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| Advisors' Forum |
Future Considerations
06/01/2007
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My wife and I are in good health and have a robust portfolio,
so it surprised me when our advisor suggested that we consider buying long-term
care insurance (LTCI). He recommended it as a way to hedge risk, but I am
confident that we could pay for whatever care we will need in the future. Is
this just an unnecessary cost?
It depends. LTCI is not only
beneficial in an economic sense, but also in an emotional sense. In your case,
it may make more emotional sense. According to a June 2005 LifePlans study, you
have a 50 percent risk of needing long-term care during your lifetime. Just
because you have the money for this care doesn’t mean you (or your family
members) want the responsibility that goes along with it. LTCI can help by
offering valuable care coordination.
If you rely on your family for care, you may feel that you are
burdening your loved ones. With many LTCI plans, licensed professionals work
with your family to organize the best care possible, accommodating both your
needs and your family’s needs. This can help avoid conflict among loved ones and
subside any feelings of guilt you may have.
As for protecting your assets, LTCI can help you do that as
well. The national average rate for a private room in a nursing home is more
than $75,000 annually. In addition, the cost of long-term care is expected to
increase threefold in the next 20 years. Consider this as you decide whether you
are willing—or able—to shoulder this cost on your own.
Matthew Sinclair, New England Financial, Tarrytown, N.Y.
Marital status somewhat affects
this decision. If a married couple purchases LTCI for both individuals, the
healthy spouse will then be able to continue using the combined income and
assets—without the high costs of healthcare and nursing care expenses reducing
them. In my experience, very few clients (wealthy or not) are secure with having
their net worth diminish as they grow older. The psychological benefits that
long-term care insurance provides merit consideration.
If an individual has no spouse but has children, the
psychological and financial aspects of medical care become somewhat more complicated. Like it or not, the next generation will try, in good faith, to
preserve as much of a parent’s assets as possible for ultimate distribution to
them and to their children. In some instances, whether or not medical care costs
will significantly diminish the parent’s assets impacts these judgments. Thus,
LTCI allows family members to make the best possible choices for their
parents—without financial considerations.
All things considered, when compared to the benefits provided
by such coverage, the insurance premiums are not a financial burden to the
majority of affluent people.
Michael H. Foreman, Cole, Schotz, Meisel, Forman &
Leonard Hackensack, N.J.
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