210: Navigating Long-Term Care Insurance with Wallis Tsai, CEO of AboveBoard Financial

Welcome to The Wealthy Mom MD Podcast, a podcast for women physicians who want to learn how to live a wealthy life. In this podcast you will learn how to make money work for you, how you can have more of it, and learn the tools to empower you to live a life on purpose. Get ready to up-level your money and your life. I’m your host, Dr. Bonnie Koo.

Hey everyone, welcome to another episode. So today I have a special guest. I have Wallis Tsai and I happen to be, I’m trying to think how did I meet her? We were introduced by a mutual friend and I have been looking for someone to educate me and educate you about long-term care insurance. 

People ask me from time to time and I don’t really have a great answer. And so this conversation is really focused on that. What is it? Why you should consider it. What are the types of costs of long-term care and how, frankly, a lot of us really do need to think about it since most of us are living longer and many of us will likely have some sort of chronic condition, unfortunately. 

Speaking of that, I am reading the book Outlive by Peter Attia. I’m not quite sure how to pronounce his last name. You may have heard of the book, Outlive. I guess you could say it’s a book about longevity, but it’s more about how can we feel and stay healthy for longer? Because right now the statistics aren’t so great about our later years because most of us will just have way less decreased function as a result of things like, you know, losing muscle mass every year after the age of 30 and things like that. 

And so I’ve been reading that book. I’ve been learning a lot and I’m ready to implement a lot of the things so that we can try to mitigate some of those risks and live healthier for longer. 

Now as a side note, I’m really hoping, and if you know of a book or some resource, go ahead and email me at [email protected]. But as much as I love that Peter wrote this really, really great book, I really wish there was something more specific to women because our bodies are different, right? We all know that. And unfortunately, a lot of the data out there is male specific because that’s just what’s been studied. And so I would love to see more data on our life as women because there’s things like hormones and things like that. 

And so I’m actually learning about that myself as I am perimenopausal, if not almost there. That’s a whole nother conversation. And so I’ve had to educate myself because basically things have changed a lot since I was in medical school. Basically I was, you know, in that era of HRT is bad, it can cause cancer. And that study has since been, not so much debunked, but basically how crappy that study was and how it basically ruined a whole generation of women in that age range where they really could have benefited from HRT. 

Anywho, this conversation with Wallis is something you definitely want to listen to for yourself to learn more about it. And to, again, it’s all about learning what options there are in terms of stewarding your money and thinking about your financial future. All right. Here’s the conversation. 

Bonnie: Welcome to the show, Wallis. 

Wallis: Thank you. 

Bonnie: I’m so excited that you’re here. Before we get started, why don’t you introduce yourself? 

Wallis: Sure. My name is Wallis Tsai and I’m the founder and CEO of AboveBoard Financial. We are an independent insurance brokerage that takes a unique ethical and tech enabled approach to life and disability and long-term care insurance. 

And it really came out of my own experience working at Goldman Sachs for over 10 years covering financial services companies and seeing just how often those industries were not delivering the best outcomes for consumers, and wanting to build something that was a better way of making these industries do the right thing for people. 

Bonnie: Tell us what’s different about you, because obviously there’s a lot of insurance companies that sell insurance. So what would you say is sort of unique about what you guys provide? 

Wallis: Yeah. So we have a uniquely analytical and also ethical approach to the way that we work for our customers. And that comes through in knowing our stuff and being transparent with clients about what the reality of these products are. Because what I’d found, even before I started AboveBoard, was that insurance can be incredibly powerful as a force for good and it can provide critical support in life’s worst moments, right? When you lose an adult prematurely or severe illness strikes and somebody can’t work, right? Insurance can be incredibly helpful. 

But I noticed that it was also the scene of some of the biggest, worst financial mistakes that I would see as well. And so at AboveBoard, we wanted to be laser focused on getting it right, like really knowing our stuff, and then also executing with efficiency and delivering a delightful experience to the customer that feels empowering. When they’re done, they feel like they got the best thing in the market for them and they really did something they can be proud of. 

