Chris: I am really excited for this conversation. I have got a really good friend of mine, Russell Boring. He is the Founder of Elevated Strategies Insurance Services. At the end of the day, Russell, you spend a lot of time dealing with insurance problems and solutions for clients, particularly high net worth and long term care. We were having a conversation about whether long term care insurance is really worth it. The main reason I bring that up is because you have seen the policies that were around 20 or 30 years ago that do not exist today. The payouts were attractive back then, and now in a world of inflation, they look different. The long term care landscape itself has changed dramatically, along with the solutions available. We run into this question with clients constantly: do you have enough to self-insure? And at what age does it make sense to look at long term care insurance? I wanted to dive into the details and hear your perspective. This is education only, not a sales pitch. Let us talk about where the long term care insurance market is today and how things have changed.
Russell: Historically, going back ten or twenty plus years, there were a number of carriers throughout the country offering what I would call traditional long term care. Think of it like car insurance. You pay premiums, you hope you never file a claim, and premiums go up and down based on claims data. There is no ancillary benefit if you never file. It is just money out of pocket. Over the years, those carriers grossly mispriced their products relative to actual actuarial claims data, which drove most of them out of the market. In California today, there are fewer than five, maybe fewer than three. Less competition means less pressure on price. You also have clients who bought those policies ten or twenty years ago who made out really well, with things like lifetime benefit pools and aggressive inflation riders that carriers are now trying to buy them out of. For most of those clients, even with a rate increase, it still makes sense to keep the policy. But the product market has changed significantly since then.
Chris: I am interested in hearing what those products look like today. Historically, as an advisor, if a client had not looked at long term care by 65, it felt too expensive. But the market looks very different now, and so do the statistics around how many people actually need this.
Russell: The numbers are part of it. About 70 percent of people over 65 will probably need some form of long term care before they pass away. About 1 in 3 may not need it at all. But 1 in 5 may need care for more than five years. If you have a long term care claim running six figures a year for five years, that is a real risk to a retirement plan.
Chris: And it is a big frustration if you are one of the 1 in 3 who never needed it and paid a lot of money for something that felt like money gone, when you think about what that could have done for your kids or the causes you care about.
Russell: That is exactly why these products have evolved. You do not want to pay into something you might never see a return on. There are now four primary product structures. You still have traditional, which is the old school version. Premiums go up and down. It might be inexpensive compared to alternatives, but you have no control over the future and no payback if you never file a claim. The more popular products now are hybrid structures. One option sits on a life insurance chassis, essentially a life insurance policy with a rider that can accelerate the death benefit pool for tax-free long term care. A lot of people like that because it covers two needs at once. But not everyone needs a million dollar life insurance policy if they are in the two to ten million dollar range and do not have an estate tax issue. Some of the other options are more long term care-leveraged plays, still on a life insurance chassis, but where the life insurance component functions more as a return of premium. If you put in $100,000, your death benefit is going to be somewhere in the $100,000 to $150,000 range, so if you never use it your money is coming back to you or your beneficiaries, income tax free. The more important aspect is the long term care piece. On that same $100,000 commitment, you could have $300,000 available for long term care from day one. That is the conversation today: using dollars to leverage up for long term care, with distributions that remain income tax free and a pool that can grow with inflation.
Russell: There is a fourth option gaining popularity, and that is the annuity-based structure. It is attractive because you do not fully lose the investment opportunity of those dollars. When we look at someone's portfolio across safe, moderate, and higher-risk assets, we can consider using some of their safe-bucket allocation. So instead of sitting in a money market, those dollars go into a structure where you still get two to three times leverage on the long term care pool from day one, but your actual contribution amount continues growing at three to five or six percent, without meaningful market risk. This is not an eight to ten percent return. This is a safe asset. The eight to ten percent growth story is on the long term care pool itself. The most attractive version of this is when someone has an existing annuity or a life insurance policy with cash value they do not need for retirement income, and it is sitting in a gain position. You can take that account value and create a tax-free position for long term care that is leveraged up. That is where this gets really interesting.
Chris: So in that example, I am 74 years old, I have a life insurance policy I have been paying into for years, but my net worth has grown and I do not really need it anymore. If there is cash value in it, I can do an exchange into a long term care type policy and still go to sleep knowing that if I never use it for long term care, those dollars are still coming back.
Russell: Exactly. A lot of people buy life insurance a decade or more ago and it has grown. Then their life circumstances change. Their kids are independently wealthy, or their relationships have shifted, or they simply have more assets than they originally anticipated. They look at the policy and say, we do not need this, but the long term care risk is real. There is now a way to potentially fund and protect that risk with an asset other than their managed accounts.
