Far too often, long-term care (LTC) insurance is viewed exclusively as a product designed to shield individuals of moderate means from depleting their assets if an extended long term care event arises. As a result, many physicians who seek guidance about LTC planning are told, “Because you are of higher net worth (HNW), you can afford to self-fund your long-term care.”
Beyond physicians, many HNW individuals assume they will not need long-term care because they invest heavily in their health with personal trainers, highly nutritious diets, top-tier medical specialists, and preventive wellness programs. Ironically, this often has the opposite effect: healthier people tend to live longer and are statistically more likely to require extended care, especially due to cognitive decline.[1]
Simply having the financial means to self-fund does not mean it is a strategically sound decision. Many compelling financial and personal reasons point to why affluent individuals should incorporate LTC insurance into their broader wealth, lifestyle, and estate planning strategies. Below, we explore several of the reasons to show why LTC planning remains essential, even for the well-off to the wealthy.
Affluent Individuals Typically Spend More on Long-Term Care
One of the biggest misconceptions is that affluent clients will spend roughly the same amount on long-term care as the average person. In practice, the opposite is true: HNW individuals often spend significantly more.
HNW families often have children with demanding, high-income careers (physicians, corporate executives, attorneys, and entrepreneurs). These adult children are far less likely to step away from their careers to care for aging parents, leaving professional care providers as the primary option.
Regardless of cost, HNW clients generally wish to stay in their own homes. Today, the national average for 24/7 in-home care exceeds $260,000 per year, and in major metropolitan or wealthy areas, costs routinely reach $350,000–$400,000 or more annually.[i]
Luxury assisted living or memory care communities often feature amenities such as personal concierge services, fine dining, on-site spas, dog-walking, chauffeur services, and elevated staffing ratios. These communities can cost $35,000 per month, surpassing $400,000 a year.
When you consider these cost levels, a three-year care event can easily surpass $1 million, even in today’s dollars. Project those numbers 15–20 years into the future and factor in healthcare inflation and the projected expense rises dramatically. A single individual could be looking at $2 million in future dollars, and a couple may face $4 million or more.
Even for wealthy households, this represents substantial erosion of assets that could have been used more efficiently elsewhere. The financial magnitude alone creates several crucial planning “pain points” that affluent clients, including many physicians, should address with their advisors.
LTC Insurance Helps Preserve Charitable Intentions
Affluent individuals are often deeply philanthropic. However, self-funding long-term care expenses can inadvertently consume funds earmarked for charitable giving. When a client intends to leave meaningful gifts to foundations, donor-advised funds, or community organizations, an unexpected LTC event can dramatically alter those plans.
By transferring the LTC expense risk to an insurance carrier, affluent clients help ensure their philanthropic plans stay intact regardless of health outcomes. LTC coverage acts as a protective shield around the dollars designated for charitable purposes, allowing clients to fulfill their legacy goals without disruption.
LTC Insurance Provides Liquidity When Clients Need It Most
Many HNW individuals have much of their wealth concentrated in illiquid assets like real estate portfolios, privately held businesses, limited partnerships, or long-term investment holdings. While these assets may be extremely valuable, turning them into cash quickly (and without loss) can be challenging.
A sudden need for around-the-clock care, especially at home, can create an urgent demand for liquidity. The client may be forced to sell assets at the wrong time or at a steep discount simply to pay for care.
For clients whose liquidity may fluctuate, LTC insurance becomes a reliable source that safeguards the rest of their portfolio from forced liquidation.
LTC Insurance Allows Clients to Protect Their Portfolios
From a portfolio management perspective, self-funding LTC creates a risk of double loss. The portfolio can drop due to market volatility, and taking unplanned withdrawals, when the portfolio is experiencing negative returns to pay for an LTC care need can amplify those losses, leaving fewer assets available to rebound when markets recover.
LTC insurance allows the insured clients to keep their investment assets intact and fully invested during turbulent markets. Insurance benefits that are not affected by market fluctuations can pay for care while the portfolio is given time to recover or continue compounding.
In this way, LTC coverage is less about insuring the individual or family and more about “insuring” the wealth they’ve built.
The Tax Consequences of Self-Funding Are Often Overlooked
Self-funding long-term care may require selling assets from a taxable account, creating significant capital gains taxes at precisely the time a client wishes to avoid them. Conversely, when LTC insurance is in place, clients can minimize or avoid realizing taxable gains because they do not need to liquidate appreciated assets.
From an estate planning perspective, this offers a major advantage: assets in taxable accounts receive a step-up in basis at death. By letting the portfolio remain invested rather than spending it down for care, the client not only preserves wealth but may also leave heirs with substantially reduced tax exposure. Over time, this tax efficiency can far exceed the cost of LTC insurance premiums.
Conclusion
LTC insurance is not a product only for the middle market, it is a strategic planning tool that delivers meaningful financial protection, tax advantages, and peace of mind for affluent individuals – a position many physicians may find themselves towards the end of their careers. For clients with sizable net worth, the conversation should shift from “Can you afford to self-insure?” to “Is self-insuring the smartest choice?”
[1] https://www.morningstar.com/retirement/how-likely-are-you-have-an-extended-long-term-care-need
[i] A Place of Mom –” How Much Does 24/7 Home Care Cost in 2024? An In-Depth Guide” – May 9, 2024