An Easy Way to Protect Against the Cost of Long-Term Care

by Claude Thau

Like middle class citizens, many affluent individuals buy long-term care insurance (LTCi) to:
• Reduce the caregiving burden on their family;
• Protect their assets for their heirs;
• Ensure that their retirement money can be used as intended;
• Be free to engage in intended retirement; activities (caregiving responsibilities can
significantly interfere with plans);
• Be able to use their preferred caregivers.

But some people are wealthy enough to handle the above needs without LTCi. For example, they may believe they can leave more than enough assets for their heirs even if they spend their own money for long-term care. However, LTCi remains an important wealth management strategy for these reasons:
• They prefer to gift money to their children and/or charity while still alive. LTCi tames their most volatile risk, allowing more money to be gifted now.
• Tax benefits are particularly significant because the affluent are in higher tax brackets.
• For reasons beyond the scope of this article, many people don’t get care they need or would prefer even though they could easily afford to pay for it. LTCi can avoid this problem.
• LTCi reduces the need for liquidity to pay for care, permitting different investments which might earn higher yields (possibly offsetting the cost of LTCi).
• They may like to create, for pennies on the dollar, a pool of hundreds of thousands of dollars for their (and their spouse’s) care rather than worrying that someone might mismanage their savings they earmarked to pay for such care.

It may also be important that extended family members have LTCi (otherwise, they might end up providing, or paying for, care), or that employees and employees’ relatives have LTCi (to avoid the risk that employees’ caregiving responsibilities negatively impact their business).

Arranging for LTCi through a business can be the easiest and most effective approach. The following advantages can apply for businesses with as few as 3 employees:
• People who would normally not be insurable might get coverage.
• People might get coverage at lower prices than they normally would.
• Various aspects of the process can be more convenient.

Naturally, insurers are reluctant to insure people who seem likely to need long-term care. With large
employers, we can offer LTCi to all qualified employees without asking any health questions. With small
employers, many of these same benefits may apply.

For example, a 5’6”, 300 pound, chain smoker who takes 150 units of insulin daily with very high/
erratic A1C scores can be insured. That person could pay the same price that a very healthy person would normally pay.

Several top-notch insurers offer such programs. With information about employee health conditions, we can select a particularly-effective program.

With a slightly larger employer, coverage for spouses can also be secured, also with few health questions.

Besides insuring people who might not otherwise qualify, lower prices can also be obtained. Here also,
programs vary among insurers. With good health information, the best fit can be identified. For
example, perhaps all employees would be eligible for coverage, but many non-smokers (diabetics,
people with osteoporosis or shoulder/ knee surgeries, etc.) would typically not qualify for a “preferred
health” discount. Those non-smokers might save 15 percent or more of the price they’d pay if they buy independently of the business.

One convenience of a work-site LTCi program is that the effort of selecting an outstanding insurer can be done once for all employees and relatives. Secondly, educational meetings can be held during the work-day or after-hours, possibly inviting relatives to attend. Thirdly, premiums could be paid by payroll deduction if desired by the employer.

In addition, the new Kansas and Missouri Partnership programs make LTCi more attractive for middle class residents. Thus, LTCi may be more attractive to employees and their relatives than in the past. It is a good time for an employer to consider a work-site LTCi program.

 

Claude Thau is LTCi wholesaler through Target Insurance Services.
P     |     913.403.5824
E     |     cthau@targetins.com