Long term care insurance for younger people?

June 26, 2010 10:29 AM

I am a mid-thirties, single woman in good health but few assets/savings right now. I have the opportunity to purchase a long term care insurance policy through work, which would provide unlimited coverage at the average nursing home care rates in my city, and adjusts for inflation. The premiums are about 2.5% of my take-home pay, and I can afford it while meeting all my other financial goals. Worth it or not?
posted by yarly to Work & Money (21 answers total)

Whoa, you are exactly me, and I am doing this right now. And my primary reason is that, because I am single, there is no one else's salary to fall back on if something happens to me. If there is no one else to pick up the slack (and even if there is), then it's responsible to be prepared for the worst.

I was already motivated to do this, but became more motivated recently when a coworker in his late 40s was diagnosed with a horrible, terminal illness that will take years to kill him and for which he will require 24-hour care, probably in a nursing home. He is married, but his wife is a stay at home mom and they have small kids. Even if she went back to work, she wouldn't be able to afford his care or their lifestyle. He had the disability insurance though, and so he's going to get about 80% of his salary plus unlimited coverage for a nursing home.
posted by amro at 10:55 AM on June 26, 2010

Response by poster: And my primary reason is that, because I am single, there is no one else's salary to fall back on if something happens to me. If there is no one else to pick up the slack (and even if there is), then it's responsible to be prepared for the worst.


those were my thoughts!

He had the disability insurance though, and so he's going to get about 80% of his salary plus unlimited coverage for a nursing home.

This policy actually wouldn't cover any income replacement - just the cost of care. I figure that in this worst case scenario I would get goverment disability payments, which would replace about 40% of my take-home pay. I figure that if I'm disabled I won't be spending as much!
posted by yarly at 11:13 AM on June 26, 2010

My husband's grandfather's care cost his estate $13K per month for the last seven years of his life. Yeah, I'd do it.
posted by KathrynT at 11:13 AM on June 26, 2010

I would very carefully scrutinise what long term care means and what conditions that covers. I have similar insurance for similar reasons and recently discovered that I was only covered for illness and not accident, which was a serious problem when I needed the cover.

I wish, wish, wish in retrospect that I had made the time to do my complete insurance review with my independent broker instead of blowing it off because the paperwork from all those policies is so hard to get together.

I also wish I had reviewed my disability eligibility as part of that exercise. I was not, as it turns out, eligible for state disability because I am self-employed. Had I known that, I would have structured my insurance completely differently. I know you mentioned this too but make sure you know the duration and criteria for disability payments if they're going to make up a significant part of your package.

Really, what I wish I had done is sat down with the broker and said "Right, two person household, no kids, sole income earner - how do I insure my family against loss of income and long terms care costs?" and worked backwards from there.
posted by DarlingBri at 11:33 AM on June 26, 2010 [1 favorite]

I'd say do it, but also give strong consideration that while you are making moves towards future financial stability, start more aggressively focusing on retirement savings. Hopefully, you will need retirement money before you need nursing home care. You don't want to have to work up until the day before using your long term care policy. :-)
posted by treehorn+bunny at 11:34 AM on June 26, 2010

As another point to consider, you want to compare how you'd do if you saved this money yourself (i.e. self insurance).

I tried entering some numbers into the MSN Retirement Planner calculator to see how this would turn out. I set your age as 35, salary at 50,000, and your current retirement savings as $5K. According to that calculator, if you saved 2.5% of your salary yearly until retirement at age 65, you'd have $134,750.

Considering this, I still think getting the insurance is the right thing to do, because long term care is so expensive, you could spend $134,750 in just a year or two (as KathrynT pointed out). But it also certainly should prompt you to get cracking on retirement savings, because if you live to be 80 or 85 years old, you're going to need a lot more than this (find out how much by using the calculator! My calculation suggested you'd need about a million dollars).
posted by treehorn+bunny at 11:43 AM on June 26, 2010

Response by poster: As another point to consider, you want to compare how you'd do if you saved this money yourself (i.e. self insurance).

I thought of this too (or using the money to pay off low interest student loan debt more quickly). But ultimately the idea is to project myself in case something happens in the near-term too, before I'd be able to self-insure.
posted by yarly at 11:49 AM on June 26, 2010

I do not blindly agree with everything the man says (although this is the second time I've referenced him today), but Dave Ramsey says to get this when you're around 60. The odds of needing it before then are astronomically low, and the 2.5% added to your investments would make a big difference. OTOH, it's still affordable if you get in around 60, and then the odds, naturally, start climbing.

THAT said, I can see why you want it, esp. if you're single and don't see that changing any time soon. You wouldn't be wrong to do it, but just pointing out one noted financial guru's opinion.

Sounds kind of scorched earth, but if you're single and have no one else counting on you a managed care scenario could also be that they take your assets as far as they go and then some combination of SS, medicaid, etc. does the rest. IOW, plan a bit more for the best and accept that if the worst comes, it's gonna be the worst, but still livable. Sounds horrid, and you might not be in quite as nice a place if you did this, but long term care always sounds horrid to me, esp. at a young age.
posted by randomkeystrike at 12:06 PM on June 26, 2010

"...and I can afford it while meeting all my other financial goals..."

If those other financial goals include getting cracking on saving for retirement, then I'd consider going for the long term care insurance, but if it doesn't, I'd put that money (and more) toward retirement and a general emergency stash.

