Is long-term care insurance a good idea?

Ideal age to buy LTCI is mid40s. Every decade after will be significantly more. A checkered history on LTCI so it’s good that you are skeptical.

HUGE exiting of LTCI companies 2000-2015: Nationwide 2001, RiverSource 2003, Aetna 2006, UNUM individual 2009 & group 2012. 2010 MetLife, John Hancock individual, Equitable, all exiting. Prudential individual 2012. Plus many many smaller insurers. Even Genworth, the market leader for LTCI forever, had challenges and stopped new underwriting in 2019. If you have one of these LTCI policies, it’s still in force but the Company does no new policies & servicing usually by outside company. The worst cases scenario is that the insurer enters receivership and your States Guaranty Association takes over. It’s rare.

Why? Welcome to my Ted Talk…. to start, let’s go back last millennium. LTCI created late 1960s to deal with what newly created Medicare did not cover. It’s why LTCI initially started at 100 days as 100 is endpoint for Medicare rehab benefit, and also why LTCI was abt skilled nursing care and those staffing standards as 3 day hospital stay needed for Medicare to cover rehab. Big idea that LTCI did was it covered custodial care which Medicare did not AND skilled beyond Medicare’s 100. LTCI filled this gap. LTC = being in a NH. Insurers were able to project an endpoint for LTCI as it’s a 2 - 2.5 yrs avg from NH entry to death & abt 50% died before ever qualifying for LTCI. Maybe 50% would ever file & those that did abt 800 days of policyholder payout (Medicare did first 100). A definable risk & profitable. Policies sold uncapped (long tail) or 5-6 years coverage as probability was only half ever would even start payout. Risk totally fine.
HOWEVER….
1980/1990 Medicare & Medicaid changed from NH focused to having AL + community based programs as well. LTCI followed and covered inhome + AL. Problem was old risk equation didn’t work anymore. Rates had to go up and assessment got tighter. Often when LTCI asked a State Insurance Commissioner for increase they were able to get it perhaps less than the requested, but done, Then in 1996 HIPAA passed. It’s not just the privacy statement that’s “HIPAA” but was Health Insurance Portability & Accountability Act which required standardizations for all LTCI policies. All insurers had to review all products and adjust accordingly.

With this as a backdrop, big insurance co had to take a serious look at the LTCI division as to if worthwhile. 1990 380K individual policy sold, in 2000 755K sold. # seem good even if folks were living longer and more regulations. Then the recession hit: lower interest rates & voluntary lapse rates fell. State Insurance Commissioners didn’t easily allow for rate increases, which the insurance companies needed to be level funded. Plus HIPPA and dealing with independent insurance agents. (fwiw for independent agents they get 40-60% of first year premium then 5-15% for all subsequent years on average). All signs moving in the wrong direction to keep doing new LTCI policies. Majority stopped all new underwriting.

NWMutual, NYlife, MassMutal still sell LTCI. Realistically just how they have their policy options and terms and if that can work for you and you can afford it, is really something to suss out with your financial advisor imho. The current trend is “Hybrid policies” a type of whole life with a LTCI component. They seem to be structured around a doing a single large sum to set up the policy which can be used later for paying for care or left to your beneficiaries if you predecease needing a facility. I know someone who has gotten one, he had a company buy out so got a pile of cash so putting $$$$ into a hybrid with no future premium due was fine as not needed for living costs. If you are on a fixed income, it may be challenging to afford LTCI premiums over time. Good luck in your decision making!

Not worth it now. We took it out at 40. My husband is in AL now and it’s dementia. In this level of care it pays $7200/month if and when he goes into SKILLED nursing it will pay $12,000/month. Yes, premiums have increased over the years. But in spite of having this, I still pay $9000/month. It really is a shame what people have to put up with. The only upside is once we start accessing the plan, I no longer have to pay his premium.

