What's Happening?
A 70-year-old couple with $3.4 million in assets decided to sell their long-term care (LTC) policies and self-fund a $400,000 reserve instead. Facing a 27% premium increase on their 12-year-old policy,
they chose to allocate funds into a reserve that could grow to approximately $832,000 by age 85, aligning with median care costs. This decision reflects a broader trend among high-net-worth households to self-insure against rising LTC insurance premiums.
Why It's Important?
This case highlights the financial strategies available to affluent individuals facing rising LTC insurance costs. By self-funding, the couple avoids the 'use-it-or-lose-it' nature of traditional LTC policies, potentially preserving wealth for heirs. This approach may become more common as insurance premiums continue to rise, prompting high-net-worth individuals to reassess their long-term care strategies.
What's Next?
As more individuals consider self-funding, financial advisors may need to offer tailored strategies that account for inflation and investment risks. The insurance industry might also respond by developing more flexible products that address the concerns of high-net-worth clients. Monitoring the impact of these decisions on the LTC insurance market will be crucial.