And my co-founder is a software developer, and so we’ve basically built software to support the delivery of this totally differentiated experience in a way that’s efficient. And so we can help people who are looking for a million dollars in a 20 year term, we can help people who are doing sophisticated estate planning for tens of millions of dollars. And so we have a really unique client experience that’s underpinned by this desire to give smart, ethical advice. 

Bonnie: You were saying with your experience when you worked in Goldman Sachs in the financial industry, like what were sort of the things you saw that you didn’t like? 

Wallis: Yeah, so a lot of colleagues would come to me because they knew that I was a financial services sector expert. And they would say things like, hey, like I had this meeting with this insurance agent. They were saying I should do this, what do you think of it? Or they would come to me and say like, hey, I bought this thing like two years ago and it’s kind of not turning out the way I thought it was going to work. Like what’s happening here? 

And I realized that a lot of people were getting advice that was either ill-informed, like the person who was delivering the advice themselves just didn’t know what they were talking about. Or it was presented in a way that was deceptive and designed to make the sale, but not really putting the client’s best interest first and explaining to them, what is this product really? How does it work? What can you expect to get from it over time? What should you not expect to get from it over time? What are the risks? 

And being from a hedge fund investing background myself, like I’m very focused on risk management and thinking through both the upsides of something as well as the downsides. And I really think that’s the right intellectual framework to use for insurance as well. And I think perhaps the biggest proof that we do that well at AboveBoard is that we actually have clients where we end up not recommending insurance. 

And I kind of figured out from my informal work with colleagues and friends back when I was at Goldman that, wow, there’s a lot of stuff going on in the financial services industry that’s just not a good idea. Or it’s in some cases an okay idea, but maybe not the best idea for that particular client. And like, man, with good analytics, getting the math right, and then also a desire to just level with people and help them, you can really affect just massively better outcomes than what’s currently happening. 

And so that’s how we decided to start AboveBoard. 

Bonnie: I mean, in the physician sort of world in terms of personal finances, I think physicians are kind of, unfortunately used to kind of being taken advantage of. Like people just see dollar signs and they sell us all sorts of things that maybe aren’t necessarily bad products, but just might not be the most appropriate thing for them at that time. 

And so one of my goals is just to provide as much education as possible, because if you don’t know, then you’re not going to necessarily know whether you’re getting “a good deal” or good advice, right? 

And so anyway, so I’m so glad you’re here. And we talked about beforehand already why I really wanted you here is to talk specifically about long-term care insurance. You know, I’ve had episodes where I talked about disability, I’m just thinking out loud here. I think an episode on the other types of life insurance products would probably actually be a good thing. 

Maybe you and I could talk offline about that, mainly because term life is pretty easy to understand, but I’ve also been learning that it probably is best to explore some other options just because there are benefits to the other types of insurance. 

But today we’re focusing on long-term care insurance. And I’ll just tell you sort of my limited understanding of it is, first of all, it seems like it’s hard to find someone who sells it. My misconceptions about it is that, like, is it really going to pay out? Just because the data is showing that we’re all living longer, so many more of us are going to need long-term care. Like are these insurance companies going to go bankrupt? 

You know what I mean? Because an insurance company is a business, right? They’re not going to pay more than they’re going to make, right, because they’re going to go bankrupt. So how does that all work? And just like some of the costs I’m hearing of what people are paying for their parents is really scary. And so I think it’s a topic that scares people. And so we kind of avoid it. 

Just like estate planning. I think the data is like 70% of families in the US don’t have an estate plan, which I’m sure doesn’t surprise you. 

Wallis: Not at all, I see that a lot. And we actually help clients connect with legal professionals when asked. So that’s hugely important. 

Bonnie: Yeah. So where do you want to start? 

Wallis: Yeah, so how about we start with long-term care? Maybe what you mentioned about people observing their parents’ experience, because I think that’s often a catalyst for people to think about long-term care for themselves. And it also informs the expectations and assumptions people have about long-term care. 

Bonnie: Well, let’s talk about Medicaid, too, because people also know that that exists. 

