Benefit Years Vs Monthy Costs

[oozo]

Everyone, I saw something on another person's thread that I cannot seem to locate again....about having less benefit years and higher monthly outpays instead of more benefit years with lesser monthly outpays.

Is it more beneficial (premium cost wise) for me to look at buying an LTC policy with lesser benefit years and higher monthly benefits paid out? or for more benefit years with lower monthly benefits paid out? I understand that my pot of money is my pot of money no matter how many years it might take for me to spend it...the more important rule would be the monthly benefit paid.

I am wanting to keep down my premium when I buy...and am wanting to understand the premium cost differences to me of making the above type choices, using the same final pot of money purchased - eg. $324,000.

Thank you.

OOZO

 

[csalter]

Everyone, I saw something on another person's thread that I cannot seem to locate again....about having less benefit years and higher monthly outpays instead of more benefit years with lesser monthly outpays.

Is it more beneficial (premium cost wise) for me to look at buying an LTC policy with lesser benefit years and higher monthly benefits paid out? or for more benefit years with lower monthly benefits paid out? I understand that my pot of money is my pot of money no matter how many years it might take for me to spend it...the more important rule would be the monthly benefit paid.

I am wanting to keep down my premium when I buy...and am wanting to understand the premium cost differences to me of making the above type choices, using the same final pot of money purchased - eg. $324,000.

Thank you.

OOZO

Yes, there are instances in which it can be better to have a higher monthly benefit than number of years, but it would depend on different factors.

I remember looking at that with MedAmerica. I looked at doing a highest amount per month with no inflation protection for four years. I discovered that in a bout 12 or so years, I would have been equal to the inflation protected amount and then would be behind the inflation protected amount. I decided to keep the inflation protection and go with the lesser amount.

I think I remember that the amount of money per month will raise the premium more than the number of years. However, the amount of inflation protection also has a significant impact on the premium too.

 

[birch15]

Yes, in the long-term care insurance world (which I inhabit as an interested consumer/policy holder rather than an insurance professional), it is often said that Short and Fat (higher daily or monthly payment for fewer years) is better than Long and Thin (lower payments for more years). The reason for this is that, under most plans, you can turn a Short and Fat plan into a Long and Thin plan by not seeking reimbursement for the full amount of the daily or monthly payment--putting in for $100 a day instead of the $150/day in your plan, for example. The money you don't take stays in the pool of money available under your plan and can be used later. If you do that, your pool of money will last longer than it would if you took--your Short and Fat plan will become Longer and Thinner. However, you cannot turn a Long and Thin plan into a Short and Fat one--you cannot get more money sooner than your plan provides.

Since none of us knows when we will need to draw on our LTC insurance or how quickly, Short and Fat covers the bases in a way that Long and Thin does not That is why, all things being equal, Short and Fat is better.

 

[yankee466]

Although it has not typically been my dating preference, or my ideal client profile, short and fat works well for structuring LTC insurance benefits.

 

[Arthur Rudnick]

"Short & Fat" or "Long & Thin" has been debated for years. Your premiums and the quality of your policy will essentially be based on the amount of dollars in your pool of money or benefit account.

 

[CALTCAgent]

To say whether "short & fat" or "long & thin" is better, depends on each persons situation, IMO.

Just because you have the same pool of money does not mean the price will be equal.

So it gets into one of those what is "best" debates. There is no "best", it depends.

 

[Mr_Ed]

To say whether "short & fat" or "long & thin" is better, depends on each persons situation, IMO.

Just because you have the same pool of money does not mean the price will be equal.

So it gets into one of those what is "best" debates. There is no "best", it depends.

well said.

I would prefer $200 per day for 10 years than, for about the same premium, $300 per day for 4 years.

 

[Arthur Rudnick]

previously posted by Mr_Ed

I would prefer $200 per day for 10 years than, for about the same premium, $300 per day for 4 years.

You're right the premium is pretty close.
In NY, Genworth with a 3% Cmp. rider for a 55 yr. old couple, the premium is $4,985 for $200/day for 10 years and $5,238 for $300/day for 4 years.

But, the actuaries may look at it differently:
They may be thinking that someone with 4 yrs @ $300/day is more apt to use a good part of their benefit, while someone with a 10-year policy will most likely die before using anywhere near their full benefit.

My numbers may be off but the concept could be sound.

 

[birch15]

My point above was, "Since none of us knows when we will need to draw on our LTC insurance or how quickly, Short and Fat covers the bases in a way that Long and Thin does not That is why, all things being equal, Short and Fat is better."

​

If the same amount in premium buys the same pool of money, isn't short and fat always better than long and thin?

I am a humble consumer, not in the field, but LTC insurance is a fascinating area and, really, the most workable solution to the impending Boomer long term care crises. Too bad less than 10% of the population bothers with LTCi. Maybe some of the newer products will help overcome the "I'll likely never use it" objection.

 

[Mr_Ed]

My point above was, "Since none of us knows when we will need to draw on our LTC insurance or how quickly, Short and Fat covers the bases in a way that Long and Thin does not That is why, all things being equal, Short and Fat is better."
If the same amount in premium buys the same pool of money, isn't short and fat always better than long and thin?

I am a humble consumer, not in the field, but LTC insurance is a fascinating area and, really, the most workable solution to the impending Boomer long term care crises. Too bad less than 10% of the population bothers with LTCi. Maybe some of the newer products will help overcome the "I'll likely never use it" objection.

If I could get $200 per day with a 3 year Benefit Period for the same premium as $100 per day with a 6 year Benefit Period of course the former would be better.

However, they are never the same premium. Short and fat is usually about 50% more premium than long and thin.