Insurance is generally a game of odds. Your odds of needing long term care are fairly low, while your odds of living to retirement and needing to support yourself after your working days are very high. To me, the better place to put your money is retirement savings. Once that need is being adequately met, then extras like long term care insurance for low-odds situations make more sense.
posted by cecic at 12:09 PM on June 26, 2010 [1 favorite]

If this is a benefit tied to your current job, I'd think that the odds of you needing to use the benefit before you move on to another job is terribly low.

If the insurance remains with you if and when you change jobs, I would still caution you to read the policy very carefully, preferably with an advisor, before signing on.
posted by rainbaby at 12:14 PM on June 26, 2010

Sounds kind of scorched earth, but if you're single and have no one else counting on you a managed care scenario could also be that they take your assets as far as they go and then some combination of SS, medicaid, etc. does the rest

My mother is a nursing consultant who has worked in long term care facilities all over the country for years, and she has always said long term care insurance is a waste of money for this reason.
posted by something something at 12:26 PM on June 26, 2010

Response by poster: Yes, I am working on saving for retirement! This would be in addition to saving the full amount that the retirement calculators say I should be spending.

It does make sense to use medicaid as a backup for the next decade and then get insurance -- since I won't have that many assets yet, the spend-down won't matter as much. But it looks like Medicaid usually counts retirement savings as assets you have to spend down, but exempts most of the equity in a house. Yet again, the annoying USAmerican policy of promoting home ownership over other investments rears its head, grrr....
posted by yarly at 1:44 PM on June 26, 2010

yarly, my understanding is - don't worry, they'll get around to the house as well. :-) Seriously, they generally (in my understanding), treat the house somewhat differently depending on whether anyone is there who needs it. In a typical scenario, a spouse may have to go to assisted living while a healthier spouse may still need the house. Yeah, there is a logical inconsistency when they siphon off the retirement savings that would allow this healthy spouse to live in said house in dignity, but in a typical long-term care situation at a younger age if you were single, the grim reality is you'd not likely need the retirement assets. Yes, you could need care for six months because you were flat on your back and could get better, but that's a perfect storm scenario that is just kinda hard to plan for.

I agree, however - houses are kinda treated as sacred, and they're just a very illiquid asset that can either be purchased or rented with cash, so it's odd the way they're handled. Almost like realtors(R) and builders are a powerful lobby...

Second the advice that you look very carefully at the policy and that you be careful to have it not tied to work. Unfortunate fact is that there are many junk policies offered through the workplace. I passed on everything but the medical for that reason, and I'd love it if medical were unhooked from the employer benefits - I think this would really change the insurance marketplace and, along with proper competition, solve at least some of our healthcare mess.
posted by randomkeystrike at 2:11 PM on June 26, 2010

I meant, in that last comment, "not tied to work" in the sense that you could continue in it if you left. Odds are poor you'll work there your whole working life.
posted by randomkeystrike at 2:13 PM on June 26, 2010

does anyone not worry about the insurance companies solvency when you need it?
posted by dougiedd at 2:49 PM on June 26, 2010

If the policy is transportable I would consider it strongly. Also, is your company subsidizing it? If so, and you move to another job, could you still afford to pay it?
posted by JohnnyGunn at 2:57 PM on June 26, 2010

My financial adviser advised against LTC coverage and long-term disability coverage. Statistically you're most likely to require short-term care and disability coverage. Most people die before they get to the point of needing long term care or disability. Gruesome but true.

You say that you're young, in good health, and with few assets or savings. In which case - and I mean this in the kindest possible way - it's madness to pay into LTC insurance.

Take away the emotional component of "WHO WILL CARE FOR ME?" and look at it realistically. There are better, more statistically useful ways to spend your money. Are you maxing out your 401K contribution? How about the Roth IRA? Even rolling that 2.5% of your pay into an off-the-rack money market or savings account will be far more useful to you than purchasing long term care insurance.

To put it another way, 2.5% of your take-home pay in a savings account is a far better way to plan for your future.
posted by ErikaB at 6:04 PM on June 26, 2010 [2 favorites]

I would look very carefully at the terms. My grandmother had long-term care insurance and it turned out to be almost useless. I'm sorry I don't know the details, but I think there were conditions and loopholes that meant the insurance company didn't have to pay for her care.
posted by Mavri at 7:35 PM on June 26, 2010

Best answer: You might want to look at this link.

Last year when I was analyzing the question I found a Consumer Reports article from November 2003 entitled "Do you need long-term-care insurance?" I am holding a print-out of it right now. However when I search Google and the Consumer Reports site I cannot find that article, only the one above. Weird.
posted by forthright at 8:24 AM on June 27, 2010 [1 favorite]

Response by poster: From forthright's consumer reports link:

In general, the financial planners we talked with say that if you have a net worth below $200,000 to $300,000 (not including your home and depending on the cost of care in your region), an LTC policy won't be an affordable option and you will probably rely on government programs should you need long-term care. If you have assets of about $2 million or more, you should be able to pay for care yourself. If you fall in between, you're a more likely candidate for an LTC policy.
posted by yarly at 5:03 PM on June 27, 2010

Response by poster: So I'm going to skip buying LTC for a few more decades! Will save the money I would have spent on premiums for a down payment, since I just have to accept that the government wants me to buy a house.
posted by yarly at 5:05 PM on June 27, 2010