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I was in a home a while back doing a policy analysis for an older lady. It was one of those policies that provides a death benefit in addition to long term care benefits through an accelerated death benefit (It pays out a portion of the benefit prior to death – what ordinarily would seem like a pretty cool feature). The woman’s age was 73. I kept looking at the policy and trying to figure out if I should recommend that she keep the policy or let it lapse. Something just didn’t look right but I couldn’t quite put my head around it. The annual premium was lower than what I would have expected for a traditional LTCi product, but the LTC benefits were far less than I would have recommended, and there was no growth in benefit, which would be an appropriate planning strategy for her age.

When I asked her why she purchased this policy she said that if she needed any help with care later on, it would provide money to pay for it. That made good sense, but it just didn’t feel right. The house she lived in was on the back side of the 16th hole of a private golf club, a very nice house with a very nice view, and beautifully furnished. This lady was well healed. I finally realized that what she was sold was actually a small whole life policy with a built-in long term care benefit at a fixed amount, far below what would make a real difference in her financial situation.

Needless to say, I would have approached the long term care planning process for this dear lady far differently. The principle lesson I learned in all this was clear. Sometimes the only benefit derived from application of a particular financial product is the commission the agent earns. Good for him, not so much for the lady.

May God strike me dead if I should do that to one of my clients!