Many high net worth individuals may feel long term care insurance isn’t necessary in order to pay for long term care expenses. This is likely because most high net worth individuals have the liquidity to cover the costs of a long term care event. But, recent trends would suggest more and more high net worth individuals are beginning to give serious consideration to its value. Why is this?
High net worth individuals are beginning to experience having to care for a parent. People are beginning to see the emotional and financial impact a long term care event can have on a family. We’ve heard of situations where it is costing anywhere from $12,000 to $25,000 per month to provide care for a family member. Regardless of your level of wealth, not many people like having to write these types of checks. Especially when the alternative of buying long term care insurance is less costly.
Long term care insurance has been talked about as an asset protection tool to preserve retirement savings, and in some states, assist in the process of becoming eligible for Medicaid through a Partnership Policy once long term care insurance benefits have been exhausted. Some would argue that asset protection is not applicable to high net worth individuals. But, why wouldn’t it be? Despite what many people might think, high net worth families don’t always have immediate access to cash. A high net worth individuals net worth isn’t always liquid assets. In many cases their net worth is made up of real estate, privately held stock, or even art and jewelry. Some of these asset classes may produce cash flow, but often times the cash flow is being used to support lifestyle or the growth of more wealth through investments. Long term care insurance can provide high net worth individuals with the ability to have access to policy benefits without disrupting or reallocating the use of existing assets. To put into perspective, many high net worth individuals insure their assets from the risk of loss even though they could likely afford to replace them. So why not self-insure those items? The answer is simple. It’s less costly to shift that risk to an insurance company.
The primary value most high net worth individuals will receive by having a long term care insurance policy is access to care and management of that care.When a long term care event occurs, the long term care insurance policy will give access to a team of advocates. This team can provide individuals with assistance in designing, developing, implementing, and managing a plan of care. This can be extremely beneficial to ensure access to the best available care while avoiding becoming a burden to family members. The policy will provide access to independent health care professionals who will provide care at home, negotiate provider discounts, and coordinate needed care.
At the end of the day long term care insurance is a risk management tool. Most high net worth individuals have built their wealth by taking advantage of opportunities, while minimizing their risk or exposure as much as possible. Purchasing long term care insurance allows high net worth individuals to minimize risk, work with experts and avoid having to liquidate or reallocate existing assets to fund a long term care scenario.