Long-Term Care Policies - Worth it?

Lapsing means you lose everything. Some rate increases come with options to convert the policy to paid-up, with benefits equal to accumulated premiums. If a company fails, guarantee associations will pay much or all of the benefits.

In the late 1980s, NAIC regulators proposed that LTC policies have nonforfeiture benefits, like whole life. But industry folks persuaded them that any worthwhile nonforfeiture options would make an already-expensive product unaffordable.

Some blame the actuaries for the LTC mess. But there were no well-developed tables, just some public studies; economists (and many actuaries) were declaring that we would never again see single-digit interest rates; and there was public demand as well as marketing pressure for an affordable product.

Some might remember that the original ACA included a LTC benefit. It only took the Federal Government about a year to realize that such benefits would be far more expensive than any coalition of consumers and Congress would pay for.


I’m pretty certain that this policy is immune to rate changes. It’s a one-and-done premium in full policy. The coverage inflates over time but everything is set in tables from the outset.


Yeah the worst that could happen is declare bankruptcy and adjust the benefit. Seems unlikely for a mutual company the size of nationwide tho

I guess the worst financial outcome is they never see the inside of a nursing home but I think it’s better to go quickly than to have it drag on for years

Social care only really works as a public option really (everybody pays into the ring-fenced risk pool). I do recognise that in the US this would likely be political suicide as it would have made the ACA more expensive.

Few private insurers want to take on the risk now (I am also looking at an LTC policy for my FIL but down in Brazil so only tangentially following US LTC areas).

I remember that! I remember the actuary explaining it saying that it was very underpriced and that we should buy as much as we could before they figured out how underpriced it was, but it never went to market.


Bumping this thread with a new question probably not worth a whole thread. (I could have made this “Financially Adulting Your Parents is Hard”… and we could change it should the thread keep momentum.)

Turns out my parents have some kind of universal life insurance. I don’t have any details on amount or fees. My expectation is that it’s a sub-ideal product.

Does anybody have experience cashing these policies out? I’m finding that surrender charges eat 10-40% of your total value, but at my parent’s age, premiums paid-in can be withdrawn without income tax and earnings are taxed at 10%.

I’m debating the worth of following up on that thread and potentially encouraging them to surrender it.

As noted above, they don’t have dependents, only each other to provide for. I don’t need their life insurance benefits - one sibling really could use it, but they’ve designed their life by their own decisions.

I don’t know specifics of us ul, but often these products are sub optimal initially and then become reasonable after long periods of time. So if they’ve had it for a while, might not make sense to cancel it.

In terms of the insurance itself, your utility on leaving a death benefit for your sibling may be quite different than your parents.


I believe my parents are on the same page of “dying as we hit exactly $0.00 to our name would be ideal”, while obviously in reality that’s terrible planning.

They basically funded that sibling through a decade of his adult life and helped him get a house and still support him. I’m sure they’d love to leave some cash but they seem focused more on making sure they don’t burden us unreasonably.

Perhaps it is worthwhile to keep it as an emergency source of borrowing if needed, otherwise the death payout comes into play.

Yeah if the UL policy ends up supplementing Social Security for their post-life-expectancy retirement years then that’s not a terrible outcome even if it’s not the most financially optimal way to accomplish that.

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Surrender charges usually taper off over time and are usually 0 or close to it after a decade, well after the company recoups sales/marketing expenses

I’d check in with your parents to see how long they’ve had their policy