It has been called the hidden estate tax and there are no exclusions, limits or laws regarding who and how much it can affect. The ability of a long-term illness or disability to ravage a client’s estate is tremendous. No matter how large is the estate, long term care expenses can decrease or even wipe out the assets the client has worked hard to accumulate over a lifetime.
The need for LTC insurance thus depends not on an estate’s size, but rather on how much a client plans to self-insure. Rarely does it make sense to completely self-insure when the losses can drastically reduce assets. LTC insurance, as a form of risk management, can protect these assets.
A recent National Underwriter article highlighted the need for LTC insurance and financial planning. Of those aged 44 to 65, 73% had no LTC insurance. This is despite the fact that health care and LTC costs were just behind major downturns in the stock market, competitiveness of the U.S. in international markets and inflation as major reducers of retirement next eggs–none of which clients do anything about. However, they can insure against the cost of an arduous and expensive LTC need.
Many clients are their own worst enemies because they drain their assets in an extended care scenario. Consider the expenses: In Miami, nursing home costs range from $155 to $270 per day and, on average, $71,000 annually. This scenario repeats across the country.
To consider average costs for affluent clients underestimates their real costs for LTC in a facility or at home. Affluent clients are accustomed to receiving superior services. Because skimping on nursing or home care is unacceptable to them, they purchase quality products that entail higher costs.
A further effect of quality care is greater longevity. Since a longer and more comfortable life comes at financial cost, longevity compounds the reduction of the client’s estate. This cost may be higher than the client’s heirs anticipated; they may wonder why the client didn’t purchase LTCI to protect the estate at a significantly lower cost than by self-insuring.