Senior Market Advisor. December 2005. www.SeniorMarketAdvisor.com
LTCI Insider. With Margie Barrie.
When to Self Insure
Q.
I work with wealthy clients and am frequently asked about the specific amount
of assets they need to consider self insuring instead of buying LTC insurance. Is
there a guideline that you use, and how do you suggest I respond?
Note From Margie - This column is a continuation from last month's article. I
received so many excellent responses to this question that I wanted to share
them with you.
"I believe that there is no exact answer. The individual with assets valued at
three to five million dollars or more could probably finance his or her long term
care expenses very easily, but is this how they want to use their money? The
attorney and accountant look at this question from a number's perspective and
not from the emotional or human aspect. We, the financial planner/advisor, need
to look at it both ways and then tailor a plan that is satisfactory to the client. My
clients find a great deal of comfort knowing that their LTCi policy will provide the
first line of defense against the expense of long term care as well as a
professional care coordinator who will work with the healthy spouse and/or
children to install a plan of care and not put that pressure on any one person. So
coinsuring the person's assets with a LTC policy is a great compromise to satisfy
the attorney, accountant, family members and the insured. They have not spent a
lot of money for the policy but they know there is a plan in place to provide long
more term care better and longer. I just closed a case with a healthy 58 year old with
personal assets between three and six million dollars simply because of the
"peace of mind" she gets by having a comprehensive LTCi policy in place." Bill Cox, Lexington, KY
"I don't believe any amount of the assets should be used for LTC. When you
calculate the cost of the benefits it comes to around four cents on the dollar.
Most wealthy people have used leverage all their lives. This is the perfect
product to do it again. I'm in the process of sending letters to old prospects who
did not buy when I originally proposed LTC. In the follow-up letter I'm explaining
what it will cost them if both spouses needed care 20 years from now.
"Here's an example of the explanation I'm including in these letters:
| Cost Of Benefit Calculation |
| Insurance cost on last proposal |
$3057 |
| 20 years of payments |
$61,140 |
| Cost of home health (8 hours per day) |
$45,000/yr |
| Twenty years from now (based on 5% inflation) |
$119,000 |
| Benefits needed for five years (per spouse) |
$596,992 |
| If both spouses need care |
$1,193,984 |
| Money paid |
$61,140 = .05 on the dollar |
| Benefits received |
$1,193,984 |
Bob Lutz, Longwood, FL
"For those who've either witnessed or experienced the total impact of long
term care on family, friends and/or loved ones - the question of assets pales
in comparison to the numerous advantages of a plan designed to encompass
the full spectrum of "caregiving" in the setting of choice offered in today's
quality insurance products. No one, regardless of status, can deny the peace
of mind achieved by investing in a plan designed to protect their loved ones.
It's time to get rid of the "old" thinking - this isn't about asset protection - it's
about "insuring" that your loved ones never have to pay, provide, or suffer
from your "unplanned for" long term care needs. People just need to be
educated on what they're buying and who it protects…and then it all starts to
make a lot of sense!" Denise R. Molohon,Indianapolis, IN.
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