Chris: So if a couple hundred thousand dollars goes into one of these policies and I get five or six hundred thousand dollars available for long term care, and I never use it, I get that original contribution back plus some growth. But that five or six hundred thousand for care: how much do I actually have access to each month?
Russell: It depends on the carrier, the product, and the state. On some annuity structures, if you put in $250,000 to $300,000, your monthly maximum is somewhere around $10,000 from day one. It is a larger contribution, but it can make a lot of sense if the goal is to protect a risk that could otherwise significantly affect the retirement plan.
Chris: One of the things I have seen in 17 years as an advisor is that clients who could easily self-fund long term care often do not spend the money when they need to. Life happens, and what I have seen both personally and with clients is that they have enough money to pay for care if their spouse needed it, but they just do not spend it. To me, having a long term care policy protects you from that. So you are not stuck being the caregiver yourself, going to every appointment alone. You are still there for your spouse and part of it, but it is not all falling on your shoulders. I have seen that play out in a couple of cases.
Russell: And today, a lot of these carriers have concierge teams to help coordinate the care. They partner with third-party professional groups that assist the healthy spouse with managing documents and navigating the claims process. That is another valuable feature in some of these products.
Chris: Because we all love dealing with medical bills and insurance paperwork.
Russell: They are still insurance companies at the end of the day. But the goal is to protect a risk, and there is real support built into some of these products now.
Chris: So when does long term care insurance not make sense?
Russell: It becomes more of a want versus need conversation as wealth increases. On the lower end, if someone is struggling to cover basic retirement expenses, it is very hard to redirect money toward an insurance premium. There are also Medicaid protections in place for people who draw down their assets, though those plans offer significantly less flexibility. On the other end, for ultra-high-net-worth clients, you could argue this is more of a want than a need because they could self-insure. That said, and I acknowledge I have a conflict of interest here, I still think there is a sincere math conversation to be had even for clients with $30, $40, or $50 million, particularly on the annuity-based structures. If someone has a large safe bucket, we can look at whether it makes sense to take a portion of it and leverage it up three times compared to keeping it in a money market.
Chris: And sometimes ultra-high-net-worth clients have a lot of assets but not a lot of liquidity.
Russell: That happens. You have to look at the full picture.
Chris: What I found most interesting in our conversations about what has changed in the market is that it is not always dependent on age the way it used to be. If you have two to fifteen million dollars and you are in your 70s and long term care is on your mind, there are solutions today that make more sense than anything that existed five, six, or seven years ago.
Russell: Correct. Life insurance-based structures become less attractive the older you get because the carrier is managing risk for both life and long term care. As you move into higher ages, the annuity option starts to make more sense. The carrier's net amount of risk is significantly lower because they are managing the assets directly rather than insuring a life event. So they can offer more attractive leverage on the long term care piece at older ages. A lot of the factors that would otherwise disqualify you for life insurance or make it prohibitively expensive are no longer on the table. You can still get meaningful leverage into your 70s.
Chris: You also mentioned that California has different leverage and benefit parameters compared to other states. In some states the monthly maximum can increase over time with the crediting rate, whereas in California certain products fix that maximum.
Russell: Yes. The multipliers may be similar, two or three times depending on underwriting, and the process is typically just a short questionnaire and sometimes a brief phone interview. But in California, certain annuity products may fix the monthly maximum you can tap. The long term care pool still grows with the crediting rate, which might be four, five, or six percent. But the monthly maximum amount you can draw from it may be fixed on certain products. In other states, that monthly ceiling can grow alongside the crediting rate, which is a meaningful difference when you are thinking about the impact of inflation over time.
Chris: So in California, if your monthly maximum is $10,000 today, on certain products it may stay at $10,000 even as the overall pool grows. Whereas outside California, that maximum could increase over time to reflect inflation.
Russell: For certain products, yes. It really depends on the specific client's situation and which product fits their fact pattern. But that is one of the state-specific constraints worth knowing about.
Chris: I enjoyed this conversation. The real takeaway is trying to understand whether long term care belongs in your plan. First, do a self-assessment: can you afford to self-fund, or do you want some form of protection? Then have a conversation about what age-appropriate solutions exist and how your assets are allocated across safe, moderate, and risky buckets. Do you have an old cash value life insurance policy that could be repositioned? The landscape has changed, and that is the main reason I wanted to have this conversation. These new options changed my thinking. If you are 70 years old and you have never looked at long term care, it is not too late. It is worth a discussion.
Russell: Absolutely. My job is to partner with advisors. If I can bring the right information for the client's team to assess whether this makes sense, I am doing my job. The goal is to equip advisors to have a thoughtful conversation and come up with a solution that is genuinely in the best interest of clients.
Chris: Thank you so much, Russell.
Russell: Thank you.
