 LTC Bullet: Why Should the Wealthy Buy LTCI? Friday, May 30, 2025 Seattle— LTC Comment: Why buy insurance when you can afford to self-fund for the risk and cost of long-term care? Answers after the ***news.*** *** WHO PAYS FOR LTC? We’ve explained elsewhere how little of the cost of LTC gets paid “out of pocket.” Here’s a table summarizing all of the LTC financing sources.
Note that only 12.9% of LTC spending comes out of pocket. But half of that is spend through of income (not savings) that people already on Medicaid half to contribute to offset Medicaid’s cost for their care. So, only about 6.5% of total LTC expenditures could come from savings, despite all the media hullaballoo about how LTC wipes out the life savings of millions of Americans. That brings us to this LTC Clipping we published last week about similar findings presented by Andrew Biggs of the American Enterprise Institute. 5/20/2025,
“No,
Long-Term Care Costs Aren’t Going to Cause a Retirement Crisis*,” by
Andrew G. Biggs, American Enterprise Institute
LTC BULLET: WHY SHOULD THE WEALTHY BUY LTCI LTC Comment: “Let me tell you about
the very rich. They are different from you and me.” That sentiment holds true for the reasons high net worth people should consider purchasing private long-term care insurance. In today’s “Guest Bullet,” Center for LTC Reform individual member Shawn Britt of corporate-member Nationwide explains why the wealthy would be well advised to buy LTCI. The very rich may have different “pain points” than the less affluent. Finding those vulnerabilities, identifying them, and asking the right questions to bring them forward are keys to helping the wealthy see the need to insure. Read Shawn’s cogent advice and apply it for your well-to-do clients’ benefit … and yours.
Long-term care insurance is often thought of as a “safety-net” for the middle market, but in reality, LTC coverage is for everyone! Too often, high net worth (HNW) clients approaching their financial professional about purchasing LTC coverage are told “you can afford to self-fund long-term care.” It happens in reverse as well, with clients rebuffing a LTC discussion by saying “we plan to self-insure.” However, being able to afford self-funding does not make it a good idea. There are many sound reasons for the wealthy to use LTC coverage in their financial strategy. Find financial pain point How do you discuss the need for LTC coverage with HNW clients in a way that makes sense? For these clients, you are looking for their “financial pain point” – a concern related to money that can be solved or protected by having LTC coverage. Yes, they can afford to pay for their own care, but that involves spending money – funds that may have been allocated to be used for better purposes. When you find their financial pain point, you justify the need for LTC coverage, particularly if that pain point has an emotional tie to it. But first, it is important to understand just how much the affluent and the HNW spend on long-term care expenses. Highly affluent individuals spend more on long-term care High net worth and highly affluent clients typically spend more on LTC than the typical upper middle class or middle market client. • The HNW and highly affluent people are less likely to receive physical care from their adult children – who are more likely to have executive/professional level jobs • The HNW are more likely to stay at home for care, no matter the cost. The current national average cost for 24/7 care at home exceeds $260,000 annually, but can run $350,000, $400,000 or higher in the wealthier communties!1 • For those going to a facility, it is often a top end “luxury” facility with services and amenities not typically found in a traditional facility. The cost of receiving care in such an atmosphere can run upwards to $35,000 a month.2 That can add up to over $400,000 per year in today’s dollars. The cost of an LTC event for a HNW or highly affluent individual that lasts three years can easily exceed a $1,000,000 or more in today’s dollars - and fifteen to twenty years from now, costs could run from $2 million to $4 million for an individual or a couple. That is a lot of money – even for the wealthy! When you discuss that level of cost with a client, the idea of “self-insuring” may start to lose appeal. How could those same dollars have been put to a better use if the HNW client had used cost effective insurance to pay for their LTC expenses? How LTC Insurance Eases the “Financial Pain Points” The following are just a few of the potential pain points you may discover when talking with your financially affluent and HNW clients. • Ask your client to list the charities and causes they would like their estate to donate to upon their death. Then after showing them the cost of a 3-year LTC claim that could cost anywhere from $1 million to $2 million (depending on when the claim commences), ask them which charity should be crossed off the list. • Is your HNW client heavily invested in real estate or businesses that cannot be easily liquidated? An LTC event taking place when this client is asset rich and cash poor could result in having to sell an asset well below its value. • Does your client have relatives or other people they are financially responsible for? Using LTC coverage to fund those potential events make much more sense than paying out of pocket. • Does your client call you every time the market takes a hit? Most clients, regardless of wealth, do not want to see their account values go down. Pulling out large amounts of money to pay for care in a down market results in a double loss. The money cannot be grown back or grown forward. • Self-funding sets up the client’s estate to potentially pay unnecessary estate taxes. If they are lucky enough not to need LTC, the “LTC funds” sitting in their estate could be estate taxed. What if you could avoid that risk by using the “self-insurance funds” to purchase LTC coverage at a faction of the cost, and then donate the rest of the dollars to charity now, which would allow for a tax deduction now? The tax deduction could help offset the cost of the LTC insurance premium! • Regardless of wealth, putting one adult child in charge of a parent’s care puts them in the position of making financial decisions that their siblings may not agree with. Having LTC insurance helps take that issue off the table. When LTC benefits are paying for the parent’s care, it is far less likely that siblings will disagree on how the money is being spent, since the care is being paid for by LTC benefits from an insurance company – not their inheritance. Final Thoughts How do the HNW become wealthy? Some inherit – but many build their wealth (or build it further) by making good financial decisions throughout their life that include leveraging assets and finding win-win solutions to potential problems. So, why would they stop doing that now? The key is to find the pain point. What really means something to the HNW or highly-affluent client that has that has a dollar cost associated with it? Then show the client how self-funding LTC expenses eats up the dollars they might otherwise devote to that desire, such as charitable giving, liquidity needs, supporting family members needing LTC, inheritances, major philanthropy or whatever that pain point is. Today’s LTC coverage options attached to some form of financial product can offer guaranteed premiums and benefits, and protect the investment in the policy from loss if LTC is not needed. Long-term care coverage is just as important for the HNW and highly affluent client as with any client – it is just for different reasons. Shawn Britt is Director of Long-term Care Initiatives, Advanced Consulting Group, Nationwide 1 A Place of Mom – ”How Much Does 24/7 Home Care Cost in 2024? An In-Depth Guide” – May 9, 2024 2 Evelyn Battaglia – Brick Underground “Where seniors can find luxury independent living residences with resort-like amenities plus 24/7 personal care” – August 22, 2023 |
