| I think the terminology the OP is using is unclear. Sometimes people and insurance companies settle a long term care policy for a fixed amount and the policy is cancelled. Kinda like the commercials on TV, "It's my money and I want it NOW!".
All they do is take the expected amount paid per months, the actuarial life of the person (increased or reduced by the actual health of the person) and multiply it out. Then take the net present value of the calculation. Of course there are the fees to do this. The real trick comes in from the "increased or reduced" portion. As with all insurance "bets", each side wants the best deal. The company wants the biggest reduction and the owner wants the biggest increase.
I've never seen an increase from the expected life per the tables. For truly sick people where the policy is paying out a lot, the tables are often reduced a lot. Insurance companies do this much more than the owners, so, who do you think is going to win this bet? Many cases I see the owner is being used by others to get what the others want.
"Wouldn't it be nicer to add on a room to the house so I can take care of you all the time?" "You should go on a nice vacation before you get much sicker. I'll go with you to take care of you." "You really need a new car to get you from place to place." Stuff like that where the other convinces the owner to sell the policy. Even if the motivations are genuine, it tends to be a grasshopper/ant-type of thing.
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07-16-2008, 05:07 PM
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