Joe Heider, founder of Cleveland, Ohio-based Cirrus Wealth Management, says that he has a pair of clients who found themselves in a long-term-care trap. The husband developed Parkinson’s Disease while he was still in his fifties and needed help, but the wife wanted to keep him at home as long as possible.

As the disease progressed, the wife became responsible for more and more of her husband’s daily needs, until she had to be rushed to the hospital from exhaustion.

“The flipside of assuming your family member is going to be a caregiver is that you’re going to have to watch them become physically and emotionally exhausted because of trying to provide round-the-clock care for you,” Heider says. “It’s a tough topic. Individually owned disability income is expensive, but there’s a high probability that you’re going to have to use it. It should be part of any long-term financial plan.”

Wealthy Americans may assume that they can simply cover the expenses themselves or self-insure, but Heider says that might put any planned wealth transfer at risk.

“LTC is great for people who have assets to protect, but they don’t have excess earnings opportunities,” Heider says. “We’re looking for people who could drop $200,000 to $300,000 on a policy without impacting their remaining spouse’s ability to live the kind of life that they want.  When clients have above $3 million to $4 million in liquid retirement assets, LTC is less critical because they have sufficient assets to pay and meet their needs without devastating their estate.”

But Newman counters that even within wealthy families, a spouse or a child may end up taking on more of the caregiving responsibilities instead of spending money on their loved one. Long-term-care insurance could also head-off arguments among heirs about whether to put a client into a long-term-care facility, Newman says.

Yet standalone coverage is not widely utilized today, even among those who need it most, perhaps because of the uncertain and expensive costs associated with coverage.

“The price structure is difficult for people to appreciate and understand,” says Toumayants. “They’re having to pay anywhere from $2,000 to $10,000 a year on coverage without knowing if they’re ever going to use it. Why should they spend that money? Now insurance companies have too few people as policyholders and that’s forced them to continue raising rates.”

Toumayants says that as future health-care costs increase and become difficult for actuaries to project, many companies are closing their LTC business because the risk is too high.

“I can do great due diligence on existing standalone LTC plans, but when a company decides not to offer a policy anymore, it becomes a pool,” Toumayants says. “Those people inside the pool are getting older and need care, so the people still paying in have to come up with the money. If a company says that it is going to stop offering LTC within five years, that’s a clear sign that you can expect rate increases, and significant ones, for policy holders.”