Why LTC insurance falls short for so many - KFF article (conversation, spouse)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
The biggest problem with LTC is that it cannot possibly keep up with the cost of care by the time on needs it. My mother-in-law went into assisted living in 2002, and it was $3,800/month, and was there 13 years until she passed. Today that same place is charging $7,400....
Quote:
Originally Posted by kavm
LTC is paying a daily and lifetime max. So, if the prevailing costs exceed that, it does not cost the insurance company much. And, if the now larger cost seems too high compared to that in the past, guess it is better to have 50% covered rather than self-pay 100%.
Most policies either have an inflation protection built in or periodically offer increases in daily max, etc. at a higher premium. That's what happened to us - and we opted to pay additional premium for the higher daily max.
I bought my policy in 2008 when I was 52. Like you, I get an option periodically to increase my coverage with my premium notice; however, this year I also received an additional one-time option to cancel my policy and receive a lump-sum payment.
When my coverage began 15 years ago, my initial annual premium cost was $1,043, and it had increased to roughly 2,000 by 2023. For 2024, I was given 4 options:
1. Keep my present benefit of $340/day ($10,200/month) and incur a 15% increase to ~$2,300/yr;
2. Increase my benefit to $394/day ($11,820/month) and incur a 50% increase to ~$3,000/yr;
3. Convert to a paid-up certificate which would limit me to a lifetime benefit of $22,904, which represents the sum total of all my premium payments to this point; or,
4. Receive a lumpsum payment of $29,400 to cancel my policy.
Obviously, if I had wanted to stop making premium payments, option 3 made no sense given that I could receive the $22,904 plus an additional $6,500 if I cancelled the policy.
I ultimately chose to continue the policy at its present benefit rate for this year, but I found it interesting that the insurance company is apparently so desperate to get out from under the policy, that not only would they refund all the money that I've paid into it for 15 years, but they also even added a 28% sweetener to entice me to drop it.
As I mentioned many times, I am not intetested in LTC in the US. I would prefer Thailand even if the cost of nursing home there weren't 1/4 of the cost in the US. My approach is again my annuities - while I am functional, I am using them to cover my normal life; if I lose ability to function, I'll use them for LTC. I prefer assets that I can actually use at the same time while they are increasing in value.
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,072 posts, read 7,505,741 times
Reputation: 9798
Quote:
Originally Posted by MadManofBethesda
I bought my policy in 2008 when I was 52. Like you, I get an option periodically to increase my coverage with my premium notice; however, this year I also received an additional one-time option to cancel my policy and receive a lump-sum payment.
When my coverage began 15 years ago, my initial annual premium cost was $1,043, and it had increased to roughly 2,000 by 2023. For 2024, I was given 4 options:
1. Keep my present benefit of $340/day ($10,200/month) and incur a 15% increase to ~$2,300/yr;
2. Increase my benefit to $394/day ($11,820/month) and incur a 50% increase to ~$3,000/yr;
3. Convert to a paid-up certificate which would limit me to a lifetime benefit of $22,904, which represents the sum total of all my premium payments to this point; or,
4. Receive a lumpsum payment of $29,400 to cancel my policy.
Obviously, if I had wanted to stop making premium payments, option 3 made no sense given that I could receive the $22,904 plus an additional $6,500 if I cancelled the policy.
I ultimately chose to continue the policy at its present benefit rate for this year, but I found it interesting that the insurance company is apparently so desperate to get out from under the policy, that not only would they refund all the money that I've paid into it for 15 years, but they also even added a 28% sweetener to entice me to drop it.
LTC insurers must set aside reserves for your purchase. In a low interest environment the insurance co couldn’t make enough to cover inflation. And in the current high interest environment they have sell their current holdings at a loss.
Last edited by leastprime; 01-24-2024 at 01:58 PM..
I bought my policy in 2008 when I was 52. Like you, I get an option periodically to increase my coverage with my premium notice; however, this year I also received an additional one-time option to cancel my policy and receive a lump-sum payment.
When my coverage began 15 years ago, my initial annual premium cost was $1,043, and it had increased to roughly 2,000 by 2023. For 2024, I was given 4 options:
1. Keep my present benefit of $340/day ($10,200/month) and incur a 15% increase to ~$2,300/yr;
2. Increase my benefit to $394/day ($11,820/month) and incur a 50% increase to ~$3,000/yr;
3. Convert to a paid-up certificate which would limit me to a lifetime benefit of $22,904, which represents the sum total of all my premium payments to this point; or,
4. Receive a lumpsum payment of $29,400 to cancel my policy.
Obviously, if I had wanted to stop making premium payments, option 3 made no sense given that I could receive the $22,904 plus an additional $6,500 if I cancelled the policy.
I ultimately chose to continue the policy at its present benefit rate for this year, but I found it interesting that the insurance company is apparently so desperate to get out from under the policy, that not only would they refund all the money that I've paid into it for 15 years, but they also even added a 28% sweetener to entice me to drop it.
It’s clear many LTCi companies want out of the business. What’s to stop them from raising rates to $5k or $10k a month?
The biggest problem with LTC is that it cannot possibly keep up with the cost of care by the time on needs it. My mother-in-law went into assisted living in 2002, and it was $3,800/month, and was there 13 years until she passed. Today that same place is charging $7,400. My wife and I have had LTC policies since 1997, but the amount we will get is not going to go very far when we need it. Currently our combined income would barely cover the cost for one of us. The policy will help for sure, but if we both need to go into care it will be tough.
Sadly, most people who end up in those facilities for an extended period are going to end up bankrupt.
As I mentioned many times, I am not intetested in LTC in the US. I would prefer Thailand even if the cost of nursing home there weren't 1/4 of the cost in the US. My approach is again my annuities - while I am functional, I am using them to cover my normal life; if I lose ability to function, I'll use them for LTC. I prefer assets that I can actually use at the same time while they are increasing in value.
Thailand's going to wise up pretty soon and start charging comparable rates.
LTC insurers must set aside reserves for your purchase. In a low interest environment the insurance co couldn’t make enough to cover inflation. And in the current high interest environment they have sell their current holdings at a loss.
reserves are kept by law in most states in cash or very short term instruments. the money invested for current claims isn’t in much that would have losses
The biggest problem with LTC is that it cannot possibly keep up with the cost of care by the time on needs it. My mother-in-law went into assisted living in 2002, and it was $3,800/month, and was there 13 years until she passed. Today that same place is charging $7,400. My wife and I have had LTC policies since 1997, but the amount we will get is not going to go very far when we need it. Currently our combined income would barely cover the cost for one of us. The policy will help for sure, but if we both need to go into care it will be tough.
It won't happen in USA without a sea change in political thinking, but only way for this country to have any shot at reasonable LTC policies is to follow lead of other nations and make it part of Social Security.
Obama and democrats wanted LTC as part of "Obamacare" but fear of costs (and GOP using that as yet another club to beat them about heads with over ACP), which to some extent is a vaild.
Thus make any said scheme a hybrid between federal and state governments with perhaps private sector involvement.
It’s clear many LTCi companies want out of the business. What’s to stop them from raising rates to $5k or $10k a month?
State governments. Companies need to request approval of their proposed rate increases.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
