long term care insurance

[kork13]

Have you factored inflation into your math as well? I assume the benefit is not inflation protected .... And not incorporating escalating premiums is foolish -- it's a guarantee that it'll increase dramatically as you age.

[QuarterMillionMan]

I knew someone would be fixated on future increases in premiums & inflation, fair point. So for ease of calculation I used examples of 5% inflation per year and 5% increases in premiums per year, both could be more or less for either inflation or increases in premiums but for simplicity’s sake I used these amounts for a total of 10% hikes overall per year. LTC insurance companies tends to increase premiums maybe once every 5 years by maybe 25%. For illustrative purposes I used 10% hikes each year and this is the results that follows;
$1300 in 2025 annual premium
$1430 in 2026 annual premium
$1573 in 2027 annual premium
$1730 in 2028 annual premium
$1904 in 2029 annual premium
$2094 in 2030 annual premium
$2303 in 2031 annual premium
$2533 in 2032 annual premium
$2785 in 2033 annual premium
$3063 in 2034 annual premium
$3369 in 2035 annual premium
$3705 in 2036 annual premium
$4075 in 2037 annual premium
$4483 in 2038 annual premium
$4932 in 2039 annual premium
$5425 in 2040 annual premium
$5967 in 2041 annual premium
$6563 in 2042 annual premium
$7219 in 2043 annual premium
$7940 in 2044 annual premium
=$73,093 total in 20 years which is still not even close if I were to self-insure compared to my $180,000 lifetime benefit for LTC coverage. So you all can self-insure, I’ll keep paying my annual premiums for LTC insurance.

[LivingAlmostLarge]

I knew someone would be fixated on future increases in premiums & inflation, fair point. So for ease of calculation I used examples of 5% inflation per year and 5% increases in premiums per year, both could be more or less for either inflation or increases in premiums but for simplicity’s sake I used these amounts for a total of 10% hikes overall per year. LTC insurance companies tends to increase premiums maybe once every 5 years by maybe 25%. For illustrative purposes I used 10% hikes each year and this is the results that follows;
$1300 in 2025 annual premium
$1430 in 2026 annual premium
$1573 in 2027 annual premium
$1730 in 2028 annual premium
$1904 in 2029 annual premium
$2094 in 2030 annual premium
$2303 in 2031 annual premium
$2533 in 2032 annual premium
$2785 in 2033 annual premium
$3063 in 2034 annual premium
$3369 in 2035 annual premium
$3705 in 2036 annual premium
$4075 in 2037 annual premium
$4483 in 2038 annual premium
$4932 in 2039 annual premium
$5425 in 2040 annual premium
$5967 in 2041 annual premium
$6563 in 2042 annual premium
$7219 in 2043 annual premium
$7940 in 2044 annual premium
=$73,093 total in 20 years which is still not even close if I were to self-insure compared to my $180,000 lifetime benefit for LTC coverage. So you all can self-insure, I’ll keep paying my annual premiums for LTC insurance.

thanks that's really good. I do worry it won't go up by 10% but exponentially. but that helps at least. But what about putting that premium into an investment vehicle like a balanced fund like wellington? And getting 6% return for 20 years?

[QuarterMillionMan]

My situation is unique from others so LTC insurance is something I would need. I have no spouse, nor offspring who might be able to assist me in my old age so LTC insurance is necessary for me in my own situation.

[disneysteve]

$73,093 total in 20 years which is still not even close if I were to self-insure compared to my $180,000 lifetime benefit for LTC coverage.

Maybe I'm missing something here. I haven't really been following the conversation.

Are you saying you could potentially pay in $73,000 over the next 20 years and if you then qualify for benefits the most you could possibly get back in benefits would be $180,000? If so, that sounds like an awful deal. Paying 73K for a benefit of only 180K is outrageously expensive insurance. You could certainly save up 180K on your own over 20 years and maintain full control of that money. And you really only need to save up 107K to break even.

[QuarterMillionMan]

That's an additional $107,000 that I would need to save up which is a significant amount of money to save. That is not lunch money.

[kork13]

Funny enough .... I was curious & did the math (because I'm a nerd). If you instead invested the insurance premiums, over those 20 years with a very reasonable 6% return, you'd end up with around $113k. You don't quite double your money, because alot of it occurs later on.

But if you do it in reverse (invest $7940 in year #1, and $1300 in year #20), you actually do way better, hitting the same dollar figure 5 years earlier. You also end up with $161k, more than doubling your money, even though you use the same absolute dollar amount, you just front-load it.

This is where you can use compounding to YOUR benefit, vs. the insurance company's benefit. Not saying this is what you MUST do .... But it's less than a car payment every month to be self-reliant vs. dependent on the insurance company: (a) still existing when you need the policy; (b) paying out as you expect them to; (c) the premium not escalating wildly or of control.

I choose self-reliance every time.

[disneysteve]

That's an additional $107,000 that I would need to save up which is a significant amount of money to save.

It's not a significant amount to save over the course of 20 years.