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Is Long-Term Care Insurance Worth It? · How to Retire on Time

• 0:00
  Mike: Hi. Mike Decker, author of the book How to Retire on Time. Here's a question I was recently asked on my Retire on Time q and a. Check it out. One was the take on long term care insurance, especially the stay in one's home.
• 0:19
  So the problem with long term care... I I've been selling this long term care insurance for over a decade. Mhmm. And I'm just... I I won't say anything, but put in the chat how many policies do you think I've sold in over ten years of of doing this?
• 0:35
  Mhmm. So we'll let that linger. I'm curious what your chat might be. But that's that's an unfair question. But if you need it, you can't afford it.
• 0:43
  And if you can afford it, you probably don't need it.
• 0:45
  David: Yeah. There's a lot in that statement.
• 0:48
  Mike: It's a conundrum. Yeah. So to to answer the question that I propose to everyone, I've never successfully sold a long term care policy.
• 0:58
  David: But you did attempt to a couple of times. Is that right?
• 1:00
  Mike: Mhmm. If you think about it, what are you really solving for? You're transferring to an insurance company the risk that you're gonna end up into a long term care facility, or you qualify for the benefits. And if you do qualify within the first ten years of you having the policy, it's pretty financially nice. But if you don't, the policy and the benefits don't really do much better than like a bond funds rate of return.
• 1:26
  David: And
• 1:27
  Mike: that's kind of depressing. And so I don't know the future. I don't know the future of their health. I'll say here's the trade. How do you want to handle it?
• 1:35
  And every time I've had someone say, look, if you want long term care, like here's the break even, then benefits and detriments. I'm indifferent. I'm a flat fee fiduciary. It's okay if you don't buy a policy, but I'll run I'll run the benefits, and those who say no, we want the benefits every time have been denied.
• 1:55
  David: Mhmm.
• 1:56
  Mike: Because the insurance company only works if the odds are in the insurance company's favor. They're not given term life insurance out to people who are just like, you know, they're about to die. Right? You have to be healthy and in a good state for them to accept the risk that you're transferring to them. So I've had a lot of people request it.
• 2:17
  We've gone through the process, and then they got denied because of a heart attack, or a stroke, or liver disease or whatever it was. Now, the way I like to think about it is insurance is not an investment. That is the best literal definition of what insurance is. Insurance is the transference of a risk to an insurance company when the odds are not in your favor. Now I know people before they did the planning process that have purchased long term care, whether it's asset based or traditional, and I said, help me understand why you bought it.
• 2:54
  They said, because we want the peace of mind. That is appropriate. Mhmm. They're buying peace of mind, and they're okay if it's not financially prudent. Mhmm.
• 3:04
  Do you see the difference though? Yeah. And the reason why I really wanna hit this home is because too often insurance is sold in a predatory fear based argument that scares people into thinking they need it or else. But we don't know the future. There are good insurances.
• 3:22
  I mean, have insurance. I have term life insurance. Disability is kind of a good insurance if your family depends on you. There are... There's...
• 3:30
  Insurance is not good or bad. It's just a thing. It's bad when it's miss explained, and almost like as a threat that scares you into buying it. I just prefer the methodology of, here's your break even. It would be good in these situations.
• 3:46
  It wouldn't be financially prudent in these situations, but honestly you can afford it either way. How do you wanna proceed?
• 3:52
  David: Mhmm.
• 3:53
  Mike: And if if you use it in these situations, so like in home care was one of the kind of examples, these are the policies that would be appropriate for that. Here's a different way to do the tax planning, and so on. Here are the average costs in these situations. If you're in memory care, that's gonna be a different situation. If there's early Alzheimer's, early onset Alzheimer's, that's gonna be a different situation.
• 4:13
  So I like to have a comprehensive health conversation with them. We're just a little bit different in how we approach it mostly because I just like to explain the options and let you decide. I think that's the only fair way to go about this. Yeah. So, yeah, we've tried to do a lot of them.
• 4:35
  But you can't get insurance company to take on a high risk patient, or high risk, like if if they're already kind of not doing so well.
• 4:44
  David: Right. Right.
• 4:45
  Mike: That's the uncomfortable truth. Yeah. There's a there's a lot of fear based marketing out there, which is kind of why I think according to the Gallup report, insurance agents, financial advisors, they're next to used car salesmen and politicians on the trust level.
• 5:00
  David: Yeah. Because it always feels like we're getting ripped off. Right? Like, oh, I have to pay this premium every each month for for the possibility of this.
• 5:10
  Mike: Well, yeah. That's a fair point. So asset based, you pay once, that's it. There's no more premiums. Mhmm.
• 5:15
  And you have a fixed benefit.
• 5:17
  David: Okay.
• 5:18
  Mike: Traditional long term care, the old ones was they don't really do this as much anymore because they priced it wrong. And those people that have those, I say you don't keep that. That's a really good thing. But we need to put into the plan that the insurance company is gonna try and increase premiums every year that the state will allow them.
• 5:32
  David: Oh, right.
• 5:34
  Mike: So you just put into the plan, and that's that's okay. Right? It's not common that an insurance could be prices something wrong and tries to get out of it. But they legally have to. They have to stay in.
• 5:45
  They have to honor the policy. Yeah. So they do what they can to raise the premiums, but it's still not in their favor, and there's some really good policies that were out there, but you can't get them anymore. The insurance company's wised up. Yeah.
• 5:57
  So, yeah. Great question on the long term care. By the way, the ten year is the break even. You get the long term care policy for life.
• 6:08
  David: Okay.
• 6:09
  Mike: You get the benefits for life, and you can include a cost of living adjustment, so it kind of increases that 3% or so a certain period of time. Yeah. So I... Someone made the comment I wanna clarify. It's just that generally speaking, insurance is financially more favorable if you ended up using it sooner than later.
• 6:25
  There's just a break even that comes up. I just wanna clarify that. Hey, if you're just joining us, this is how to retire on time. Don't forget to grab a free copy of my book today at retireontime.com to help you prepare to retire on time.