Do Wealthy People Need LTC Insurance?

Some financial planners might say that if you have enough savings, why insure?  While that might seem like a fair question, let’s put something in perspective: There is a 1 in 1800 chance of a claim on your homeowners insurance in any given year.  HHS says once you’ve reached 65 there is a 70% chance you will need LTC.  So which one do they say you don’t need (which can cost many hundreds of thousands) and which one do they make sure you have (which might cost $100,000 to $300,000 – and rarely happens)?

There are several other reasons for wealthy people to insure for LTC.  When care is needed, which accounts will be tapped first?  Which stock will be sold (or maybe we should wait until next year)?  Is it the right time to liquidate bonds?  Which real estate should we sell, and what will the capital gains taxes be?

A stream of tax free money (another good reason to insure) that comes every month can leave investments in place to mature.  No family fighting over which assets to liquidate.  Remember, your children who are arranging all this for you, will be liquidating their inheritance.

Today’s Wall Street Journal had an article on curbing elder abuse.  It happens.  Someone “borrows” from mom or dad’s estate while they are getting care.  If Medicaid is needed when assets run out, these “borrowed” amounts may be counted as gifts making Medicaid unavailable.

” Elder financial abuse is expected to grow dramatically” says the WSJ.  The articles suggests financial advisors might soon be expected to report suspected financial abuse.  Such abuse is up over 12% in just the past two years.  Having a regular stream of insurance payments to cover the costs of LTC means less likelihood of anyone needing to invade savings and investment accounts.

Lastly, the return on LTC insurance, if it is needed, is huge.  If you never need to use it, wouldn’t that be wonderful.  However, if it is needed, $60,000 of tax deductible premiums over a lifetime can yield nearly a million dollars.  And that is not dependent on stock or bond market returns.

So, do you plan to simply spend all those assets down when care is needed? Or will you at lest investigate the insurance that can pay for LTC and leave your assets to go to those you want them to go to?  Do so while you are still healthy enough to have this option available.

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