Long Term Care Planning – Part 2

Urmas Lupkin

Protecting what’s most important to you

We all spend our life paying for various types of insurance that we hope we may never need to use. We pay to insure our cars and homes without ever thinking twice about it. But when it comes to protecting our most valuable assets, people either choose not to or purposely ignore it. A former coworker of mine named Pete, told me the best story once about how he sold a client on the concept of long term care. He talked to her about it each year at their annual review meeting. The client knew she probably needed it to protect her $400,000 nest egg but could never get past the idea of what if I pay $4,000/year for this premium and then never use it. So Pete told her to imagine her $400,000 nest egg as $100 bills neatly stacked in her basement. He asked her if she would pay $4,000 per year to hire a security guard that would protect the money against theft or fire or anything else that could go wrong. The client thought about it for a second and smiled and said of course I would, where do I sign!

Leaving a legacy

This story has stuck with me for many years. Long Term Care is important to me as I lived it with my father who developed dementia in his late 70’s. He wound up spending 3 years in an assisted living facility and then moved to skilled nursing for the last 3 months of his life. Fortunately, we purchased a long term care insurance policy at age 70 for $4,200per year. My father was from the “old country” so it was very important to him to leave a legacy for his two boys. As the years passed he complained each year about paying this premium and thought perhaps it was a waste of money. We paid out nearly $70,000 in premiums and the standard 90-day elimination period when he entered assisted living. The insurance company paid out $192,000 for his care. As it turned out, it was money well spent and my father was able to leave a legacy to my brother and I which is what he wanted.

Risk management

So instead of thinking about it as “Insurance”, I look at it as risk management. There are many risks in life. There is the risk of sickness, premature death, disability, car accident or your house burning down. Needing long term care is no different. It is a risk that you at least need to consider how you plan on managing it. For those who choose to do nothing they are taking on the entire risk themselves. So if they need long term care they are on the hook until they are poor enough to qualify for Medicaid. Some see the value in sharing the risk with an insurance company so they aren’t taking on the entire risk themselves. Either way you choose to go you should sit down with a financial advisor and have the conversation so that you can make an educated decision for your situation.

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