Wallis: Yes. Yes, and so in terms of how to think about long-term care, it’s an industry that’s undergone a lot of change and it’s an industry that made a lot of mistakes in the 90s and early 2000s. And I would say that that book of business that was so problematic that the insurance carriers did back in the 90s and the 2000s is driving a lot of the things that people are observing their parents experience today. 

So we often get clients who work with us on life and disability because they’re kind of like the young, like earning family stage of life. And they reach out and they’re like, wow, like my mom just got this letter and it says that her premiums are going to go up by 32%. Should we keep paying this or not? I think it’s a very common scenario. 

And the reason for that is that a lot of companies wrote really aggressive policies based on faulty assumptions. And just to use round numbers, if you price this product assuming that 20% of your folks are going to actually need long-term care for an average of two years, and then you find out that actually 53% of the folks need long-term care for an average of three and a half years, that massively destroys the profitability of that business for the insurance company. 

Bonnie: Yep. 

Wallis: So what’s happening now is those carriers that made mistakes in the past are going to their state regulators asking for price increases, and in many cases being approved because as much as state regulators don’t like price increases, they really don’t like insurance companies going under on their watch. 

And so that’s an important consideration that we’ll come back to in a minute when I talk about what’s on the market today and what to look out for as a consumer, and how to think about the choices that are currently available, because I have talked to a number of clients who were unaware that the price of the policies could go up. And the truth is that it was in the fine print all along, and it was probably sold in a way that either wasn’t transparent about that fact, or the person selling it might not even have been aware of it themselves. 

And so people’s expectations about what long-term care is, is often formed by these policies that are relics of the past and not representative of what’s available today. And so what I encourage people to do is get a quote, learn what’s actually available in the market, and then make a decision based on those facts. 

As humans we’re busy, and we want to give ourselves a pass to not have to take a to-do off our list. And so it’s easy to think like, oh, I don’t think long-term care is worth it, like it’s not worth looking at. But it really is worth taking a look because there are products in the market today that are very well-structured and can actually insulate you from that experience I was describing of getting really unpleasant letters saying that your price is going up. 

Now, in terms of what is available in the market today, the mistakes that the industry made in the 90s and early 2000s have led to some different choices available in the market. And so traditional long-term care is one bucket of policies, and those are still available. There are some carriers that still do that. And those policies are generally characterized by you pay in premiums, and you only get money back if you have a long-term care need. So it’s a little bit like term insurance in that way. 

But you can structure some of those policies so you get a refund of the premium. The reality is the math of doing that is rarely compelling, because, of course, the insurance company charges you more for that. So the right analysis then is like, well, if I just took the insurance-only product and invested my money elsewhere, how would that play out? 

And we run that analysis, which I think is hugely different from how a lot of insurance brokerages operate. We will run that analysis for the client and just level with them about what the math says. I’m like, I love math. I love correct math. So if you do that for clients and you’re just honest about what it says, the right answer really becomes apparent. 

So aside from traditional care, long-term care policies, there’s this newer category of policies which offer some very attractive benefits. And those are typically called hybrid or linked benefit policies because they combine life insurance and long-term care, but they’re really weighted towards long-term care. 

Like the reason that you would get this type of policy is that you’re looking to hedge your future risk of needing a bunch of long-term care and wanting to be able to pay for it comfortably, without raiding your other assets. So these hybrid policies tend to be characterized by offering indemnity instead of reimbursement-based benefits. And what that means is that you don’t have to submit receipts. 

Most traditional long-term care policies do require you to submit receipts. I’ve actually gone through this process myself with a family member. It’s not impossible, right? It’s definitely something you can do. But if you’ve ever put together a corporate expense reimbursement request, you kind of know. 

Bonnie: It’s annoying. 

Wallis: It’s not great, right? Like it’s definitely something you could do. You could have maybe adult children do it, but it’s not great, right? And so like these policies where you just don’t have to do it and all that’s required is proof that you need long-term care at all before you just get the benefit and then it’s your business how you spend the money. I think if you had a choice between the two and the price was the same, you would choose something that’s easier. 

