Senior Market Advisor. November 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?
A.
I too was recently asked this question during the Q and A of a national
teleconference I presented. I did have an answer - my response was if a person
has over $8 million in assets, they should consider self insuring. However, a
number of listeners objected to my answer and I agreed with their logic. So
what I am sharing below are their answers.
"I personally have reached the conclusion that you are never too rich. This is
a result of my experience with my own mother for the last three years. She had
plenty of money for the best of care but fought me tooth and nail about spending
the money on herself. She increasingly lost the ability to understand what she
needed and still wanted to be in control. If I would have been able to say to her
that the insurance company was providing the money, we would have avoided
some difficult times and she might have been more comfortable during her last
months.
"These are the talking points I review with prospects. I call it 'Are you ever too Rich?'
- Long term care becomes definable expense
- Affordability of premium
- Investments: Can be less liquid, can be more aggressive; well designed
portfolios not subject to disruption and capital gains.
- Gifting program to children and charities: Not threatened, more generous, can
save estate taxes
- Avoid family discussion over how money spent for LTC
- Avoid resentment of children and/or in-laws
- Live up to full commitment/goals to family and charities"
Sally Leimbach, Baltimore, MD.
"The amount of assets an individual should have to self insure is really
based on several factors, such as age, health, the cost of care in today's market
place along with where the individual either lives or plans to receive care. My
anticipation of those assets should be at least $1,000,000 for an individual living
in South Florida. (Double that for a couple). This will vary drastically, especially
for those living in the Northeast where the cost of care is much much higher. A
better number is at least $1,500,000 to take into account any inflation and
miscellaneous expenses associated with the cost of caring for someone in both a
nursing home and/or at home." Gary Haft, Boyton Beach, FL
"In my 30 years in the insurance business, I realize that for LTC the average
cost of care now is only a faint shadow of the future costs. For a 60 year old, the
cost of care at 85 is about 3 1/2 times the cost now with only moderate LTC
inflation of 5% (compounded). The length of care is four to six years (AARP).
We're looking at 5 years times 3 1/2 = 17 times the average current cost - i.e.,
$54,000 now = $185,000 in 25 years x 5 yrs. = $925,000. Plus, consider the LTC
needs for those with such illnesses as Alzheimer's and Parkinson's. It can be an
average of 8 to 12 years. Even for couples who have several millions of assets,
recognize that their potential exposure is enormous." Les Light, Los Angeles, CA
NOTE FROM MARGIE - Because of the number of excellent responses I
received, I will continue this subject in next month's column.
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