Long Term Care Insurance Options
July 28, 2022
Dear Clients and Friends:
In my last issue of the LISTEN TO LAWRENCE LETTER, I talked about how I still recommend Long Term Care Insurance, although not any particular company. A client of mine, who also happens to be a retired insurance broker, wrote me a response that I think you will all find valuable…so here it is:
LTCI is an essential protection and I am glad to see that you still recommend this so strongly. You might recall that when we did our T&E planning with you in the late 90’s we also set up an Irrevocable Trust, funded it with a Second To Die Universal Life policy (still in effect and with so much cash value that we haven’t had to pay premiums for years) and we also purchased Long Term Care Insurance with an Inflation Rider. I am now 81 and my wife is 79 but we bought the LTCI through our business which was allowed to expense premiums for individual policies. The Daily Benefit started at $100 and is now close to $500 per day times the 3yr. Benefit period…so the “pool of money” is very substantial. Our children’s inheritance will not have to be impacted by the cost of any long-term care so we have accomplished what we set out to do with your guidance.
To your response below which is accurate and while it’s true that many LTC carriers have exited the business there are still many planning options available that could be considered for individuals:
• New products are available called “Hybrids” that afford an LTCI option with the Life Policy. There are several A-rated companies now in the market and some are the older carriers. Too involved to state details here but insurable folks should seek out a knowledgeable agent or broker and find out about it. There are many new combinations to choose from.
• Large employers are now offering LTCI as part of their group benefits package on both a total employer-paid or part-employee contribution. Usually, all or a portion of the coverage may be underwritten on a “guaranteed issue” like long-term disability. Products are also becoming available in some states for even smaller employers to offer LTCI. Everyone should be asking their employer if anything may be available.
• Encourage hi-net worth seniors to persuade their children to purchase LTCI at a young age (as you did) and either pay or gift the premiums.
• Small businesses can purchase Individual LTCI policies and pay premiums but must discuss thoroughly with their accountants and advisors as this is not group insurance.
• Set up a “Sinking Fund” for an uninsurable person, funding on a regular and systematic basis using annuities, investments, current income and bonuses, and other non-insurance products. Owners of small businesses can easily set up something (similar to planning as in funding a death benefit in a partnership buy-sell agreement where one partner is insurable and the other may not be).
So there are many options that can be explored but people have to commit to planning. One of my mottos still is the 6Ps: ” Proper Planning Prevents Piss Poor Performance.”
Your newsletters are great. Very stimulating even to old-timers like me.
I think my client’s response is great and consistent with what I tell my clients. Long-term care insurance, one way or another, is the place to start when addressing the costs of long-term care. Only when this is not an option should Medicaid planning be considered.
I hope this helps! Please forward this information to your friends and relatives to share these informative answers to some very commonly asked questions.
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Until next time,
peace, health, and happiness,
Lawrence Eric Davidow