I learned here from other posters that some require any care at a facility be a facility that always has an RN on duty .
That can save the insurance company from having to pay for assisted living , as most don’t have RN’s always on duty.
This results in some only covering SNF care in some areas depending on where you live. This is by design by the insurance to get out of paying .

Make sure you read the contract . I’m sure some don’t cover home care and others do as well .

I’ve also heard of some insurance closing ( went out of business ) , people lost coverage they paid for . Do your research .

If you do choose to do it, read the fine print and all requirements CAREFULLY before you sign on the dotted line. My grandparents bought one - well - I have no idea when they actually bought it. My mom hazarded a guess that they had been paying on it for like 30 years. I honestly don't know that they ever really read the whole thing - which was surprising for them.

But the long and the short of it was that it didn't kick in until after a "vetting" period - which was 90 days after initial care started. For facility care, that would have been 3 months of course. My grandfather was long since passed, but my grandmother needed in home care - which was covered - but after the same vetting period - and she only needed care a couple of days a week to give my mom a break. So 90 days would have taken longer than she actually lived once she needed that level of 24/7 care. We opted instead for me to work from my grandmother's house on the days mom needed to get out of the house.

It was a shame because they invested so much into it and got nothing in return.

Make sure you know the rules and requirements and whether or not they meet the needs you might potentially have. I think that is the most critical point to make sure it even does what you need it to do when you are ready to use it.

I am surprised the anyone in their 70's could get LTC insurance. I would think the cost would be prohibitive. I purchased mine about 12 years ago. It is like paying another mortgage.

Long-term insurance is well worthwhile, especially considering this administration's cuts to Medicare. But p if you are that old it is apt to be prohibitively expensive, but it is probably worth checking out how expensive. It truly is something you should sign up for at a much earlier age.

I bought into a plan some time in my 40's and it was paid up shortly after I retired. I'm now 80 and the insurance is now picking up the roughly $10K a month charges for my wife's care; my savings could easily run out otherwise.

Based on past comments about reading the fine line of the contract and finding payment limits far below what is needed in today's facilities, full payment cannot occur until a time period of payments, or if care is first needed at home and payment only comes with facility placement, I suggest you find a good financial advisor and invest in their recommendations. But you should have started this around age 55 or so. My mom and aunt did this 25 years before needed and assigned me as trustee. It was a trust . They made more than 8% each year. The plan was to take out, if and when they needed to start in IL and then progress. The nice part is when they both passed away, their trust went to the beneficeries. One of them was me. That portfolio still did well through COVID to today. I even kept the same financial advisor. Do not think of stocks as a losing endeavor. They had about 10 invested funds in stable money markets and some individual stocks.

You definitely need to read the fine print on LTC. My mom lived to be 103 yrs. Her LTC ran out at age 100 yrs. Who would have expected that? Mary

Long term care has gotten extremely expensive. 30 years ago at age 50 I paid $1,700 per year premium which covers me for $300 per day for life after first 100 day excludable This year the premium is over $8,000 per year and by 2028 the premium will be over $19,000 per year according to the insurance company for the same benefits. They say I can lower the benefit for a slightly reduced rate but with costs going higher I need increased benefits not lower benefits By 2028 if I’m still living I will be 85 years old
Medicare does not pay for nursing homes or Assisted Living but if you have no money you can apply for Medicaid for nursing home but not for Assisted Living. Poor people get much more benefits than people with money. I suggest you see an Elder Attorney for advice. If I cancel my insurance I will lose everything I paid into it.
if I had to first take it out now I definitely would not but I don’t want to lose everything I put into it. Most insurance companies discontinued selling these policies because people are now living longer and they are losing money.

You've waited too long to get LTC. You should have started saving in an interest-bearing bank account or mutual fund a couple of decades ago. But since you didn't, start saving now.

Dealing with the LTC insurance company during my husband's illness has been a nightmare. They delay and delay, hoping the insured will die before they have to pay. It was only for a total of $15,000. That didn't even pay for two months of his memory care facility.