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Are your HNW clients exposed to writing blank checks?


The Blank Check Story

Many advisors do not believe they should spend time discussing long-term care insurance with wealthy clients.  There is certainly some merit to the perspective but who’s decision is it?  About 10 years ago, I was consulting with an advisor and his high net worth client.  The client had retired as an executive at a major accounting firm and had already given away his unified credits, established and gifted money to a family foundation.  With a remaining net worth of $20 million, he was interested in purchasing a second-to-die life insurance policy using his maximum annual exclusions to provide the liquidity to pay estate taxes due upon his (and his wife’s) death.  He had researched his options and understood the leverage power of life insurance.

As we helped him audit his life insurance coverage and acquire the Right Fit™ policy to fund the irrevocable trust, he expressed interest in purchasing long-term care insurance.  My advisor was a little taken back by the request, but we forged ahead to design the Right Fit™ long-term care policy for his client.  He purchased a comprehensive policy on him and his wife for a $6,000/month, lifetime benefit, 5% compound inflation, with an annual premium of $22,000, paid up in 10 years.

After helping him secure his insurance coverage, I was curious to understand the perspective behind his long-term care insurance purchase.  Here was a very successful and intelligent person who was willing to spend a considerable amount for long-term care insurance.  When we questioned him on the matter, he was very quick to reply with what I consider great insight and certainly a paradigm shift from what many believe.

He wasn’t sure if he or his wife were going to need care.  If either of them needed care, he wasn’t sure how long they would need it or how much it would cost.  His most striking comment was: “I consider that like writing a blank check and I am not in the habit of writing blank checks”. 

It makes perfect sense when you consider that long-term care planning is about protecting your assets, family & dignity.  I understand the typical advisor thinking that wealthy clients can pay for care if they need it.  But, perhaps it makes sense to offer them the choice to protect and leverage their assets?  Hybrid policies (aka, asset-based policies) are one-way clients can leverage and protect for extended care.  Wealthy clients may also consider a life insurance policy with a LTC rider as this assures them a maximum return if they need care or not.

Have you seen our client-based Insurance Insights™ on Long-Term Care Planning?

Exploring the Options reviews the pros and cons for three primary ways to insure for long-term care.  With so many insurance options available today, it is important for clients to understand the advantages and disadvantages.  This “Insight” provides key questions to help narrow down which insurance options to explore for your client.



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