $365k lifetime max, with 5% compound annual increase. In 2022, coverage is now $557 per day ($1016k lifetime max), which is well above my CCRC’s present rates for care. Furthermore, having the 5-year policy reduced my CCRC entry fee by $60k. I know how fortunate I was to choose LTCI in 2001, before insurance companies realized they were undercharging!
I bought a NY State Partnership policy around 7 years ago. Provides at home and facility care through Medicaid with no look back period. Several states offered such plans but currently hard to purchase.
Seems like the person in the middle needs it the most. One with assets more than $500k but less than $1M. More than that and you can self fund. Seems like most LTC policies can increase at any time and many older policy holders can no longer afford them, after years of paying premiums. I don’t know how insurance policies with riders work, but I imagine premiums for those are pretty high also. In most cases, apparently, the need for care isn’t that long.
We did an irrevocable trust with our children, home and will and assets in trust. Currently waiting 5 year period. Don’t know but thought a good way to go. Years ago, did have a policy with Glenworth until they increased rate 50 percent. We dropped them.
Another “insurance” option that’s often overlooked: A Continuing Care Retirement Community” (CCRC) where you plunk down a lump sum for a guarantee of access to an appropriate level of care for life, even if you run out of money. Not a solution for the less affluent, and it can be a very complex buying decision, but it may be the right one for folks averse to traditional or hybrid insurance.
We bought LTCI in 2003 through my employer. Interestingly, at that time my wife’s Long Term Disability insurance was more expensive than her LTCI. We paid $1,555 that year. In 2019, we paid $7,846. That included some cost-of-living increases we had added over the years. In a way I’m sympathetic toward the insurance companies, although they should have done a better job of pricing their product in the beginning. If I were running the company today that provides our LTCI I would have the same problems they do. There aren’t any good, easy solutions to the problem of increasing LTCI premiums.
I’ll defer to the planners for independent analysis, but the more I hear, the more I am turned off. Rates have apparently increased substantially, and unless you are right in that sweet spot age of mid-late 50s, they say it doesn’t make the most sense.
Candidates for LTC insurance would be those in the mass affluent category–not super-rich but have enough. Low net worth people can depend on government assistance while the rich can self-insure.
People with kids nearby who can help is something to consider, while not an ideal situation and certainly not something you should count on 100%.
It’s good to know some numbers–JPM’s Guide to Retirement shows that there is a 64% chance that a man will need assistance for two or more daily activities. That figure jumps to 75% for women. That assistance can come from family/friends, paid home care, nursing home living, and assisted living.
The duration of paid care after age 65 can range wildly, but the plurality of those paying care use it for under 2 years (47% of men, 35% of women). If paid care is used, over 3 in 10 men and 4 in 10 women require it for 4 or more years.
“Candidates for LTC insurance would be those in the mass affluent category–not super-rich but have enough. Low net worth people can depend on government assistance while the rich can self-insure.”—That is true. How do we define “the mass affluent”? the 90 to 99% of wealth? ( I might be in that group, but I won’t buy it because of its unpredictability. ) But surely the 60 to 90% need assistance, too. Too rich for government help and too poor to pay for adequate assistance without breaking the bank. BTW: if you haven’t seen a nursing home that relies on Medicaid for most of its residents, don’t envy the ‘poor’.
Buying long term care insurance is a complicated decision. My wife and I bought ours when it was offered by my employer back in the early 1990’s and we were in our 30s. It was fairly affordable and my wife and I each bought a policy that covered the maximum daily benefit for 5 years. Our policies cover at home care as well as institutional care. We also have the return of premium option so someone will eventually get all of our premiums back tax free. About every two years we are offered an inflation rider which boosts the daily benefit but also boosts the policy cost. I’ve compared our annual costs with current policy costs and we pay about 1/2 of the current new policy cost for the same new coverage. Our current carrier is not writing any new long term care policies.
I would say the market right now is only affordable if you have a large net worth. If you have assets less than $500,000 it’s probably more efficient if you go on Medicaid spend down. If you are young enough you can still buy a policy, but as you age ( especially over 65 years old) there is a risk you may be turned down for LTC. In my area, private 24/7 care in a single room can run up to more than $300 per day. It is extremely expensive and some families will be financially stressed paying for more than a couple months of care. If your children can’t care for you it becomes a real dilemma.
