The time to get long-term care insurance is before you need it

For business owners who are starting to see their retirement years on the horizon, preserving the wealth they’ve accumulated through a lifetime of work becomes top of mind. Before the time comes that they or their spouse need assistance with daily living, business owners should insulate their wealth and assets from those expenses with long-term care insurance.

“Long-term care insurance helps defray the high cost of extended care,” says Craig Berson, President and CEO of Berson-Sokol Agency Inc. “That means services such as an at-home nurse or a stay in a retirement facility doesn’t bite into the wealth that’s needed to maintain their standard of living, or that they expect to pass down to their heirs or use for philanthropy.”

Smart Business spoke with Berson about long-term care insurance and its role in shielding wealth from costly care expenses later in life.

What does long-term care insurance cover?

Long-term care insurance will help cover the cost of care, the day in and day out care that a person may need when deemed chronically ill, which means that disability will last 90 days or more. For example assistance with activities of daily living (bathing, dressing or feeding themselves) or supervision due to a severe cognitive impairment. It allows a person to choose where they want to be — at home or at an adult day care, assisted living facility, nursing home or hospice — and choose who they want to provide that care. This is care that neither standard health insurance nor Medicare will cover.

Long-term care insurance is a pool of money that the insured can use each month to pay for care. It can cover a limited amount of time — three to five years — or an unlimited amount of time.

The best time for someone to get this coverage is between the ages of 40 and 60, and is most often purchased for an individual and their spouse. While it could also be used to cover elderly parents or adult children, that’s typically not the norm.

How does this insurance protect wealth?

Those who’ve successfully accumulated a good deal of wealth in their working years often assume that they have enough money to self insure care for an extended period. But because people at this stage of their life often are not liquid, covering the costs could mean selling assets. Long-term care insurance offers that liquidity at pennies on the dollar without selling off assets. It can also be a stopgap, meaning the insurance plan will pay for the first few years of care so a person isn’t forced into a fire sale — of their business, their property or their stock.

These plans can help protect what business owners have built over their lifetime and ensure they can pass on their legacy and wealth to their children or to a charity. The cost of care can be tens of thousands of dollars each month for the individual and their spouse. Long-term care insurance can give an individual a few years of income-tax-free dollars to pay for care instead of forcing them to liquidate assets.

Do these plans offer tax benefits?

There are some significant tax benefits that can be leveraged with long-term care insurance. C-corp owners can buy long-term care coverage for themselves and their spouse, and deduct the premiums and receive the benefits income tax free. S-corps can also realize some tax benefits, but not to the same degree.

There also are several funding methods — the policy could be a linked to a life insurance policy or an annuity long-term care policy.

Those who are interested in learning more about long-term care insurance should talk with a broker who specializes in long-term care. These brokers must be certified by their state’s Department of Insurance to be able to sell the product and can offer many options that those who are interested can shop to find the best policy for their needs. ●

INSIGHTS Insurance is brought to you by Berson-Sokol Agency Inc.

Craig Berson

President and CEO


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