There’s a reason the LTCI policies are called LONG-TERM. They are not designed to cover short-term care such as your friend’s dad. The story would have been very different if your friend’s dad lingered in a weak/ demented state where he could not care for himself for 6 months…or, like many people with dementia, for years. If that had been the case, the family would have been happy to get $120 per day to help defray the cost of care.
Every type of insurance has a strong element of luck. The lucky people pay for the unlucky people. I happen to be unusually unlucky, having suffered events from fire to illness (several times) to having a tree blown down onto my garage and even having my husband damage my car. I have used insurance benefits several times. I bought LTCI because DH has COPD and is a bear when he gets sick. Also I am a cancer survivor. My bad luck tells me that I may need LTCI at some point.
LTCI is not for people who come from families with no chronic illness or dementia and who all run marathons until age 95 like @flyerboys’ late mom.
Like every other financial decision, the purchase of LTCI is a personal risk/ reward calculation. I am willing to pay to mitigate risk. That’s my choice.
Wendy
@bjurasz you have precisely put your finger on the key issue.
@intercst does not understand the difference between short-term skilled nursing care after a hospital stay (which Medicare pays for) and long-term care such as needed in case of dementia, which Medicare does not pay for.
@intercst is also overconfident when he calculates the cost/ benefit since he uses the best-case scenario for a population while ignoring the worst-case scenario for an individual. My father used to say, “Murphy was an optimist.” That has been my personal experience…which is why I buy and have used insurance.
Ugghh, very depressing to think about given the for profit healthcare industry in the US.
Other countries have experimented more with Dementia Villages. Those haven’t exactly taken off here. Maybe if we put the demented to work ala “arts and crafts time”, private equity firms would get on board.
While this is true, some insurances are closer to “prepaid coverage” than to “insured risks”. Dental insurance is a perfect example, it is VERY close to being prepaid dental care rather than true insurance for large and rare risks. The same applies to most LTC policies, they are closer to “prepaid” coverage than to “risk” coverage.
As an aside, with the rapidly rising prices of homeowners insurance here in Florida (and other places), even homeowners insurance is getting closer to prepaid coverage than actual large risk coverage.
[EDIT: Just for fun I made a little spreadsheet for LTC calculations. $3500 a year invested at 9% becomes $180,000 in 20 years.]
This is exactly the kind of risk that you can fund yourself with an S&P 500 index fund. You’ll likely be paying premiums for 20 to 40 years before you make a claim and stock market returns become asymptotic the longer you are in the market.
Not at all. You calculate the odds/cost of the worst case event, decide if you have assets to cover it, and whether insurance will make covering the risk any cheaper.
In terms of LTC, there’s a relatively narrow band of net worth where insurance will do you any good (somewhere around $500K to $3 MM in assets). And that’s assuming you believe the 15% to 20% skim rate on the LTC insurance is fair and you can trust them to pay a claim. Deny, delay, and depose isn’t just a United Healthcare business model.
{{ There’s a long-standing rule of thumb that says purchasing LTC insurance coverage makes the most sense when net worth falls between $200,000 and $2 million. This assumes that if assets are less than $200,000, then LTC insurance is not financially viable considering that Medicaid would quickly kick in to cover the cost of care once assets are depleted.
On the other hand, having assets of $2 million or more is typically more than enough to pay for any type of LTC, allowing clients to forgo the cost of premiums and account for the possibility of not needing any care. For folks who fall in between, like many Americans do, then the protection offered by LTC insurance often makes sense. }}
You are not taking the same odds. A good insurance company is part of the house. Their odds are very differently spread over the pool. The timing is also different.
If over 97% of the public should be in only an index fund and most are not, then figure out if you are in the 3%, perhaps we should say 1%. I doubt percentages 2 and 3 are doing much better than breaking slightly above the SPX return.
If you are in that 1% you insure yourself. The rest walk.
At 44 I had a surprise emergency spinal surgery that could have left me paralyzed. (not exaggerating) This had nothing to do with lifestyle “choices” of diet, exercise, etc. At 57 I had heart surgery, fortunately not an emergency basis, but still huge risk. THINGS HAPPEN UNEXPECTEDLY and you don’t seem to be able to grasp that concept.
We aren’t talking about THOSE things! We are talking about things that are reasonably EXPECTED. Just look at the title of this post - 42% risk is something that is nearly expected. Same for long term care, a huge percentage of people are expected to require long term care at some point in their lives (usually sometime during the last few years).
Not at all. At age 32 I had a golf ball sized brain tumor cut out of my head. Then at 44, after I’d been retired for about 5 years, I got diagnosed with a potentially deadly and expensive autoimmune disease. I quickly began studying all the ways from Sunday that the health insurance industry could screw me, and the risk analysis revealed that the best approach was a high deductible policy while shopping around and paying for almost all of my expenses out-of-pocket. I bought the $10,000-$20,000/year drug I needed in Canada at a big discount, found that I could order my own lab tests online for a fraction of what the insurance company would charge. And when my doctor ordered a $3,500 MRI at the top hospital in Houston, I found a strip mall MRI clinic about a mile from my home that would do it for $1,000 with a $200 discount if I had the scan done after 10 PM in the evening.
I’m pretty sure I’ve saved at least $200,000 over the past 25 years just by taking the time to do the research and not use old wives tales to inform my actions. And of course, the $200,000 I saved has been compounding in the stock market over that time.