As fewer and fewer companies offer LTC insurance, search for an adviser who understands the marketplace and the current options available. It’s more complex as the products vary by state. Try to find an A+ or better insurer who has been in business a long time. It’s probably worth the extra cost to have a very stable insurance carrier.
Truth is I don’t know. The more research I do, the more confused I am. Three choices are buy a policy at a young age, hybrid or self insure. Buying a policy early can and has led to increased premiums when you’ll probably need it the most. Hybrid is fine but why not just keep the money aside and invested versus giving it to an insurance company. The earnings should more than make up for the increased benefits of LTC from the policy. Self insure is a mix of my last thought or using your fully paid off house as a backstop.
To your question about why not just set the funds aside (compared to a hybrid Life/LTC Rider policy), I’d offer that the one element that can’t be controlled is the risk that you need the funds before you’ve accumulated them. There’s usually no extra charge for the addition of a Chronic Illness (essentially, LTC) rider on a life policy today, so you can transfer that risk to a life insurer with little to no opportunity cost to you.
Yes, provided that you buy a policy at a young enough age, opt for a benefits adjustment over time and go with a top rated company that has been in this business for awhile and is financially strong enough to still be in this business when you will need this benefit. If you have (or expect to have) sufficient other assets, its also wise to not over-buy the dollar amount or time period of any benefit payout, which could greatly escalate the premium cost over time. I hope never to have to use our coverage, but it will help us meet the cost of long term care should it become necessary.
I bought a hybrid LTC insurance policy that I will either use or have my beneficiaries receive as a death benefit. My policy also has a lifetime benefit. Like most buyers I was leery of a policy that could have premium increases and wanted a fixed price. My hybrid policy has that. I had to convince myself that the insurance company would honor this and after resaerching the company I believe that they will as the policy is life insurance based. Now I consider my policy as an asset and do not worry about an unknown future expense and that “peace of mind” is worth it.
The other element in support of your thoughts, James, is that the market for Chronic Illness (essentially, LTC) riders is robust in the life insurance market, while the straight LTC market has become severely restricted. It’s a buyer’s market with the riders on the life policies, but a seller’s market in the straight LTC market.
My wife made me buy them. We bought policies for each of us in 2001. The first annual premium was just over $2000/year. Today (age 78), my policy premium is $8,400/year.
The initial coverage was $200/day, with a 5% yearly increase. Today, the daily rate is $614/day.
My wife is on a premium waiver as she is receiving benefits.
She fell in our home in April 2020 (age 73) and suffered a TBI. Medicare paid for hospitalizations and the rehab facility. It was a full six months before she came home.
Here’s the math. Out-of-pocket cost for the first 100 days of 24-7 care in the sub-acute rehab facility during COVID-19 was $72,000.00
When she came home, she needed 24-7 care as she could not do one ADL. TLCI paid for that, with me paying the shortfall.
To date (48 months), LTCI has laid out just over $400,000.00. Our policies have no limits other than $224,000 annually, which increases at the compounded rate of 5% annually.
Policies like ours are no longer offered. Both are unlimited in LIFETIME MAX and REMAINING BALANCE.
Her current care is 58 hours a week.
She has improved as much as she can. The caregiver is here 58 hours (@$34/hour) a week, and I care for her the other 110 hours per week. Her care plan calls for 24-hour care. Currently, LTCI pays just under $2000/week. Her coverage will never end, assuming the insurance company stays in business.
If you’re lucky, you can do without it. Costs are skyrocketing for in-home care if you can find it. We did everything we could to keep our parents out of nursing homes (warehousing for old people).
We expect, depending on my health, that she will eventually need 24-hour care again. Assuming rates are as they are today would result in out-of-pocket costs of about $75,000/year to make up the shortfall.
Long-term care facilities, such as group homes, nursing homes, or relatives, are options. They are cheaper than non-medical in-home care. We lived through the experience of having a parent in a nursing home for 4 weeks. It was awful. We didn’t want it for them and certainly don’t want it for ourselves.
I hope you find this “case” useful in determining whether or not LTCI makes sense for you.
I hear discussions on various retirement podcasts on buying LTC. Most the “experts” are salesman that give you little real information. My husband and I have a shared benefit rider on our policy and a 5% annual coverage increase. It is pretty robust coverage since we live in CT where care is very high compared to other places. But my question is not “Should I buy LTC?” (since I have it) it is “Should I keep my LTC policy?”. No one even discusses that. One thing no one mentioned here was that in order to self insure you have to set aside the money to cover LTC and that money should not be invested in any variable assets since you never know when you will need it. That does not appeal to me, so I tend to want to keep the policy even though the premiums continue to rise.
