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Insurance Vs. Self Insure. Rule #1 – Do not wait until the end of your discussion to talk about self-insuring – Bring it up during the discussion.
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Insurance Vs. Self Insure • Rule #1 – Do not wait until the end of your discussion to talk about self-insuring – Bring it up during the discussion. • Example – Considering that the current cost of care is $180 per day, which is $65,700 per year, how long would your funds last? What if you didn’t need LTC for 20 more years, What effect would inflation have on your ability to pay?
Insurance Vs. Self Insure • Rule #2 – What is your money for? • Answers might be to travel, to pay for grandchildren’s schooling, to golf, to vacation, to live. Maybe it’s for an emergency or for a rainy day. It’s not to pay for LTC. Find out what your client plans to do with his/her money. Focus on that.
Insurance Vs. Self Insure • Rule #3 – Talk about the effect self-insuring will have on the remaining, healthy spouse. • Example – Should one spouse need LTCI for 4 years, that could consume $262,800 of the estate. How would that affect the remaining spouse? How would that affect his/her lifestyle or quality of life? How would that affect your family?
Insurance Vs. Self Insure • Rule #4 – Show them that the liquidation of assets to pay for LTC is very costly. • Example – 25 years from now, a person at a 40% tax bracket, would need around $378K of pre-tax dollars to fund the $270K you will need to pay the “average” price for 1 year of LTC. Remember, that with liquidation, not only do you pay taxes and maybe penalties, but you are now losing earning power.
Insurance Vs. Self Insure • Rule #5 – Is LTCI only about asset/wealth protection? • Answer – No, it’s not. It’s about protection, professional/quality care, lifestyle, freedom, choices, flexibility, control, self-reliance, dignity, independence, empowerment. Ultimately LTCI makes a tragic situation less stressful by giving the policyholder control of his/her life.
Insurance Vs. Self Insure • Rule #6 – How would you handle a Long-Term Care need if you decide to self-insure? • Questions – Who would coordinate your care? How would you pay for it? Who would be in a position to help you make choices? What if you suffer from Dementia or Alzheimer’s or are unable to communicate your wishes?
Insurance Vs. Self Insure • Rule #7 – Supposing someone could realistically self-insure you could show them the following: • 50-Year-Old Client – Standard Health – Single – Buys a 4-year, $180 per day, 5% Compound Inflation benefit with a 45 day EP. This costs $2,291.42 per year. Client goes on claim after paying premiums for 25 years. • Your client has paid a total of $52,797.75 in premiums over 25 years. That’s $12,902.25 less than what it would cost someone to self insure one year in today’s dollars. • For that $52,797.75 dollars your client is getting $222K the first year, $233K the second year, $245K year 3 and $257K year 4. That’s a total of $957K over 4 years. • Remember, at the same time, the money that they have saved and are using for retirement is still in place and hopefully continuing to grow.
Insurance Vs. Self Insure • Rule #8 – It’s not only about the money, but about the emotional & physical protection and peace of mind • LTCI gives your clients what they want which is quality care at little or no cost to them when they need it most. LTCI gives your clients the choices, power, control, freedom and dignity they deserve.
Insurance Vs. Self Insure • Rule #9 – Pay me now or Pay me later, either way you are going to pay. • Consider these facts: • 7 out of 10 elderly individuals entering a nursing home find their income at poverty level after only 13 weeks. • 2/3 of all elderly Americans lose all their assets within one year of LTC. • 50% of Americans over age 65 will need LTC for some period of time before they die.
