Six Ways to Buy Long-Term Care Insurance Right

My post titled Toileting and Retirement, Should I Purchase Long-Term Care Insurance? was more than enough to get me thinking about buying Long-Term Care insurance. But this is a subject I don't know much about, so I'll need to do some research. Thankfully enough, the research found me -- in the form of this piece form MoneyWatch. It lists the six ways to buy long-term care insurance as follows:

1. Buy group insurance, if your employer offers it.

2. Be prepared for your policy’s premiums to rise.

3. For individual coverage, choose a large, well-diversified insurance company, rated no lower than A.

4. If a big insurer won’t take you, go for the small insurer anyway.

5. Consider hybrid products (life insurance policies or annuities that let you divert part or all of the benefit to long-term care expenses).

6. Cut the cost of a policy while still providing yourself with a reasonable safety net.

My thoughts on these:

• I wish my employer did offer it, but I have no such luck. I'm guessing most companies don't either.
• I was talking to a financial planner friend the other day and he said that insurance companies aren't allowed to raise the price of your policy, but they can raise the price of the policy class your policy happens to be in -- which basically gives them the ability of raising your price.
• Of course you'll want to go with a company that's going to be around when you need the insurance -- just like when you buy any insurance product.
• Still a lot of ins and outs for me to learn such as when is the best time to buy, what are the options I want/need and which ones I don’t need, how much coverage is suitable, etc.

Anyone else thinking through these issues as well?

Comments

[Jackie]

I was just talking about this earlier this morning with my husband, so this post is very timely. I'm kind of at the same stage as you -- getting ready to do some research. I do know that my mom had a policy and it was extremely helpful when she got cancer at a young age. What many people don't know is it will also pay for care on your home; not just nursing homes.

[Apex]

Does anyone know if employer sponsored group long term care insurance is employee owned? For example, group life insurance generally is not. You can continue to pay the premium and get the life insurance benefit while you are employed but if you leave you don't have a policy that you can take with you and keep paying premiums on to continue the policy on your own.

Is this different for group LTC? Because if it is not, if it is such that you cannot leave the company and continue your LTC policy on your own, then employer sponsor group LTC insurance is almost worthless as 98% of people will need it after they leave the company.

Does anyone know how this works for LTC group insurance?

[cj]

they offered long term care insurance through my employer and there was a lot of debate about whether or not it was worth it. i don't know how most people chose, but i ended up not getting it. i'm sure i can always change my mind later, for a higher price of course. i think the arguments against it were too persuasive for me at my current age. i would be very interested in reading your research.

[Apex]

@cj,

As per my previous comment, do you know if you could keep the policy and continue to pay premiums on your own if you left the company?

[Janet]

"Of course you'll want to go with a company that's going to be around when you need the insurance -- just like when you buy any insurance product." --
Yes, this is a huge issue, especially on the heels of MetLife pulling out of the LTC market. I wonder if other insurance companies will follow suit?

[MC]

These policies are way pricey and even if you buy one when you're relatively young and healthy, you have absolutely no guarantee that the price won't go so high you can't afford it before you might have to use it.

Plus, even in the best case scenario that you need the policy and it pays for your care, you'll still have to suffer through a debilitating decline and die anyway.

Instead, I think I'll invest in a fitness regime now, and then I'm planning on taking up sky diving when I get really old.

Spending a fortune just to waste away painfully at the end isn't my idea of a good investment.

[jeffinwesternwa]

Like ANY insurance, you don't insure 100% of need but, the "difference" ...that needing LTC will provide. As an agent/planner I found too many folks overbought LTCI. Get a long elimination "deductible" to use some of your assets first and cover only a reasonable amount, maybe $100~ a day. Lifetime benefits rarely pay out so 3, 4 5 years of coverage seems prudent. Be sure home health care is included. Buy, top rated companies. You can fund the difference from pensions, social security, assets that you aren't enjoying anyway!

[Barbara]

Most group LTCi is paid directly by the employee, so then it is completely portable. There can be a discount on the policy, but I often see there is no guidance on the purchase. Too many folks fall for the "GPO" = guaranteed purchase option = you pay at least 15% more premium every 3 years for inflation. Better to get the inflation built in in the first place.
I have seen hundreds of LTC claims. I have NEVER had the claimant's kids ask,"Can we wait 3 months for help for Mom?" They want it pronto! Get a waiver on the wait for home care or 20-30 day max elimination. If you are young (under 65), the difference in cost is minimal. When the cost of care has doubled and doubled again to $1000 a day in 30 years, you will hate a $90,000 deductible!
Go to a Specialist in LTCi. Someone who has seen LTC claims and has insured a lot of folks. There are a lot of P&C and FA's selling a couple policies a year, and you need someone w/ better knowledge of this product.
A specialist will design the plan around your concerns and budget. Check out AALTCI.org for local members.

[brooklyn money]

Has anyone ever heard of buying a policy and then paying it off in say a ten year period, so that you'll always have it? My insurance agent suggested that to me. I thought I was too young to start thinking about this (in my 30s), but he (of course) said no.

[sammysosarules]

No LTC care here. I also don't have kidnapping and ransom insurance. Heck, I don't even have life inusrance. Seems like another oddball insurance to me. As much as we like to protect ourselves, we don't need to go overboard.

[Barbara]

Ten year period-
If you have a lot of income or a lump sum you do not need, then that may make sense. At 30, it will be a lot less than at 50-60. A 10 yr paid up can be a good thing to keep a prized employee when the premium will be tax free for a corporation. You are essentially paying the full premium for your probable lifespan up front. If it is too much one year before it is paid in full, you lost all the extra paid in (except your original low age rate) and you will still have to revert to and pay the regular yearly premium.
Folks could wind up on claim during payout or soon after the paid up date, and could have paid much less annually. Premiums will usually stop anyhow during LTC need. Each plan is very dependent on your situation. Be sure to speak w/ a specialist...