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Thousand Dollars Long-Term Care Insurance – Part 2

With a couple I always focus on you’ve got to stay on (unclear) and protect a healthy spouse. People don’t understand how much long-term care services cost because they’re always thinking about today. Yes he can write a check today for ten or eleven thousand dollars a month here in Maine to pay for a nursing home but he’s not gonna need long-term care next week. He’s gonna need it 25 years from now when he’s 87 years old and it’s gonna be $20,000 a month.

You have to point that stuff out and make them sort of absorb that. Okay and what part of this conversation do you think resonated with the surgeon the most that he wanted to look at some of the different planning options? Well I think the first part was We don’t want you in the nursing home. We want you to stay at home Chuck (his name’s Chuck) and frankly Chuck long-term care services at home can cost two or three times what our nursing home costs. Even if you don’t need skilled care if you need somebody just standing in the room with you to make sure you don’t get hurt 24 hours a day seven days a week at $35 or $40 an hour that’s gonna add up really fast. Right. So what was the solution that you were talking about designing for him? So with all of my clients I show them any product that I feel is appropriate and frankly I let them decide.

I’ll sort of nudge them one way or the other but I’ll let them make the decision. So with Chuck we talked about standalone long-term care insurance and we talked about a couple of the different hybrid plans. I see and which one of those ideas resonated with him the most? He sort of liked the hybrids but he liked the price more from the standalone long-term care plans because even though he’s wealthy you know he’s watching his dollars. Okay and so what what type of standalone plan were you looking at designing for him? Sure we went with a plan that would cover $200 a day in any of the settings it was going to be three-year benefit periods each we did shared care with a shared third pool so they had another bucket of money there that they could both draw from it had a 90 day elimination period and three percent compound inflation.

Okay and what was the cost of the plan? Well he chose the ten pay he wanted to get this out of the way as part of his retirement cash flow planning if you will so they were gonna pay about twelve thousand dollars a year for the next ten years and then they’re done. Okay so it sounds like a lot of money you know one hundred and twenty thousand dollars for their long-term care plan but what were the benefits worth to them? Initially because they had three buckets of money they had about two hundred and sixteen thousand dollars each so they had over six hundred and fifty thousand dollars that they could use for long-term care the day they wrote that first check. And then when you take the inflation into account when they’re in their mid-80s they’ll have over a million dollars of long-term care benefits there and they’ve only paid one hundred and twenty thousand dollars.

So they’re probably getting at least ten times what they put into it if they needed all the benefits in full. Yeah how would that compare if they wanted to self fund that plan one hundred twenty thousand what would that be if they need the need the care? Well I’m not the investment guy we let the planners do that but if you take a hundred and twenty thousand dollars and put it in the bank today and never touch it again you’re gonna have to make what ten eleven percent to get to that bucket of money and at age 85 it’s a lot harder to do than the long-term care insurance.

Yeah I guess it today’s low interest rates even if you bought you know a 30-year bond you know that’s earning three four percent today it’s not gonna grow that quickly maybe you’ll have double what you put into it so ten times for protection maybe double self-insuring with more flexibility around the funds in that case. Exactly yup. So it sounds like the financial value proposition is really what won over this particular client would you say? I yeah I think so two things educating them that we’re not trying to put you in a nursing home we’re trying to keep you out of it and two look at look at how little all this protection was going to cost you comparatively. Awesome well I appreciate you being on the episode I know you wrote an article about self funding versus transferring the risk on LinkedIn and I’ll kind of pair that to this interview but I’m sure we’ll be interviewing you more in the future thanks for for joining us to talk about this particular case. Thanks Marc. Nice talking to you take care.