Around August of every year, I go through the motions of asking myself whether today's the day I let my long-term care insurance policy lapse.

Around August of every year, I go through the motions of asking myself whether today's the day I let my long-term care insurance policy lapse.

The premium comes due.

I look at it. Think about what else I could do with the money.

Then there's about a two-second debate in my head.

Do I really still need this thing?

So far, the answer has always been yes.

I bought the policy when I was 41.

I'm 46 now.

At 41, long-term care wasn't exactly keeping me up at night. I was healthy. Working. Raising a family.

Old age felt appropriately far away.

And if I'm being practical about it, there was a pretty good chance I was going to spend years paying premiums for something I might never use.

That's still true.

So why buy it?

For me, the answer had less to do with insurance and more to do with my family.

What Happens If I Need Care Someday?

I've been in this business long enough to see families suddenly have to figure out care for someone they love.

Obviously, there's a financial cost.

But sometimes the harder part is everything that happens around the money.

Who takes care of Dad?

Does my wife become my caregiver?

Which kid lives closest?

Does somebody cut back at work?

Can we keep me at home?

For how long?

That's the part that got to me.

I didn't want my family answering those questions someday because I had the opportunity to plan and chose not to.

It wasn't because I knew I would need long-term care.

I don't.

It was because even if the odds were small, the risk to my family wasn't. I wanted to plan while I still had choices rather than wait until the day we needed them and discover those choices were gone.

That was the real decision.

But Why Buy Long-Term Care Insurance at 41?

This was the other side of it.

Why not wait?

Maybe 50.

Maybe 55.

Maybe whenever long-term care starts feeling a little less theoretical.

There's a problem with that.

You can't necessarily wait until you want long-term care insurance and then buy it.

You have to qualify for coverage.

Health matters.

At 41, mine was good.

But none of us gets to reserve today's health for later.

A diagnosis can change things. A medication can change things. An unexpected health event can change things.

Depending on your circumstances and an insurer's underwriting requirements, changes in health can affect whether coverage is available and on what terms.

So waiting wasn't simply a bet on what the premium might cost later.

I was also making a bet about my future health.

And I couldn't control that.

I could evaluate the decision at 41 while I was healthy, or assume I'd still have the same options years later.

I didn't want to make that assumption.

So I bought the policy.

One of My Financial Fire Drills for Googlers

Long-term care is one of the financial risks I periodically stress-test with my Googler clients.

The average age of the people I work with is around 39.

Which might sound awfully young to be talking about long-term care.

I don't think it is.

I'm not asking a 39-year-old to predict whether they'll need care at 82.

Nobody knows that.

I'm asking a much simpler question:

If you did need long-term care someday, what's the plan?

Maybe you've accumulated enough wealth that you're comfortable self-funding it.

Great.

Maybe you haven't.

Or maybe you could self-fund it, but you'd rather not have a future care expense pulling heavily from the assets you've spent decades building.

That's reasonable too.

Maybe insurance belongs somewhere in the conversation.

And for a Googler with significant Google stock, that can open another door.

Would it make sense to sell some Google stock each year and use those dollars to pay the premium on a long-term care policy?

Maybe.

There are trade-offs.

Selling Google stock can create taxes.

The premium is a real expense.

And you could pay into the policy for decades and never use it.

In fact, I hope that's exactly what happens with mine.

But keeping the money invested and choosing not to insure has a trade-off too.

You're retaining the risk yourself.

That's the Financial Fire Drill.

Not:

Should every Googler buy long-term care insurance?

Absolutely not.

It's:

If long-term care happens, what's our plan?

Maybe you self-fund it.

Maybe you insure some of the risk.

Maybe you specifically earmark assets for it.

Maybe some combination makes sense.

Or maybe you look at everything and consciously decide you're comfortable retaining the risk.

The answer can be different for different people.

But there should probably be an answer.

One of my mentors once put it in a way I've never forgotten.

Ignoring long-term care protection is a little like driving a Ferrari without a seat belt.

You can spend decades building something incredibly valuable.

That's great.

But building the Ferrari and protecting the people riding in it are two different jobs.

Then There's the 40-Year Problem

Buying coverage relatively young creates another strange problem.

I could be buying today's insurance for an 81-year-old version of myself.

I have no idea what care will cost then.

Neither does anyone else.

But I was pretty comfortable assuming I shouldn't build my plan around today's cost of care remaining unchanged for the next four decades.

That's why inflation protection mattered when I chose my policy.

My coverage includes a feature designed to increase available benefits over time, subject to the terms of the policy.