The other thing that’s nice about a number of these hybrid policies is that they’re fully guaranteed, meaning they do not give the carrier a contractual ability to raise the price in the future. Just the product is what it is. When you sign up for it, you put the premiums in that you expect. If the carrier realizes later that it mispriced your policy, that’s their problem to deal with. They have to go adjust their pricing on new business. They have to make other operational changes, but they can’t send you a letter telling you that it’s time to pay more. 

Bonnie: Wait, so is this specifically for the hybrid policy or you’re talking about something else now? 

Wallis: The hybrid policies tend to be fully guaranteed. And I’m speaking in generalities here because with hybrid policies, many of them are indemnity, but there are some examples that require reimbursement. But generally they are fully guaranteed. And so I like that aspect of the product where it just makes life easy. 

Bonnie: Right, so there’s no surprises, basically. You know what you’re paying is what you’re paying, just like my disability insurance is fully – I know the language differs between insurance products, but I know my disability insurance, for example, is fully guaranteed and it’s also non-cancelable. So my premiums won’t increase, which as a side note, part of me feels like I’m surprised it doesn’t, just because inflation does exist. You know what I mean? But that’s not my problem, I guess. 

Wallis: Oh, you mean you’re surprised that the premiums don’t go up with inflation? 

Bonnie: Yeah, at least my disability insurance, I don’t know about the type of insurance you’re talking about. 

Wallis: Yeah. Yeah, so basically the insurance companies kind of know that when they’re designing the product and so they have to model that out, right? Like they understand if I’m going to offer a fixed price product, I got to price it correctly because inflation does exist. They basically build it to account for an assumption about inflation. 

And then the third thing you can do to get long-term care benefits is really to get a life insurance policy that allows you to take the death benefit while you’re still alive if you need long-term care. And usually the way that’s structured is that you can draw a certain percentage of the death benefit each month if you need long-term care. 

That’s an option that can make sense if somebody is really focused on getting permanent life insurance coverage. And I’m using permanent life insurance to include any type of coverage that’s designed to last your entire life, whether it’s whole life or universal or variable. Permanent life insurance with a long-term care rider is another way to plan for a long-term care need. 

On average, if you’re mostly focused on long-term care and you’re not that focused on the death benefit and legacy planning, usually something from the first two categories is going to be a better value for what you’re trying to do with hedging the risk of long-term care needs. But that permanent insurance option is available and sometimes it’s the best solution. 

And so what we do for clients is we look across all these products and then we analyze like in different life scenarios what would the payouts look like? What would the returns be? And from that analysis, it becomes apparent when insurance makes sense and when it can deliver really significant value for people. 

And so, for example, if we do the analysis and it shows like, wow, you’d have to generate like a 12% return before tax year in and year out in your brokerage account to come close to replicating this policy, that’s like really attractive because a long-term pre-tax return at 12% over the next 30, 40 years should not be your base case assumption for your financial planning, right? 

That’s just too high. So markets have been on fire for the past, you know, really since the financial crisis. So it can be easy to sort of think like, oh yeah, I’ll make 15% of my money, but it’s not a good long-term planning assumption. And so we can do this analysis for people and the answer sort of reveals itself about whether insurance makes sense as part of the strategy. 

And there’s like an emotional piece too that I think is important to consider because sometimes when people look at all these insurance options in the back of their mind, and I think this is probably especially relevant for your audience, where there’s a possibility of self-insuring and I would really encourage people to at least look at the insurance options before making that determination because long-term care is really expensive and it can go on for a really long time. 

For women specifically who are lucky enough to make it to age 65, about one in five of us will end up needing long-term care for five years or more, right? That’s like a meaningful – 

Bonnie: What are the costs? I know that’s a huge wild card, right? 

Wallis: Yeah, so it varies a lot like where you are, but there’s really no place in the country where it’s cheap, right? So just like I, actually for this and I would actually encourage your audience to check it out for themselves, Nationwide, which is one of multiple carriers we work with, offers a really cool free online tool where you can just go and look up the costs of different types of long-term care by the area of your state. 