I think if you can afford it, then self-insuring is the way to go. The downside would be the downside, i.e., if your LTC costs exceed the actuarial expectations, then you’d be on the hook for possibly way more than what it would have cost for the LTCI in the first place.
However, whichever you choose, it’s not the only thing you need to do; you need to minimize your risks of needing LTC, so not just being “active” but actually regaining lost physical activities and range of performance that happened during your sedentary career. There is a slow decline in physical ability, such as with sarcopenia, but you can potentially shape the shape of the decline curve so that your “slow-go” years are minimized and you have a higher quality of life during those years. Once you start down that slippery slope, it can be hard to arrest that degradation, so the earlier you start to work on physicality and weight training, etc., the better off you will be.
My wife and I decided to self-insure. We were unwilling to pay into something with no idea where the premiums could go. Plus the fact is LTC insurance does not pay 100%. We have no children or close relatives and plan to leave whatever is left when we die to charity. We think we should be able to cash flow any issues and plan to stay in our home with home health care as long as possible. The main problem we have is making sure we have someone who is trustworthy when we can no longer manage our assets. Of course, children or relatives have no guarantee of being trustworthy either.
We bought LTC policies in our early 40s and also were able to have our mothers get them. We were both working for the State of California at the time, and the group rates were good. Over time they’ve become less good. My mother-in-law is about to use hers because she now has Alzheimer’s. This is a good thing, but as it turns out, it may not have been necessary—they have plenty of money and could absolutely have self-insured. But it seemed like a good deal at the time—It WAS a good deal. It’s just not so much anymore. My mom is 81 and hasn’t needed it yet, but that could change, and she has a lot fewer resources than my in-laws do.
As for ours, our premiums have gone up to a combined total of just under $500/month. That’s a lot. We can afford it, and having already paid into it for 20 years…we’ll keep it. I’d say we’re in a gray area where we probably could self-insure but the uncertainty of it all would be stressful. But if we were to receive a sizable inheritance a few years down the road that added to our own nest egg, we might feel secure enough to drop the LTC policies.
LTCI offered by TIAA, now administered by MetLife, was a good (and lucky) choice for me. Just before turning 51 in 2001, I purchased a 5-year policy with fixed premium $2580 per year, covering $200 per day, $365k lifetime max, with 5% compound annual increase. In 2022, coverage is now $557 per day ($1016k lifetime max), which is well above my CCRC’s present rates for care. Furthermore, having the 5-year policy reduced my CCRC entry fee by $60k. I know how fortunate I was to choose LTCI in 2001, before insurance companies realized they were undercharging!
I bought a NY State Partnership policy around 7 years ago. Provides at home and facility care through Medicaid with no look back period. Several states offered such plans but currently hard to purchase.
I would say NO
Seems like the person in the middle needs it the most. One with assets more than $500k but less than $1M. More than that and you can self fund. Seems like most LTC policies can increase at any time and many older policy holders can no longer afford them, after years of paying premiums. I don’t know how insurance policies with riders work, but I imagine premiums for those are pretty high also. In most cases, apparently, the need for care isn’t that long.
We did an irrevocable trust with our children, home and will and assets in trust. Currently waiting 5 year period. Don’t know but thought a good way to go. Years ago, did have a policy with Glenworth until they increased rate 50 percent. We dropped them.
Another “insurance” option that’s often overlooked: A Continuing Care Retirement Community” (CCRC) where you plunk down a lump sum for a guarantee of access to an appropriate level of care for life, even if you run out of money. Not a solution for the less affluent, and it can be a very complex buying decision, but it may be the right one for folks averse to traditional or hybrid insurance.
We bought LTCI in 2003 through my employer. Interestingly, at that time my wife’s Long Term Disability insurance was more expensive than her LTCI. We paid $1,555 that year. In 2019, we paid $7,846. That included some cost-of-living increases we had added over the years. In a way I’m sympathetic toward the insurance companies, although they should have done a better job of pricing their product in the beginning. If I were running the company today that provides our LTCI I would have the same problems they do. There aren’t any good, easy solutions to the problem of increasing LTCI premiums.
I’ll defer to the planners for independent analysis, but the more I hear, the more I am turned off. Rates have apparently increased substantially, and unless you are right in that sweet spot age of mid-late 50s, they say it doesn’t make the most sense.
