I have a long term care insurance policy that I’ve been paying about $837/quarter for the premium. I just received a notice of premium increase to $985/quarter. The company has provided me 3 options:
Just pay the increased premium and maintain the same benefit level
Reduce my benefits and reduce the premium, but does not say the premium will remain the same as it was though.
3.Reduced contingent non-forfeiture benefit. In this case, if I understand, I will pay no further premiums and I receive a benefit that keeps the same nursing home payment but the lifetime benefit is limited to the total amount of premiums I’ve paid or 30 times the daily nursing home benefit. It doesn’t seem to say which.
If I don’t pay the increased premium they’ll apply option 3 automatically. I’ve got about 1.2M in my IRA account, a paid off house worth around $900,000, social security benefit of about $3500/mo. and two pensions worth about $3800/mo. Besides that I’ve got about $200,000 in cash and some stocks worth another $150,000. This rate increase has me wondering if I really need the LTC insurance and maybe should just take option 3?
I wonder what Clark’s advice would be here?
It looks like you are in excellent shape to self-pay for any future long term care needs using the income from your holdings. Using the 4% withdrawal guideline for your portfolio figures and excluding your house, you could have an annual income of over $150,00 before income taxes (and before capital gains taxes for the stocks that presumably are in a brokerage account).
Social security $48,000/year, Pensions $45,600/year, IRA 1.2 million = $48,000/year, Cash 200,000 = $8,000/year and Stocks 150,000 = $6,000/year
Having dealt with assisted living and nursing home costs for several family members I have come to look at it more simplistically. I don’t know the terms of your contract but lets say it $150 a day. The increase for this year would essentially pay for itself with 4 days of care. At the last increase (every 5 yrs) in my contract I added up all my payments for the insurance. It was eye opening to see how little assisted living care, let alone nursing home care, that cash would buy. Even with the most recent rate increase my yearly premium equates to roughly only one month of care so, to me, worth the insurance even though I could likely self insure.
Yes, if you feel you need it want the coverage pay the increase. It’s really not that much. But, also get with a financial advisor or insurance consultant to be sure you are getting a good policy and deal. Insurance is a complicated issue with many nuances and you’ll find many sales people know more about sales than they do about the product they are selling. Insurance is all about having Peace of Mind, and that includes peace about the product, who’s selling it and the company you are buying from. If price is your primary factor, one day you’ll be sorely disappointed. Get educated and then look for the best deal. If you are already at that point, I’d pay the increase.
I agree with your thinking, WJB. Take option 3. It will eliminate the yearly stress of wondering how much my LTC insurance will increase this year. My wife and I went through that stress for years, as our premiums went up and up and then increased even faster the closer we got to needing it. It seems to be a giant scam and rip-off, over which the consumer has no control. If your premium increases (the year before you need the insurance) to an amount you can’t pay, then what is this insurance really worth? Zero! There is absolutely NOTHING to stop that happening. It is NOT something you can depend on being there when you really need it. The sooner you get out, the happier you will be. Maybe someday there will be some better options. We canceled and got nothing for our years of payments, except peace of mind. The bottom line is that LTC insurance is only as trustworthy and dependable as the profit-centered company that issued it. They care NOTHING about your future. Only you care about that, so you have to take that responsibility and risk on your own shoulders. There are no true safety nets in this case.
I’m moving into assisted living tomorrow, and the costs are astronomical! I’m looking at my LTC policy, and it pays a large amount, but not nearly all. Will seriously dig into my savings.
Many thanks…! If not for my son, I could never have done it. 40 years of “stuff” to dig through and purge. Worse, we used to live in Taiwan, so that entire household moved in here…Two houses in one…scheesh
At the risk of “poor me” the worst part is being so helpless. An active guy for decades and now use mostly walkers over 15-20 feet. I really REALLY hate this…!
Such is life. When I was young and able, preparing for the time when I would become feeble was very low on my to-do list. But once that time arrived, I realize all the things I should have done to prepare for a different, dependent life. I did buy long-term insurance along the way, but eventually canceled it when I realized that it was nearly worthless.
A paid off house, savings and retirement accounts are your long term care insurance. Yes, care is expensive. Let’s say assisted living is $5K per month. You could live for 10 years on $600K. Double it to $10K for full nursing home care and you can live for 5 years. Average nursing home stay is under two years. Be self-insured.
Thanks for all the discussion. Our house, savings, retirement and investments are also earmarked for our three kids, but not until we’ve both passed. I told them not to expect anything though. They need to get on with their own lives and not wait for an inheritance.
I’ve been approached with LTC investment annuity. A lot up front but it cover both my wife and I
If the long term insurance decides to close it’s doors, you will need to shop around
Nothing says they have to be loyal. they must fulfill their current coverage but that ends if they don’t offer renewal
You did not mention the terms of your policy, but we have been paying for more than 30 years. Our policy states that we are now entitled to 75% of our coverage if we stop paying the premiums, a nice option, and we can self insure the amount the LTC doesn’t cover. No easy answers, every policy is different. The newest LTCs allow a spouse to use his/her spouse’s coverage in case of a death. Some combine life insurance with LTC. Ours won’t let us switch to these new terms.