Earlier this week during LTC Coffee Break Espresso Shot, we dipped into the mailbag and answered the question “my client can afford to pay for long term care, he is high net worth.” Well, Michael shared an analogy to buying a luxury sports car. Check it out.
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As Michael mentioned, many people (clients, advisors, agents, carriers, etc.) believe that someone with “adequate financial resources” are in a position where they can afford to self-fund an extended healthcare situation.
Last week, I shared a little bit about underfunding a long term care insurance plan. A similar argument can be made for someone who is opting to retain the full risk of an extended healthcare event.
If you recall, short durations of care consumer little capital which plays into the strength of self-funding. Moderate and long duration events (obviously) will consume significantly more capital and may present a hurdle to completing any wealth transfer or legacy building strategies.
A question to ask is how can one mitigate that risk. Simply – leverage and an insurance based solution provides the best leverage and insulation for those monies.
What is the right solution for a client? Well, it is up to them.
They should determine whether they are willing to retain the full risk and self-fund. Or, to transfer the risk and opt for a fully insured solution for a long duration is what they want. Or, they can opt for a short duration insured solution to play the averages acknowledging the self-funding is the long game. Or, they can accept a short duration self-funding strategy where insurance is in place to provide “stop-loss” protection.
It is our responsibility as advisors to have the extended healthcare funding conversation with our clients without product bias and LET THEM DECIDE whether an insurance strategy is what they want to do.
But, let’s consider that luxury car analogy for a minute.
The 2022 Ferrari 812 GTS retails at $410,000 American. Consider that for a minute, that is equivalent to 2 full years of 24 hour a day home care at $25/hour. And, if you have the resources for a GTS, you likely are assumed to have more than enough capital to self-fund a long term care risk.
BUT – would you want to divert $410,000 into cash or cash equivalents in order to address the potential for an extended healthcare event? Wouldn’t it be more prudent (not to mention increase your wealth) to allocate a third of that money to create a dedicated pool of resources to fund a long term care event? And, if you don’t use them, at worst, you get your premium dollars back – AT WORST.
Just a little something to think about …
For questions about OneAmerica, case design, strategies, or asset-based long term care solutions, please contact me via email at kevin.fisher@oneamerica.com or call me at (678) 512-9627.
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