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About Long term care insurance

Posted Mar 02 2012 10:32am

sailing sunset


Dear “Bob and Sue”,

Here is a basic summary of how you can control some future costs and the values that are more important to you and your family.

We all know, governments will shrink funding for seniors & health care.  So we ourselves can save more for our future care, or we can insure these costs.  Which is going to be easier?  Well can you imagine scrimping to save $1000 /month for 20 years (at 5%) to accumulate $400,000 after tax?  What if other needs arose along the way?  What if illness or frailty came sooner?  Want another idea?

Trudy was 83, a delightful woman of declining health, widowed five years earlier.  One day she described to me her worry about “running out of money”.  It broke my heart to see her struggle, as that was 1994 and I had no solutions at that time to ease her burden.

John was 73, a scientist who had devoted his life’s research to others’ health.  Yet in 1995 when I arrived at his home – with a “for sale” sign on the front — he mentioned having 33 months to live.   I asked him how he would know this.  He explained, “I’ve done the math.  When the house sells, and I move into the lodge with my wife, we’ll run out of money in 33 months.  We’ll have to die then.”   It broke my heart.

If you’re reading this today, I can share with you some resources that protect people from such traumatic times.   First let’s survey some other alternatives and then focus on how Long Term Care Insurance may help.


(a) Life Annuities have been widely ignored since the 1990s.  LA.s guarantee lifetime income and are especially helpful for people who stay healthy long into their 80s and 90s…  Laddering life annuities in our 70s & 80s can pay high income with very low tax.  If you’re betting to stay healthy you can find extremely high income for life (or beyond!) without owning LTCI.

(b) Home Equity Line of Credit.  We’ve all heard of reverse mortgages:  historically they have high fees, punishing interest rates, and solve cash worries for awhile but provoke more worries later.  You might prefer a HELOC which lets you boost cash flow, reduce tax & clawbacks, and capitalize interest until you sell the house.

(c)  Systematic withdrawal from Mutual or Segregated funds.  There are easy and tax-effective ways to draw income from most investment funds.  Segregated funds add value by guaranteeing net deposits at maturity and guaranteeing full value in event of death.  They also can bypass your estate, saving on probate and legal fees – and pay your beneficiaries as soon as 5 – 15 days.   There are many ways to create strategic and tax-effective income from investment funds.

(d) Children who may be in their 50s, or even 60s+, can be asked to help.  As a legal or moral obligation these children who are nearing or entering their own retirement can perhaps take on the financial costs of their parents’ care.  If this was accepted in earlier times of large families, it can present quite a problem now with fewer children to contribute to mom’s & dad’s care.

Long Term Care Insurance is independent of other savings, and has the power to fund a person’s care much sooner – even immediately – when it has been put in place ahead of time. This “disability insurance for seniors” (though actually for all adults) protects our independence, privacy, dignity and care when a person becomes frail. 

Seniors realize how health costs can endanger a nest egg.  Amid government cutbacks and rising costs, LTCI can pay you from $1000 to $8500 per month.

When does it pay?  

Typically people will qualify to receive LTCI benefits when they have a cognitive disability such that their care requires supervision, or they are unable to do two of the six basic “activities of daily living”.   These activities include such basic self-care as bathing, dressing, toileting, transferring, continence, and eating.

How does it pay?

(1) Reimbursement plans can repay expenses up to a daily limit, excluding such items as natural caregivers (family or friends).

(2) Indemnity plans are similar, aiming to remedy your financial burden yet fail to compensate for natural caregivers.

(3) The Income Plan is a direct tax-free payment to your bank account each month, which you can use for any purpose you choose without having to provide receipts or proof of professional services.  With the Income Plan you and your family can fully select the type and level of care that you want – anywhere you choose!   Freedom to choose care from family or friends, plus avoid tracking receipts & expenses, are among the comforts and practical advantages of the direct Income Plan.

How long does it pay?  

Typical options include payments up to two years, five years, or unlimited benefit for as long as you live.   We can discuss which approach will be most suitable for you.

Personal reasons: 

As we age, we have personal and unique reasons for insuring our personal care!  One woman was worried her step-children would watch every dollar she spent:  insuring gives her a CLUB MED level of personal care without any comment from step-children.

A gentleman whose son died is protecting an estate for his grandchildren:  LTCI is guarding their inheritance so grandfather can age graciously without ever worrying about the cost of his care.

LTCI protects family values.  It saves the family estate for loved ones.  It even protects our children from losing their own retirement due to covering our own eventual care costs.

So may I ask you a question?  When you worked hard all your life, was your goal to save for distant days of getting old and frail?  Surely not!  So why change that now?  Don’t lose your savings on sickness, accident or frailty.  If you can insure your resources and protect your independence, consider the comfort, privacy and care that will matter most to you!

Yours in financial security for LIFE!


Brian Weatherdon,  BA, MA, CFP, CLU, CPCA, MDRT.

Sovereign Wealth Management Inc..  905-637-3500 x223    

Brian Weatherdon of Sovereign Wealth Management Inc. is a financial advisor representing Freedom 55 Financial, a division of London Life Insurance Company and a range of financial companies. The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors. The views expressed are those of the author alone and not necessarily of the issuer of any financial products for which the author may act as a distributor.

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