Consider This
I've heard this often including some "experts" in the LTC field - “No one needs more than 5 years of LTC coverage”
I shake my head and wonder why they are in the insurance industry to begin with. If they do not understand risk and risk management, why would an absolute statement like that be made? Other times, I believe the messenger is preconditioned to believe that they are immune to that risk or that they have adequate resources to provide both the income that they need in retirement and a deep emergency fund in the event of an extended healthcare event.
Consider this...the typical auto insurance claim is for windshield damage; for homeowners policies, it is hail damage to the roof; and, health policies are for accidental injuries. We do not purchase insurance policies that address each of the "most common" , or "typical" or "average" perils. We purchase "complete" or "total" coverage to protect our car, home, and health.
Why? Because it is the catastrophic event that we can’t adequately address without insurance. So, why do we allow extended healthcare to not be addressed in the same light? Certainly, the cost associated with 3 years of a private room at a nursing home could purchase a $300,000 home or an Aston Martin sports car or provide several years of income. Then, why do we not consider the impact?
"But, I will not need care for 5 years," they say. How do you know? How can you know? Can you self-fund that risk? A mantra that I learned when I first entered the insurance industry was "you cannot predict, but you can prepare." This is one of those times where preparation might be a good idea.
According to Morningstar, the estimated end-of-life care costs in a patient's last five years for someone without dementia is $217,820; the cost rises to $341,651 if there is dementia present.
So, what's the plan? Accept the risk and create a self-funded pool of $300,000? Ignore the potential issue and opt to the plan of hope? Or, address the risk head-on and implement a guaranteed, stable and predictable solution where the client benefits one way or another (a pool of money if they need it for an extended healthcare event or a pool of money that they can pass on to the next generation)?
If it's up to me, I'd consider the full risk and protect against that ... but it's just me.
For more information, please contact me at 610-382-5000.
Lawrence (Larry) Koresko is the president of Insmax Insurance Brokerage, Inc. Lawrence Koresko offers insurance solutions to small businesses and their financial advisors.