Will that perfectly match the cost of care decades from now?

I don't know.

Will it cover every dollar?

Maybe not.

That wasn't what I was trying to accomplish.

I wanted the benefit to have the opportunity to grow while I got older.

Because buying a benefit at 41 based entirely on the cost of care at 41 didn't make much sense to me.

An LTC Specialist Pushed Me on Two Things

I asked Cathy Flanagan of LTC Consumer to read my thinking on this.

Cathy works with families on long-term care planning every day.

She came back to two things almost immediately.

Health.

And inflation.

Cathy told me she regularly hears from children and other family members looking for long-term care coverage after a loved one is already receiving care or starting to run out of money.

Once care is already needed, you're having a very different conversation.

That reinforced something I hadn't emphasized enough.

Having enough money to pay a premium doesn't necessarily mean an insurance company will issue you a policy.

That's easy to forget when you're healthy.

Her second point was inflation.

If you're considering coverage relatively young, the question isn't simply whether the benefit looks adequate today.

What might it look like 20 or 30 years from now?

Cathy was right to push me on both.

So Cathy, at the risk of sounding like a broken record—thank you.

What If I Just Keep the Money?

Fair question.

I could let the policy lapse this August.

Keep this year's premium.

Invest it.

Do the same thing next year.

And maybe that works out wonderfully.

Maybe I live a long, healthy life and never need long-term care.

That's actually what I'm hoping for.

The trade-off is that once I give up the coverage, I give up something I may not be able to recreate later.

I can't go back to being 41.

I don't know what my future health will look like.

I don't know what insurance products will be available.

And I don't know what care will cost when I'm older.

That's why I don't view paying the premium as a prediction that I'll need care.

It's a decision to keep an option open.

For me, that's the better way to think about it.

So Every August, I Pay It

Buying the policy at 41 was one decision.

Keeping it is another.

I don't keep paying simply because I've already paid for five years.

I look at what I have.

What it costs.

What it protects.

What giving it up would mean.

Then I make the decision again.

So far, that little internal debate lasts about two seconds.

I pay it.

Another year.

The Policy I Hope Never Pays Me Back

This may be the strangest part of the whole thing.

With almost every other financial decision I make, I'd like some kind of return.

With this one?

I hope I get absolutely nothing.

I hope I never file a claim.

I hope I never need someone to help me get dressed or get out of bed.

I hope my kids never sit around a table trying to figure out how they're going to take care of Dad.

And I hope I'm very old someday looking back at decades of premiums I paid for a policy I never used.

I'd be thrilled.

Because it would mean I lived a long, healthy and independent life.

And if things don't work out that way?

Then I'll be glad 41-year-old me gave the rest of us some options.

That's ultimately why I keep paying the premium.

Not because long-term care insurance is the answer for everyone.

Not because I know I'll need it.

I keep it because when I think about what this money is supposed to do for my life, and for my family, the trade-off still makes sense to me.

Putting the coverage in place at 41 remains one of the more thoughtful and prudent financial planning decisions I've made.

And the best possible outcome?

I never have to use it.

Continue Learning

Long-term care is only one risk I look at when I put a financial plan through what I call a Financial Fire Drill.

The exercise isn't about predicting everything that might go wrong.

It's asking a few uncomfortable questions while you still have choices.

What if work changes?

What if health changes?

What if your family needs you?

What financial risks have you simply assumed you'll deal with later?

You don't need to insure every risk.

You don't need to eliminate every uncertainty.

But you should probably know which risks you're choosing to keep.

That's the point of the drill.

Disclosure

This article is provided for general informational and educational purposes only and reflects the author's personal experience and circumstances. It should not be construed as personalized investment, insurance, tax, legal, or accounting advice or as a recommendation to buy or sell Google stock, purchase, maintain, replace, or surrender any particular insurance product, or pursue any particular planning strategy. Insurance availability, eligibility, underwriting requirements, premiums, benefits, inflation protection features, and policy provisions vary by carrier, product, jurisdiction, and individual circumstances. References to using investment assets or proceeds from the sale of securities to pay insurance premiums are generalized planning illustrations only. Selling securities may result in taxes and other financial consequences. Please review the terms of any insurance policy carefully and evaluate your individual circumstances with your financial advisor, insurance professional, CPA, and attorney.

Hilpan Moxie Wealth Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). Registration with the SEC does not imply a certain level of skill or training. This communication does not constitute an offer to provide advisory services in any jurisdiction where the firm is not registered or exempt from registration.