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I was reminded recently of the subtle, yet critical, issue regarding long term care services. We pay for services with cash, not assets. When long term care services need to be paid for, availability of cash is critical. In past conversations with ”high asset” clients, their frequent response to the need for LTC insurance is this, “I have enough assets to pay for care myself. I don’t need insurance.”

I once talked with a client about his financial situation as part of my planning process. He explained that he had stock valued at about $300,000.00. I asked him what would happen if he had to sell off a portion to pay for care services. The truth is the stock is from a privately held small business located out of state. If he were pressed to raise cash to pay for care, he would be lucky to get pennies on the dollar. Now the dividends he earned from his stock is another story. It turns out that the dividends would more than pay for a suitable long term care insurance policy.

Even if assets are readily transferable, what about taxes that are paid after liquidation? And if there are 10-20 years before services are likely required (typically ages 80-85) inflation will increase the cost of care by perhaps two times or more. Add this all up and the total cost of care becomes VERY expensive.

Long term care insurance provides a separate flow of cash to pay for care services outside the source of income that your retirement portfolio provides. The actual cost to you may be as little as $.10 on the the dollar. Ignoring this leverage that long term care insurance provides for your premium dollars looks pretty foolish. Or is it just me?