I’m in my 50’s but about to put my Dad into a nursing home. The cost is HUGE and I quickly show nursing home care can put a family into bankruptcy.
So what do you all think about long term care insurance?
I haven’t looked into LTC insurance, but I’m guessing the premiums are based on your age, so that by the time you are likely to need LTC, you will have paid enough in premiums so that the insurance provider will have enough in their coffers to cover your costs (plus a margin of profit for themselves). It alleviates the risk of not being able to pay for any LTC you need, but its very likely that it will cost you more in the long than whatever LTC you’re likely to need.
The obvious alternative is to bear the risk yourself: factor in the likely cost of LTC into your retirement savings. If you actually need LTC, it’s likely to be somewhere between one and three years, at $50K - $75K per year. So if you’ve got a few hundred K in the bank near the end of your life, you’ll be OK. If you happen to die without needing LTC, then the balance goes to your heirs. The risk, if you run out of money, is that you will leave no inheritance and you’ll need to fall on the mercy of Medicaid to pay for your LTC.
Find out the cost of LTC insurance, weigh that against what your LTC expenses could be and what they probably will be (and your odds of needing LTC at all), and decide what level of risk you can live with.
I agree with what @Machine_Elf said. I would also add that you should look into what your state’s laws are regarding backing up the insurance. In some states the benefits are at least partially guaranteed by the state, but I do not believe that is true in all cases. You could be in a situation where you pay premiums for years only for the insurance company to go bankrupt before you get paid.
You should also be extremely careful reading exactly what benefits are covered. LTC facilities have varying levels of care, and you can move rapidly up that scale. I’m not sure if all policies cover all levels of care.
There is certainly a lot of growth in this area, and the products are pretty complicated, so I would approach it with a heavy dose of buyer beware.
My mother’s Long Term Care insurance (which she probably bought in the 1980s) is paying a huge part of her assisted living expenses. I don’t think policies available now are are as good. When I looked the term was limited (I think 3 years was the max) and the monthly benefit too low to cover the whole cost of care. I think the most I could get would cover around $300,000 in long term care expenses. (I’m sure if you shop around and are willing to pay a lot, you can get a more generous plan)
If I knew for certain I would need it, then it would be okay and a significant help with the costs. It is expensive and, obviously, we don’t know for sure who is going to need it.
We’re lucky enough to have enough saved that we can “self insure.”
I’m not anti-insurance. I buy high limits auto, home, and disability. I passed on Long Term Care.
Depends on your ability/willingness to save, your best bet as to your long term health, and the degree of care you desire.
We looked into it w/ our money guy, and decided we’d be better off just saving somewhat aggressively for retirement. But neither of us are particularly interested in being in a nursing home for an extended period. If we are not able to care for ourselves in a small apartment, we’d likely prefer to check out permanently.
That’s my belief as well, but I didn’t know how to best state it. LTC Insurance would be a total waste of money for me.
The cost is hugely dependent on the level of care that is required. Right now, my 100-year-old Mom is in Assisted Living, which is costing her/us about $5100 per month. But if she has to go into Nursing Care, the cost will jump to over $8k per month.
If you’re going to buy LTC, the best time is when you’re relatively young and the premiums are thus relatively lower. We didn’t look into it until we were in our early 50s and by then the premiums were, I thought, outrageously high. (I don’t remember the exact numbers.) Also, the policy that was offered to us paid a maximum of 18 months; it was probably the low-end that the company was offering. If you’re going to buy, be sure you know what the max payout will be.
Like others have said, we opted not to purchase LTC, based on the premium cost and the capping of benefits. Instead, we aggressively saved and should have enough to pay for our LTC.
Well, some plans will pay for in-home assistance, which might be nice. I bet getting a claim like that paid would be a hassle.
In my mother’s case, they denied her assisted living claim, and misquoted the policy provisions to us as they tried to justify the denial. Luckily, we’re attorneys. Otherwise, I bet she would have just given up.
It’s not really an all-or-nothing situation. There are varying levels of care available depending on one’s needs/wants. Some folks need major help eating/clothing/toileting/showering because they have severe mobility/cognition problems, and some folks just need someone else to manage their meds for them because they’ve become a bit forgetful. There are also “independent living” retirement communities, where staff take care of housekeeping for you and provide some/all of your meals in a communal dining room. I can understand not looking forward to a life in which you are no longer able to do anything to care for yourself, but hopefully you won’t feel like checking out just because you’ve grown tired of doing your own laundry.
Many years ago we bought into a company-sponsored benefit for Long Term Care insurance (through John Hancock). It’s the same premium, about $250 for both me and my spouse combined, but I really need to look at the current coverage. Yes, buy into it when young!
In my state (Minnesota), 25% of the premium can be taken as a credit (not deduction) on the state income tax. Looking at a few other states, it looks like a common thing. It’s not a lot, but still nice.
I’m a financial advisor. My current firm does not sell LTC insurance, but my previous one did. You are correct - it can be a debilitatingly confusing product, and it’s ripe for getting ripped off (or at least not understanding what you’re getting).
