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LTCI: yes or no?

Home Insurance LTCI: yes or no?

  • Avatar G 
    Participant
    Status: Physician, Small Business Owner
    Posts: 1641
    Joined: 01/08/2016
    medical school scholarship sponsor
    15% of retirees spend an enormous amount, more than $250,000 

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    How is this an enormous amount?  If you have $2.5M, it’s 10% of your net worth.

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    The Vanguard study said more than $250,000…. it did not specify the upper limit nor the average. The risk is with “long-term” LTC rather than “temporary” LTC, such as post-hospitalization SNF or rehab care, which lasts weeks-months and is often paid by Medicare, to a significant degree.

    At $1M or $2M in costs for long term care or memory unit care per spouse, then I might be interested in insuring against that risk.

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    You are right here… the commonest cause for long-term/ongoing LTC is dementia. Others that rank right up there are stroke, Parkinson’s, severe osteoarthritis. This is scary to me a physician because these are very common conditions, not rare diseases.

    The median nationwide cost for a pvt nursing home room in 2016 was $92,000. It varies by region and “a private room in a high-end nursing home can cost 50% or more than the average for a particular location”. Take 5 years in there and you are down $500k. 10 yrs and it’s a million. And about 16% of people need 2 yrs or more of LTC, that’s not an insignificant number.

    Then again, if I’m that far gone with no realistic hope of recovery, I might hope my family would put me out on an ice flow.  Rapid onset lead poisoning or a little too much propofol might be more economical and more humane at that point.

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    This is easier said than done. These are chronic conditions, not conditions where CPR/DNR status or feeding tube is being acutely considered or death is imminent. That would actually make it simpler. Medicare often pays for hospice care.

    *I have quoted the Vanguard Mercer Study from 2018 for this information.
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    Perhaps I am too flippant with these discussions, but I don’t really seeing it being a problem for lean-FI or folks with a WCI type approach.  Remember, if you are in an LTAC, you’re not vacationing in Europe or eating out at the fancy restaurant in the city.  In fact, unless wife is at home and still living large, would I be spending anything?  So…300k/yr/couple x 20yrs for the fancy option as worse case scenario?  Extremely unlikely.  A couple million for extended stay LTAC?  Probable, but that sounds like retirement spending anyway….

    #229267 Reply
    Avatar Infinity 
    Participant
    Status: Physician
    Posts: 52
    Joined: 05/25/2019

    But there’s a 5% increase rider on the benefits, so after 40 years, the benefits are much higher than the initial $365k. Does this change anything?

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    Please clarify: When does 5% increase rider on the benefits start?  Now or start when he starts taking his benefit in 40 years.

    If it starts now, insurance would go bankrupt.  If it starts in 40 years, it would not mean that much for him.

    #229294 Reply
    Avatar jhwkr542 
    Participant
    Status: Physician
    Posts: 1209
    Joined: 02/15/2016

    It starts now. But the premium is subject to increase. Over 40 years, it has to increase. How much and when is anybody’s guess

    #229335 Reply
    Avatar Physician Finance Basics 
    Participant
    Status: Physician
    Posts: 27
    Joined: 06/02/2019

    Any insight into what more than 2 years means? The difference between 2 years and a day vs 5 years is quite significant

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    From the Vanguard Study:

     

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    Blogging and videocasting about the basics of personal finance at http://physicianfinancebasics.com

    #229759 Reply
    Avatar Physician Finance Basics 
    Participant
    Status: Physician
    Posts: 27
    Joined: 06/02/2019
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    Perhaps I am too flippant with these discussions, but I don’t really seeing it being a problem for lean-FI or folks with a WCI type approach.  Remember, if you are in an LTAC, you’re not vacationing in Europe or eating out at the fancy restaurant in the city.  In fact, unless wife is at home and still living large, would I be spending anything?  So…300k/yr/couple x 20yrs for the fancy option as worse case scenario?  Extremely unlikely.  A couple million for extended stay LTAC?  Probable, but that sounds like retirement spending anyway….

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    True. In bringing up these numbers, my purpose is not to vote for LTCI but to increase awareness as part of retirement/FI planning.

    #Knowledgeispower

    Blogging and videocasting about the basics of personal finance at http://physicianfinancebasics.com

    #229765 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 2573
    Joined: 09/18/2018

    “But the premium is subject to increase. Over 40 years, it has to increase. How much and when is anybody’s guess”

    Not true. The premium are set in 5 year increments.
    You can get what your premiums will be at any age.
    The younger you purchase, of course the longer premium payment stream at a lower cost. There is math behind the premiums, you just may not like it. Cheers.

    #229782 Reply
    Avatar jhwkr542 
    Participant
    Status: Physician
    Posts: 1209
    Joined: 02/15/2016

    Not true. The premium are set in 5 year increments.

    Where are you getting this? Per the contract, “…XXX Company cannot change any of the terms of your policy on its own, except that, in the future, IT MAY INCREASE THE PREMIUM YOU PAY.

    The all caps/bold is actually in the contract.

    #229798 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 2573
    Joined: 09/18/2018

    My insurance has the same clause. But my insurance provides the schedule that applies to my contract. That is the policy and procedure of each insurance company.
    If I want to change coverage, new rates apply. If I hit the next 5 year band, the old table applies.
    Unum policies. They have never varied from that approach.
    Will they in the future? Who knows. This was employer policies that we are keeping for our purposes. Just one anecdote of what is actually occurring. The first increase was what prompted my inquiry. Might not get the information looking for a new policy.

    #229811 Reply
    Liked by jhwkr542
    MPMD MPMD 
    Participant
    Status: Physician
    Posts: 2265
    Joined: 05/01/2017

    Any insight into what more than 2 years means? The difference between 2 years and a day vs 5 years is quite significant

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    From the Vanguard Study:

     

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    wow thank you for posting that, what a fascinating graph.

    to me there are certain things i want to do for my kids (debt free education, solid start on life, some inheritance) and things that i’m going to do for myself (comfort in retirement — especially in infirmity) that are going to affect how much they end up with.

    if you’re not going to tap the nest egg to make sure you are cared for at the end of your life then what would you possibly tap it for? my grandparents retired with about a milly in the bank and between their care needs there’s going to be basically nothing left. but… that’s… what… they… saved… for…

    #229827 Reply

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