Candidates for LTC insurance would be those in the mass affluent category–not super-rich but have enough. Low net worth people can depend on government assistance while the rich can self-insure.
People with kids nearby who can help is something to consider, while not an ideal situation and certainly not something you should count on 100%.
It’s good to know some numbers–JPM’s Guide to Retirement shows that there is a 64% chance that a man will need assistance for two or more daily activities. That figure jumps to 75% for women. That assistance can come from family/friends, paid home care, nursing home living, and assisted living.
The duration of paid care after age 65 can range wildly, but the plurality of those paying care use it for under 2 years (47% of men, 35% of women). If paid care is used, over 3 in 10 men and 4 in 10 women require it for 4 or more years.
“Candidates for LTC insurance would be those in the mass affluent category–not super-rich but have enough. Low net worth people can depend on government assistance while the rich can self-insure.”—That is true. How do we define “the mass affluent”? the 90 to 99% of wealth? ( I might be in that group, but I won’t buy it because of its unpredictability. ) But surely the 60 to 90% need assistance, too. Too rich for government help and too poor to pay for adequate assistance without breaking the bank. BTW: if you haven’t seen a nursing home that relies on Medicaid for most of its residents, don’t envy the ‘poor’.
Buying long term care insurance is a complicated decision. My wife and I bought ours when it was offered by my employer back in the early 1990’s and we were in our 30s. It was fairly affordable and my wife and I each bought a policy that covered the maximum daily benefit for 5 years. Our policies cover at home care as well as institutional care. We also have the return of premium option so someone will eventually get all of our premiums back tax free. About every two years we are offered an inflation rider which boosts the daily benefit but also boosts the policy cost. I’ve compared our annual costs with current policy costs and we pay about 1/2 of the current new policy cost for the same new coverage. Our current carrier is not writing any new long term care policies.
I would say the market right now is only affordable if you have a large net worth.
If you have assets less than $500,000 it’s probably more efficient if you go on Medicaid spend down. If you are young enough you can still buy a policy, but as you age ( especially over 65 years old) there is a risk you may be turned down for LTC. In my area, private 24/7 care in a single room can run up to more than $300 per day. It is extremely expensive and some families will be financially stressed paying for more than a couple months of care. If your children can’t care for you it becomes a real dilemma.
As fewer and fewer companies offer LTC insurance, search for an adviser who understands the marketplace and the current options available. It’s more complex as the products vary by state. Try to find an A+ or better insurer who has been in business a long time. It’s probably worth the extra cost to have a very stable insurance carrier.
Truth is I don’t know. The more research I do, the more confused I am. Three choices are buy a policy at a young age, hybrid or self insure. Buying a policy early can and has led to increased premiums when you’ll probably need it the most. Hybrid is fine but why not just keep the money aside and invested versus giving it to an insurance company. The earnings should more than make up for the increased benefits of LTC from the policy. Self insure is a mix of my last thought or using your fully paid off house as a backstop.
As you can tell, I don’t know what to do.
To your question about why not just set the funds aside (compared to a hybrid Life/LTC Rider policy), I’d offer that the one element that can’t be controlled is the risk that you need the funds before you’ve accumulated them. There’s usually no extra charge for the addition of a Chronic Illness (essentially, LTC) rider on a life policy today, so you can transfer that risk to a life insurer with little to no opportunity cost to you.
Yes, provided that you buy a policy at a young enough age, opt for a benefits adjustment over time and go with a top rated company that has been in this business for awhile and is financially strong enough to still be in this business when you will need this benefit. If you have (or expect to have) sufficient other assets, its also wise to not over-buy the dollar amount or time period of any benefit payout, which could greatly escalate the premium cost over time. I hope never to have to use our coverage, but it will help us meet the cost of long term care should it become necessary.
I bought a hybrid LTC insurance policy that I will either use or have my beneficiaries receive as a death benefit. My policy also has a lifetime benefit. Like most buyers I was leery of a policy that could have premium increases and wanted a fixed price. My hybrid policy has that. I had to convince myself that the insurance company would honor this and after resaerching the company I believe that they will as the policy is life insurance based. Now I consider my policy as an asset and do not worry about an unknown future expense and that “peace of mind” is worth it.
The other element in support of your thoughts, James, is that the market for Chronic Illness (essentially, LTC) riders is robust in the life insurance market, while the straight LTC market has become severely restricted. It’s a buyer’s market with the riders on the life policies, but a seller’s market in the straight LTC market.