I've looked at LTCi extensively and finally decided not to purchase but still find myself wondering if I should apply for a policy and looking at these threads. It's an incredibly complicated decision that makes it hard to make an across-the-board recommendation, even by looking at gross income or asset level.
1 - A logical starting point might be to assess personal risk by reviewing familial disease patterns.
2 - Then look at your personal family situation to try to determine the impact of an early event.
Here, recognize how difficult it is to look at the stats. For one, they are in flux and often do not measure what you think they do. Some are based on decades-old studies and the data are just that - from
studies that use imperfect models. One new model estimates that while usage is
higher than previously estimated what has NOT been measured is that many actually cycle in and out of care with a portion of that care short-term potentially falling under the rehab covered by Medicare. Not everyone who goes into care never returns to more independent functioning.
http://crr.bc.edu/wp-content/uploads...p_2014-121.pdf
OTOH, some of the higher level of payouts encountered by insurance companies results from folks who have insurance being more likely to use it than estimated earlier, raising costs. Yes, the 2 ADLs must be met. Another issue (alluded to above) is that those in the higher-income quintiles who are most able to afford insurance are statistically
less likely to require it.
3 - If uncomfortable with that risk (or any risk) then figure out what income stream you'd use to pay the premiums.
4 - Ask yourself what impact those payments would have either on (1) current lifestyle (say no travel) or (2) future financial goals - and how you'd weigh the possible loss of those options against the worst case scenario of an early event.
5 - Figure out how LTCi fits into various care scenarios (for regardless, planning for future care is always a good idea and saving even small amounts can provide future options). Look at how policies pay out ... examine possible familial care ... look at how care providers actually charge (minimums etc.) ... how might you actually USE care?
Here's one calculator:
What are my long-term care insurance needs? | Calculators by CalcXML
Also, look to your state or your potential relocation state and understand exactly how Medicaid would work for your possible future financial situation. Know your worst-case scenario. Also try to determine how Medicaid is functioning in your particular geographical area. Understand the options you'd be giving up by any future reliance on Medicaid. Anecdotes can be deadly, here. For all the little old ladies who happily settle into a SNL never to leave again, sharing the facilities with full-pay patients ... there are others who leave for a hospital readmit then find the bed gone (Medicaid no longer covers beyond a certain time period) then cannot locate a satisfactory bed in a good geographical location upon discharge.
6. For those who have some need (potentially that includes us all) and can afford it, another issue becomes the purely financial. Is it "worth it?" If the answer is to provide another potential LTC income stream, then possibly. If the answer is for peace of mind, then sure. But from a purely financial point, the answer appears much more complicated.
First, there IS a certain insurance-risk, that the policy will not be there or there will be a pay-out issue. How to measure that is difficult for what is true today may not be 20 years from there. Perhaps not high enough to turn into a "scare-story" but certainly if the reason to purchase is to mitigate risk it is not unreasonable to recognize that the instrument itself carries risk.
For the "older" policies, a purchaser should come out ahead actuarially - even with policy price increases.
For a brand-new policy, it's a whole different story. There is a reason that so few are being sold today. Mathematically, the insurance company knows, of course, your risk profile and a policy is priced to where the chances are high that you will "lose" not only if you never need LTC
BUT even if you DO. In other words, by the time you require LTC there is a high statistical probability that you will have already prepaid for that care (for the current SHORT-TERM no longer unlimited care policies) in future dollars.
This is NOT really an insurance product where you pool your risk as with life insurance. A better analogy are the prepaid college tuition programs - but with no refund for non-use. Again, LTC is a high-probability event.
Here's a good Kitces article that explains it much better than I could:
https://www.kitces.com/blog/can-incr...6373#more-5601
But you can play around with your own data to see this impact by using a calculator will let you do a break-even analysis.
The actual figures to plug in are tricky due to the difficulty in predicting future policy price increases and the opportunity costs of your payments (and that cost will vary according to the
source of those payments - ongoing income stream vs tax advantage account withdrawals and your marginal rate).
Long Term Care | Compare Policies | LTC Break-Even Calculator
Another cost issue is that in a few states, mainly NY and Illinois (?) the value of a policy may not be measured by a simple calculator. These states provide total asset protection. OTOH, the much lesser asset protection of the remaining states is much less attractive depending on your net worth. Not only is that asset protection limited to the value of the insurance payout - it is last dollar protection. You still need to spend down to qualify for Medicaid.
7. After all that, there are scenarios where counter to standard advice a good case can be made for someone with a low net worth to possibly
buy LTCi. The decision is THAT variable.
This (the above) is pretty much what I've done and so far I'm still not buying even though I still find myself considering it. If I had one of the older policies, I'd be quite pleased with myself. Tough, tough call, though, on the newer ones.
(And finally, all of the above can result in very different answers depending on whether you are married ... single etc. Both the pricing and the use profiles vary.)
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