Dear Michael:

My dad died a few years back and left my mother with some substantial cash assets as well as ownership of the farm. She has in excess of $400,000. She is approaching her mid-seventies and has now become concerned with long-term care insurance, as she seen a few of her friends end up in facilities.

I keep telling her between the savings and the cash rents I pay her, she has more than enough to pay to pay for any long-term care costs, so why bother paying a premium on something that she has enough income and assets to use to pay for her care?

–Mom Won’t Listen


Dear Mom Won’t Listen:

To start off with, I’ll ask you some basic questions about your mom’s situation.

Does she have a car? If so, does she insure that car? If so, why? She has more than enough to pay for the replacement of the car.
Does she have a home and does she insure that home? If so, because based on what you’re saying why insure anything if you have enough money or income to replace it?

People won’t sleep at night if suddenly remember they forgot to pay their car insurance or their homeowners insurance, yet the chances of totaling your car are less than one in five thousand. The chances of losing your home or sustaining major damage to the point of being uninhabitable is one in twenty thousand.

Your mom’s chances of needing some type of care someday? About 50/50, or one in two people her age will need some type of assistance. Just like insuring your car or your home, though, the amount of the payment of the claim depends on the event that causes a claim. If she falls and breaks a hip and needs rehab for six months and then goes home, not much of a claim. If she falls and breaks her hip and can’t move without assistance, huge claim.

Everyone in advance always comes up with ways to mitigate that claim. “We can take care of Mom at home with us,” or, “My wife is an LPN’”

This is the same as saying she doesn’t need hail insurance on her home because you’ll come over and reroof the home if it gets hailed on, no matter what else you got going on in your life at the time.

So, people buy insurance for security and peace of mind.

Digging deeper into the issue, people who have long-term care insurance are more apt to reach out for help sooner than those who do not – no matter how much money in the bank. I’ve seen millionaires who ended up laying on their bathroom floor for two days, when they shouldn’t have been alone for the past few years, because “By God, I’m not going to spend good money on any help,” and yet it ends up costing hundreds of thousands of dollars in care costs when they push it too far past the sane and reasonable limits of self-care.

This doesn’t get better as we get older either as we tend to cling more and more to our money as we age.
Why? The simple answer, security.

Security they could have purchased cheaply years before but someone talked them out of it.

It’s a quality of life decision we all have to make someday, and it would be great if everyone would make this in their late fifties or early sixties, when the prices are still reasonable.

Last but not least, if you’re cash renting the farm, then I’m guessing you want the farm someday. Your mom probably has this money earmarked to go to your sibling(s) in lieu of receiving any farmland. Be a shame if all that money was gone because you told her she didn’t need long-term care insurance and burned up their inheritance. Best hope is your siblings will never talk to you again – worst case scenario, they end up suing you for what they feel like they had coming as it was specified in the will.

Do you still feel like gambling that her assets and the cash rent you pay will cover any long-term care costs?

Factor in that average costs of care is rising by 9% each year, and is quickly averaging $100,000 per year.