3 Replies Latest reply on Feb 12, 2012 2:02 PM by jkom51

    Experience with Long-term care insurance?

      Hello all;
      I've posted on this board before but am no closer to making any definite decision on LTCI for my wife and myself.  In my researching, I found that Northwestern Mutual sells LTC policies that are "participating" -- that is over time you get dividends (really just refunds of premiums paid) to help offset the cost.  This appeals to me, as one of my issues with LTCI is that it's such a big chunck of money to send to an insurance company every year, while hoping you never have to use it (even more so than other types of insurance).  So I was just wondering if anyone here has a LTC policy with Northwestern and what their experience has been?  Does the participating feature really impact the cost over time?
      Thanks, and happy holidays. 
       
        • Re: Experience with Long-term care insurance?
          jkom51
          NWM is an excellent company, well-regarded within the industry and has stated a commitment to remain in the LTC marketplace, which is very important.
           
          Although we don't have our LTC with them - ours is a guaranteed carrier through DH's pension fund, so we get very favorable terms - if we were looking on our own for an LTC policy, NWM is one of the two companies I would consider, the other being Lincoln Benefit Life which is the largest LTC insurer.
           
          But I think NWM is a better-run company overall. Assuming the two quotes came within reasonable range, I would pick them over LBL.
           
          Please don't wait to get LTC. I used to pull quotes for insurance when I worked at an independent CFP's office, and too many people wait too long, only to find their health and age make the premiums too costly for them.
           
          With our health factors, buying LTC was basic risk mitigation, so that the disability of one spouse wouldn't financially devastate the other.
           
          We got our policies in our late 40's. Even with two class-wide premium increases, the policies remain very affordable, and give us great peace of mind.
           
          The total premiums we have paid on two LTC policies for thirteen years, do not even equal six months for one of us in a top-quality facility. I wish I could have that kind of cost value on our homeowners and earthquake insurance, frankly.
           
          The really telling point? I tried to get two friends and three of my family members to buy LTC insurance less than a decade ago. Two of them even agreed to let me pull quotes. Everybody waffled and said, "oh, no, too expensive."
           
          Now that we're all in our 60's, all five people have separately confessed they're sorry they didn't get those LTC policies back then. Now that they're at retirement age, they're realizing what a huge financial risk they're taking by not being insured for the biggest potential expenditure by the elderly.
            • Re: Experience with Long-term care insurance?
              JerryD
              Jkom, to me '"oh, no, too expensive."' is not the issue on LTC. It is that these policies are very complex, non-standard and have little control on increased premiums. The company can get out of the business as has happened with TC. The company can't pick on you by raising your premium but it can raise it without problem for everybody. If you can't then afford it, all of those payments go out the door. Our choice was to pass and try to keep healthy with little debt.
               
                • Re: Experience with Long-term care insurance?
                  jkom51
                  Yes, LTCi is complex. There are also numerous articles for free on the Web which help clarify what to look out for. A few days of research seems to me, to be a small price to pay for substantial risk mitigation, for untold years in our lives going forward.
                   
                  When it comes to companies entering/exiting the LTC business, that is why an ethical LTC broker is invaluable (or in my experience, an experienced independent CFP with insurance certification).
                   
                  The CFP I worked for offered insurance only as an accommodation to his clients. He made so little off the commissions they were a negligible percentage of his income. He only offered two types of life for example: level term and Variable Universal Life, the latter strictly for high-net-worth individuals who needed estate tax planning. He was not a fan of most annuities either and was very careful about who needed them and who didn't, as well as what funds were offered for investment.
                   
                  When it came to LTCi, he only worked with those companies he felt were stable and would remain in the business. Met Life was one of those companies, and although they have exited that business as of 2010, the LTC policyholders they have REMAIN insured; it is merely what is called a 'closed block of business'.
                   
                  Met Life will pay all LTC claims on those policies, they just won't write any more in the future. This is what a good reputable company will do, as opposed to Conseco and its six subsidiaries, which gouged thousands of seniors who struggled to get claims paid.
                   
                  Met was the biggest company in the LTCi business but even they only had 600,000 LTC in-force policies - a very tiny percentage of their 20 million policyholders!
                   
                  For all the debate about whether it's worth it and what you should buy and who from, it's one of the smallest segments of the insurance industry, dwarfed by segments like health, life, property, and annuities.
                   
                  Because I've worked in and with the life insurance industry for decades, it was very clear to me in the 1980's that the increasing lifespans of Boomers would eventually force LTCi premiums to go up, for the same reasons that all types of life insurance premiums would trend downwards.
                   
                  People are living longer, but with impaired functionality in the end years. I watched several family members live with bad hearts for over a decade in the 1990's, whereas in the 1960's they would have probably died from their first cardiac infarction (heart attack).
                   
                  When it was recommended that we look into LTCi we were 48 and 46 yrs old. The premiums were extremely inexpensive for comprehensive benefits, and I told my DH that we should expect premium increases over time.
                   
                  This indeed has happened, twice. I would expect to see a few more as time goes on. People living longer = greater life expectancy but increasing physical frailties.
                   
                  BUT - because we started our LTCi at an affordable rate, the increases of 35% (first time) and 25% (second time) worked out, each time, to be less than $100/month total for the two of us. It has never been a 'drain' on our budget; it's about equal to two weeks' of grocery money.
                   
                  We have a comfortable - not lavish, but certainly not barebones - retirement lifestyle. What we currently pay for LTCi on our two policies is less than what we pay for an earthquake rider on our homeowners insurance (which has, I might add, a walloping $100K deductible to begin with).
                   
                  So careful research, a good professional to help you understand all that fine print, sticking to reputable LTCi carriers, and understanding the cost of risk mitigation, is what is needed to purchase LTCi.
                   
                  As one writer for SmartMoney/WSJournal points out, even a $100/day LTCi policy, if it's a comprehensive policy from a good carrier, can help immensely to offset LTC costs for a senior. An LTCi policy doesn't have to cover ALL your costs, any more than auto or homeowners insurance would.
                   
                  You always, always, always want to find the "sweet spot" for your individual circumstances. Risk mitigation is an equation: what degree of risk mitigation can you afford versus what you are trying to protect.
                   
                  It is for this reason I am not a big fan of DIY financial planning, investing, or insurance purchase. Most people are very bad at determining their risk profiles and even worse at evaluating their degree of needed risk mitigation. These are situations where a careful, balanced, honest analysis is needed of the pros/cons.
                   
                  The majority of folks are focused on "what does it cost?" in so many aspects of their financial lives, when that isn't the right question to ask, and can sometimes do more harm than good.