If I have a lot of money, why would I need to pay for Long Term Care insurance?
That’s a fair question and one I hear regularly. When dealing with clients, I look at insurance whether it be life, disability, or Long Term Care, as an asset class. I view it as an investment piece to their overall portfolio rather than viewing it as a cost.
I’ll be the first to tell you that I don’t like insurance. Additionally, I hope that neither myself nor my clients ever have to use the policies we have. I do know however, that the likelihood of not needing care in some form or fashion down the road is slim. More and more of the population is living longer and living with conditions that need expert care and attention. That being said, even though I don’t like insurance, I can see its valuable place within the discussion of protecting one’s portfolio.
For those individuals that have a lot of money (I’m not talking about a couple hundred thousand dollars that can be eaten up in long term care costs within 4 to 5 years**) something upwards of 2.5 to 3Million, I pose this question to you.
Q: What was it all for? All the hard work you did to get to where you are. All the money you saved and all the extra steps you took to ensure that your family would be provided for. What happens next? Are you ready to start spending it? Are you ready to let something beyond your control determine when and where that money is going to go?
My point is this…. I’ve never met someone who told me that they saved and worked their entire life so that one day they would be able to give that money to a facility or hospital if/when they need care.
That money was saved for them. That money was saved for their children, and their children’s children. That money was intended for higher education, comfort, philanthropy, relaxation; what it’s not intended for is medical bills.
Consider that a long term care premium today for a couple in good health could be obtained for approximately $5k to $6k per year. Assuming they have saved and boast a net worth of several million dollars, they could secure protection on those savings for less than ¼ of 1% per year. That’s a small price to pay to protect one’s portfolio from the risks of medical costs even if they don’t end up needing the care. You could pay long term care premiums for 30+ years and recover all your money back within one year of receiving care. If you pay premiums all those years, and never end up using the policy, it may feel as though you’ve lost out. I would suggest however that you’ve not lost out at all. Your protected your family’s wealth from its unintended use on medical costs. It’s a small price to pay to ensure your dreams and legacy transfer on to the intended recipients. You have the opportunity now to control what your money will and will not be used for in the future. Don’t wait till it’s out of your control.
For more information on Long Term care, read my piece titled “Why Consider it” here.
**I have personally witnessed individuals with $500,000+ in their portfolio, be completely penniless within a matter of 5 years. The lesser the amount they have saved, the quicker it’s gone. With the average annual long term care cost pushing $75,000 per year, it isn’t hard to understand how quickly assets can be depleted.
Buchanan Wealth Management – Securities offered through LPL Financial, Member FINRA/SIPC
The opinions voiced in this article are for general purposes only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.
