Long term care, strange option

[UDRogue]

My husband and I are approaching 60 and it's time to buy long term care insurance. We've looked at two options and were given these prices:

Option 1. $4700 per year ordinary "term" style. If you don't need it, it's gone. This is a discounted group rate offered by our Credit Union.

Option 2. A one time premium of $100,000 and you are covered for life. If you never use it, the money (plus interest) goes to your estate.

We have about $1 million in retirement accounts but we are $90,000 in debt with our "on budget" accounts (credit cards and home equity line). So we don't have cash around for option 2. But buying option 1 right now would be a strain also because of our tight monthly budget.

Normally we wouldn't cash in our retirement accounts for anything, however, long term care might be the exception. It's what we've been saving it for all our lives (to take care of us in old age). If we convert $100,000 of our retirement investments to that LTC policy, this protects the remaining $900,000 for the other spouse to live comfortably. And if neither of us needs it, the kids will get the premium back when we die.

On the other hand, option 1 will protect the entire $1 million - initially. It is likely one or both of us will live at least 20 more years. Option 1 will end up costing more than $100,000 over that time and who knows how much they will raise the premiums. If we never need it, it will be money thrown away, plus we will need to pay the yearly premiums after we retire and are living on a much reduced monthly budget.

For that reason I am leaning to option 2. But I want to gather opinions and any experience or knowledge any of you want to share. Thanks in advance.

[QuarterMillionMan]

I took this picture off of my TV when watching Fox Business News one day in 2014. It's pretty much in line with what you've come across. As for which option is best for your needs I'm not sure. Both options seems expensive but at least you have the resources to obtain coverage, others are not as fortunate and forego getting any LTC insurance coverage but get wiped out financially when and if they do need it. A few posters have indicated this very same scenario of their loved ones not having LTC insurance coverage and taking a big hit as a result of not having any coverage and needed nursing facilities which incurred insurmountable bills.

[97guns]

im not familiar with ltc but option 2 looks good especially if the estate gets some of it back, at $4700 a month it takes 20 years to make up $100K, that will put you at 80 by the time you break even on the other option. if you start using it at 75 or under it might make sense to go with option 1

[UDRogue]

A few posters have indicated this very same scenario of their loved ones not having LTC insurance coverage and taking a big hit as a result of not having any coverage and needed nursing facilities which incurred insurmountable bills.

I know some people in this situation and it's terrifying.

[UDRogue]

im not familiar with ltc but option 2 looks good especially if the estate gets some of it back, at $4700 a month it takes 20 years to make up $100K, that will put you at 80 by the time you break even on the other option. if you start using it at 75 or under it might make sense to go with option 1

That's exactly what I'm thinking. It's a gamble. Because we cannot know the future. If we did know it and I knew we would need it in one year, we'd go for Option 1 of course. But if we never need it, option 2 we get the money back. But the problem is coming up with the cash to buy option 2 in the first place. Cashing the IRA will result in a huge tax hit.

I could take the tax hit number and put time value on it, and compare that to the annual premium of option 1. Our income once we start tapping the IRA will vary slightly depending on its starting principle at retirement, I could consider that and run numbers.

But in the end those numbers will be insignificant compared to the big variable - WHEN if ever, will we need the care? And for how long?

[97guns]

my dad was in a care home for the last 6 months of his life, no insurance, paid out of pocket. it was just over 6K a month so he burned through 36K in that time, could have been a whole lot more but he had always been independent and we waited until he absolutely needed 24 hour care before we put him in.

if he had insurance i would say he might have been there 1 1/2 years instead of the 6 months which would have came out to $108K

[snafu]

What do you get for your money if you need LTC? What health concerns thus far? What are the hereditary/family history for aging issues? What annual income do your figures project for the period 65-75? Do you see yourself selling your home and downsizing? Moving elsewhere? What factors in Advanced Care Directive? There are so many factors to consider in LTC.

Isn't it somewhat like car insurance? If you smash into someone's e vehicle it's important to have the best possible coverage. How much have you paid in auto insurance since your first auto? How much has the insurer paid out on your behalf? Is it better to have a major or tiny deductible? How much will your insurance pay out if your car is a write-off?

[we've a different medical system so it's hard to assess costs for care]

[UDRogue]

These are all great questions. I'm beginning to find out more information and seeing that it is a more complicated question than I thought. I'm quite shocked at some of the things I'm finding out. None of it good news.

[GrimJack]

Option 2. A one time premium of $100,000 and you are covered for life. If you never use it, the money (plus interest) goes to your estate.