You are also correct - no one saw the huge increase in LTC costs (due to inflation, better quality of care, and people living a lot longer in a facility). There are a number of companies that went out of business because their LTC payouts put them under.
Whole life insurance is seen as a 4-letter word in a lot of circles, but there are some very good products out there that provide an LTC rider that pays out a small percentage of the policy per month for LTC. It’s a very good alternative for those who worry about paying so much into a traditional policy and never getting anything out of it.
Can’t disagree with much upthread.
The problem is how exactly are you going to arrange to check out on cue?
In a future more enlightened society that should be easy. But here and now it is not. So you (any you) run the risk of being elderly, physically dependent, effectively broke, and unable to do anything to fix any of those 3 factors. Bad pickle.
Everything about retirement planning would be vastly easier if you could predict or control your date of death.
I have LTC for my wife, myself, and my aged MIL. All bought back around year 2000 when we were 40-ish and she was 75-ish. And back at the heyday of rich LTC policies being sold fairly cheap. The one and only example of good timing in my financial life.
MIL’s deal has proven very profitable for her. As in $12K total premiums paid in, $80K in benefits received so far, and $160K of benefits still available to draw from if needed. The amazing thing is that once she started drawing a benefit they stopped charging premiums. So she only paid in for about 3-1/2 years. It’s almost like a Ponzi scheme where she was in on the ground floor!
Because she declined to upgrade her policy to keep pace with inflation, the benefit now is not big enough to entirely pay for a truly excellent nursing home, but it’ll cover the first $42K/yr of any assisted living or nursing home and she has enough lifetime benefits left today to pay that for almost 4 years before the insurance runs dry. Very, very few people live 4 more years once they transition to assisted living or higher level care.
Meanwhile she can, if she wants, draw up to $21K/year to pay for part time helpers to come in for a couple hours to the independent living place where she resides to help her bathe, get dressed, remember her pills, etc. She doesn’t need that much help, but she does use a few hundred dollars a month, so a few thou a year on these helpers, slowly eating her remaining lifetime benefit.
The claims process is stupid-easy. The helper company sends the bill to the insurance company and they pay it without the slightest problem or complaint. That’s been true for ~15 years straight now. Zero hassle. The helper company knows how much is covered (the benefit is measured per day, not per month) and they send us a separate bill for any day with any overage in it. Mom’s a cheapskate, so overages are rare.
Now at age 95 her biggest fear is dying before she somehow extracts the remaining $160K out of the insurance company. Go Mom!
Once a year a nurse from the insurance company used to come out to check on her and confirm she needed the help. At Mom’s current age they take her/our word for it. Everybody at 95 qualifies for needing help.
My wife and I will take care of each other if we are around and able, and if not, 2 of our kids are willing to help us out.
Yeah - we’re a morbid bunch.
It’s a trade off. If you have plenty of funds, then self insure insurance is fine. If you are broke, then it doesn’t matter. It’s the in-between where the hard decisions are made. With that being said, there are some states that have long term care partnerships, where the state will take into account any insurance when it comes to determining when Medicaid takes over. Usually, the family has to spend down to $2k in assets before Medicaid kicks in for LTC. But it you have a LTC policy that paid, say, $125K in benefits then the family only needs to spend down to $125K (maybe $127K?) before the state will start Medicaid. This is important in that it doesn’t completely impoverish a surviving spouse. This doesn’t apply in all states.
Nothing morbid about it. What’s stupid is people pretending they can’t possibly ever become infirm. Then acting all surprised when it happens to them.
It’s rather difficult to get away with killing an elder; it’s not like the authorities haven’t thought of that maneuver.
In my case, with no kids and a great likelihood of outliving my wife, I need to plan for dealing with elder infirmity solo. The least bad answer still isn’t very good.
Morbid spoiler…for decades now I’ve kept “medication” on hand to effect my demise, should I feel it necessary. I periodically update my medication and have never been close to using it. I’m not depressed or anything, merely practical, having seen too many people trapped in situations I’d prefer to not tolerate.
Damn - I keep finding ways you and I are alike. 
a nursing home may cost 10k a month but the median stay at one is only five months.
assisted living is closer to 3-4k a month but you could he there for several years.
I guess my plan is to move to a developing nation if I need long term care. it’s much cheaper than here
I am in the middle of the pack with regards to LTC. We bought policies in the early 00’s when they were relatively cheap. LTC for people who have been successful financially is a bad investment. As is almost all insurance. But for those whose financial plans didn’t work out, LTC can be a literal lifesaver. Or at least a comfortable life extender. Up to you to decide which group you will be in. Our benefits are very good and we bought an inflation rider. We also overpaid until age 65 and after that age the premiums are 50% of the full premium. So the big premium increases of the last few years haven’t been nearly as bad. As it turns out we would have been better off self-insuring, but 15 years ago we didn’t know that. Like all insurance, one has to factor in the benefit of being covered if your financial condition doesn’t turn out well. That security we had for 15 years is a benefit to us and IMHO made the insurance worth it. Besides I get to tell each financial advisor I talk to that I am already covered. It deflates at least half of their sales pitch before they even begin. 