Long-Term Care Insurance

My wife and I are fortunate to have assets at a level where it is recommended we consider purchasing long-term care insurance. I understand that Economists feel that the purpose of insurance is to pay for very expensive but unlikely events, so we should self-insure against affordable but more likely events.

My question is: how do I use ESPlanner Plus to determine the level of long-term care insurance coverage we should purchase?


dan royer's picture

Others would have better answers than me I'm afraid. ESPlanner can't evaluate that kind of risk. It evaluates to the dollar the amount of term life needed in any given year, but it of course has no knowledge of your health situation--just age. There's no built in algorithm for long term care needs.

From an old forum item I found this:

I'm trying to model the cost impact of a Long Term Care policy against the policy benefit distributed at an arbitrary date in the future, where:
Known benefit assumed distributed in yr 2038: $1M (this is FV amount of 2013 coverage amount with a 5% annual inflation increase) assumed to be utilized over a 6 year period to pay for daily care
Known cost: $2500 premium paid annually until year of distribution (e.g. paid 25 yrs until tapping benefits in 2038).

Is the following approach the way to do it (and not use Reserve Fund)?
Special tab inputs
Special Expenditures: $2,500 annually for 25 yrs?
Special Receipts: $1m proportioned over 6 years of disbursement starting in 2038.

[Yes, this is a correct way to do it]

I also see that I wrote the following:

The need for long-term care is not something we consider explicitly, but you can enter a large, say 7 year, long-term care expense and compare the outcome, in terms of your living standard, of not insuring with the outcome of paying premium and having smaller expenses during the 7 years. You would enter the insurance premium as a special expenditure.

This thread has some ideas:



"Genworth's annual "cost of care survey" has some helpful LTC data. It comes out each year in late April. There are also individual state reports with local city/county data in a number of areas such as homemakers services, home health aide services, adult day health care, assisted living facility, and nursing home care. You can see the daily rate range (min to max along with median), median annual rate and trailing 5 year annual growth rate."

There are many studies on LTC that sometimes align and sometimes not. Beyond Genworth, here are a couple of sources that may be useful.

- http://crr.bc.edu/wp-content/uploads/2014/11/IB_14-18_508_rev.pdf
- http://longtermcare.gov/
- “Long-Term Care Over an Uncertain Future: What Can Current retirees Expect?”

I see this as a risk management question. If you have a decent range of annual expense values to work from and can model a range of "reasonable" scenarios using ESPlanner (e.g. X years for one spouse in an assisted living facility (ALF), Y years for both spouses in ALF, then Z years in a nursing home, etc.), then you can work backwards to the level of coverage you may consider purchasing.



Thanks much for the responses!


I haven't used ESP much since I bought it a few years ago, so despite the fact it's been on my PC that long, I still believe I'm a neophyte. At this time, I'm trying to figure out how to enter my annual LTC premiums. Where would they go? My policy has a cost of living increase which is usually more than offset by percent increase in annual premium, if the insured elects to take that in a given year.

dan royer's picture

If you want to treat these expenses as part of your discretionary spending, of course you simply do nothing and think of the cost like you do other ordinary expenses. If you want them treated as off-the-top expenses then enter these payments as a series of special expenditures. If it's a $1000 this year and you want them to go up each year with inflation, then enter $1000 in today's dollars and set it to continue for 10, 20 or whatever number of years. Then it will appear as a series of payment, adjusted for inflation each year.

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