By: Ethan Frey, Wealth Advisor, BMO Private Bank

It shouldn’t come as a surprise that health care costs are among the leading concerns on people’s minds when nearing retirement.

Long-term care costs can vary widely by the type of care and location.  A single room at a nursing home facility will cost on average close to $88,000 per year, with a typical stay of approximately four years.  Part-time in-home care by a home health care practitioner will cost considerably less.

Long-term care insurance (LTCI) may be the answer. Like any insurance, it is cheapest to buy when the event insured is more likely further down the road.  In other words, buy early.

Traditionally, LTCI was best suited for those with a net worth between $250,000 and $2 million.  This group could afford LTCI premiums and had significant assets to protect for their family. Also, they did not possess adequate resources to self-insure. For individuals with net worth above $2 million, the general rule, until now, was to self-insure.

Today, in light of rising long-term care costs and people living longer, this traditional approach to long-term care coverage warrants re-evaluation. In fact, everyone should at least consider LTCI for one or more of the following reasons:

To Avoid Being a Burden

None of us want our future health care needs to create a physical or emotional strain on family members.

One way to reduce family “burden,” even the psychological impact, is to have long-term care benefits available.  For some, such benefits mean a greater range of options. Families with long-term care coverage tend to seek outside professional help sooner and with less family conflict. In addition, opportunities are enhanced to remain at home with professional in-home care.

Most people prefer to stay in the comfort of their own home as long as possible.  LTCI benefits often allow this to happen as professional in-home care can be started sooner and provided at a higher level.

To Protect Family Finances

People work a lifetime to accumulate assets.  They build a net worth and spend considerable dollars protecting assets against taxes, estate costs and family issues.  They plan for a happy and healthy retirement and hope to leave an inheritance to their family.  However, many fail to plan for long-term care costs.

Why is this? Some are unsure where to start the process or hope family members will help when the need arises.  Others believe premiums cost too much.    

This creates a financial dilemma.  People want and need the long-term care benefit, but are unsure if the premiums are worth it, especially if cash flow is tight.  Fortunately for high net worth families the cost of premiums is less likely to cause significant burden in their annual cash flow.

Premiums may also be partially tax-deductible, which makes the insurance even more cost-effective.  For these reasons, long-term care insurance should at least be considered as one part of a comprehensive strategy to protect family assets.

To Provide Liquidity

Some business owners have significant net worth, but minimal liquidity and cash flow. They may hold significant wealth in non-income producing assets, or assets that are difficult to sell due to tax consequences or an illiquid market. In these situations, long-term care insurance can reduce out-of-pocket health care expenses and protect cash reserves for day-to-day living and business costs.

To Obtain Peace of Mind

Numbers and dollars are important, but so is peace of mind.  With a net worth over $2 million it may be possible to self-insure, but that does not mean these individuals want to self-insure, or that it is the best solution for their situation.

Families should work with their financial advisors to look at the risks, costs and benefits involved, and then determine if long-term care insurance is a smart way for them to achieve peace of mind.


Ethan Frey serves as an advisor to high net worth individuals, families and organizations, including closely-held and family-owned businesses, endowments and foundations, and assembles the appropriate team of professionals to provide a full range of wealth services as part of an overall personal wealth management strategy. He joined the organization in 2011 and has 14 years of experience in financial services.

Ethan attended Georgetown University and Georgetown University Law Center in Washington, D.C. He has earned the Chartered Life Underwriter (CLU) designation and is a member of the State Bar of Arizona. He was named a BMO Private Bank Platinum Award Recipient in 2014.

Ethan serves on the board of directors for UMOM.


BMO Private Bank is a brand name used in the United States by BMO Harris Bank N.A. Member FDIC. Equal Housing Lender. Not all products and services are available in every state and/or location. Investment products are: NOT A DEPOSIT- NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY- NOT GUARANTEED BY ANY BANK-