This is the option that my mother took; she moved into low-care facility and as she gets older (she will be 90 shortly) and more infirm, she can move to assisted living, then to hospice. I forget how much she paid up front but it was about 100k and her 2-bdrm is about 4k/month. My sister and BIL researched the place with mom and they were pleased with it. Mom had to move in even though she did not get the exact apt. she was looking for (when what she wants comes up, they will offer it to her first) but the place does not allow anyone to just go directly to assisted living - they have to have a place there then they can progress from independent living to assisted.

[UDRogue]

This is the option that my mother took; she moved into low-care facility and as she gets older (she will be 90 shortly) and more infirm, she can move to assisted living, then to hospice. I forget how much she paid up front but it was about 100k and her 2-bdrm is about 4k/month. My sister and BIL researched the place with mom and they were pleased with it. Mom had to move in even though she did not get the exact apt. she was looking for (when what she wants comes up, they will offer it to her first) but the place does not allow anyone to just go directly to assisted living - they have to have a place there then they can progress from independent living to assisted.

My husband's mom is in a place like that. I think she paid $90,000 up front, then moved into a 2 br duplex. When she needs assisted living, she can move to an efficiency apartment and if she needs full time care she can move to the nursing facility section. The place has a dining hall which serves good food and she has been very happy there in retirement.

I guess buying in to a community like that is an option. The one I was looking at is just a policy, not connected to a specific place.

But part of this planning is deciding, do we stay in this house? If so we need to renovate it. Can we afford that? Can we afford a large lump sum premium now? If we buy traditional will we be able to afford the premiums year after year, especially if they keep raising them?

I don't feel good about any of these options. I think what I need is some kind of planning expert who can help my husband and me sort it all out. NOT an agent who sells LTC insurance, of either types, or a planner who sells investments, but a financial consultant who can help us see the whole picture.

[jIM_Ohio]

My husband and I are approaching 60 and it's time to buy long term care insurance. We've looked at two options and were given these prices:

Option 1. $4700 per year ordinary "term" style. If you don't need it, it's gone. This is a discounted group rate offered by our Credit Union.

Option 2. A one time premium of $100,000 and you are covered for life. If you never use it, the money (plus interest) goes to your estate.

We have about $1 million in retirement accounts but we are $90,000 in debt with our "on budget" accounts (credit cards and home equity line). So we don't have cash around for option 2. But buying option 1 right now would be a strain also because of our tight monthly budget.

Normally we wouldn't cash in our retirement accounts for anything, however, long term care might be the exception. It's what we've been saving it for all our lives (to take care of us in old age). If we convert $100,000 of our retirement investments to that LTC policy, this protects the remaining $900,000 for the other spouse to live comfortably. And if neither of us needs it, the kids will get the premium back when we die.

On the other hand, option 1 will protect the entire $1 million - initially. It is likely one or both of us will live at least 20 more years. Option 1 will end up costing more than $100,000 over that time and who knows how much they will raise the premiums. If we never need it, it will be money thrown away, plus we will need to pay the yearly premiums after we retire and are living on a much reduced monthly budget.

For that reason I am leaning to option 2. But I want to gather opinions and any experience or knowledge any of you want to share. Thanks in advance.

Is option 1 a straight up LTC policy or a rider on an annuity or life insurance contract?
option 2 sounds like life insurance, don't even consider using life insurance for LTC.

Make sure the policy you get is a partnership policy. If the sales rep has not mentioned that, then find another salesperson.

If you want a referral, I have a great LTC specialist I trust which has access to all policies and talks people through them. He talks about the state partnerships as part of the education process. This is VERY important.

[UDRogue]

Is option 1 a straight up LTC policy or a rider on an annuity or life insurance contract?
option 2 sounds like life insurance, don't even consider using life insurance for LTC.

Make sure the policy you get is a partnership policy. If the sales rep has not mentioned that, then find another salesperson.

If you want a referral, I have a great LTC specialist I trust which has access to all policies and talks people through them. He talks about the state partnerships as part of the education process. This is VERY important.

Option 1 is straight LTC policy.

Option 2 I think you are right it is what they call "hybrid" which means when we die it is life insurance but if we need long term care it pays, but I've been reading about these and I don't like some of the things I'm finding out, like maybe the benefits decline.

I'll keep your specialist in mind, I found someone in my state I'm talking to now, she comes highly recommended and I'm going to see what she can do for us. But I think I'd be interested in maybe talking to your person too.

[jIM_Ohio]

Option 1 is straight LTC policy.

Option 2 I think you are right it is what they call "hybrid" which means when we die it is life insurance but if we need long term care it pays, but I've been reading about these and I don't like some of the things I'm finding out, like maybe the benefits decline.

I'll keep your specialist in mind, I found someone in my state I'm talking to now, she comes highly recommended and I'm going to see what she can do for us. But I think I'd be interested in maybe talking to your person too.

My specialist can sell through your insurance agent, and help you with the various policy types, so if you need help, just ask.