So for example, like where I am in the New York City metro area, the average cost for a nursing home runs about $15,000 a month. 

Bonnie: I know, which is insane. 

Wallis: Yeah. And it’s actually even more ludicrous if you narrow it down to where I live currently, which is the Upper West Side of Manhattan. Yeah, I’m an only child and so being kind of a planner, I have visited facilities locally thinking like, okay, well, if just one of my parents or both my parents need this kind of support one day, where could they go that would be an easy walking distance for me? And the quotes I found from those places are 20 to 30,000 a month. I mean, it is real. 

And even if I look at a much lower cost of living area, like where I grew up in Cleveland, Ohio, the nursing home average there is a bit over $9,000 per month. So absolutely less than Manhattan, but $9,000 a month is not an easy lift either. Even for somebody who’s quite well off, that’s a meaningful amount of money. 

And I think importantly, it’s really important to try and put yourself in the headspace of where you’re likely to be in life when these types of topics are really presenting themselves. Some people need long-term care during their working lives, but for most of us, it’s something that happens post-retirement. 

And so in that situation, right, like you’re oftentimes retired, thinking about, you know, maybe there are children and or grandchildren in the picture and you’re thinking about like, well, what is it that I want to sort of leave behind? How do I want to be remembered? 

And when you’re self-insuring, it’s tough because you don’t know for sure that self-insurance money was needed for you until after you’re gone, right? Like even if you’re a healthy 82-year-old, you can’t decide then that like, okay, well, I was holding back this one and a half million dollars for myself, but like, I feel good. I’m going to just go ahead and give it to my kids or I’m going to endow something at my college that I want to support. 

And so I think the long-term care can be a great tool for people to take risk off their own balance sheet, because even if you’re well off and you could spend down your own money to cover a five-year Alzheimer’s situation for yourself, like, do you want to manage your life assuming that you might have to, or do you want that to be someone else’s problem if it comes up? 

And so long-term care insurance is the instrument for making that someone else’s issue to deal with so that you can focus on, this is my money, I’m going to choose to use it in a way that’s meaningful to me during my lifetime. 

Bonnie: Yeah, no, that totally makes sense. Yeah, I remember hearing that cost before and it still just boggles my mind. So, okay. So everyone listening is probably freaked out. They’re probably paying attention now. 

Wallis: I mean, it’s good to connect with reality, right? Because the reality exists whether you want to acknowledge it or not. 

Bonnie: Yeah. So when should people start thinking about getting it? Because for example, for life and disability it’s kind of like as young as you can basically, right? And so when do you need to think about long-term care? Is it like just do it all at once? Like what’s the best recommendation? 

Wallis: Yeah, that’s a great question. So with long-term care, one element of it that’s quite different from life and disability is that some of the carriers impose a minimum age that’s way higher than 18. And so for some long-term care companies, they won’t even consider you until you’re 40. Others, it’s 35, some it’s 30, but you really can’t get individual long-term care coverage in your 20s. And a number of carriers won’t consider you until you’re 35 or 40. 

So I would say the ideal time is probably when you hit 40. It’s kind of a milestone birthday. Just go consider your options because at that point, the world is your oyster, right? One of the good things about turning 40 is that any carrier that does long-term care is excited to consider your application, which I know, might not – 

Bonnie: Why is that? 

Wallis: They just impose these minimum ages, I think, because they don’t want people who are coming in too early and holding their capital for that long. I won’t bore you with the details of insurance capital and regulation, but I think they’ve decided that for their business they just don’t want to have clients on the books for quite that long. 

But once you’re 40, anything is an option. And then it becomes a question of, is there a way to get this thing to fit into your overall financial plan? Because as much as you want to be thinking ahead about your future self’s needs and planning for them while you have time, right? Like while you have good enough health to qualify, while you have enough runway to put the money in to have a meaningful benefit for your future self, that’s all great, right? 

But the 40s also often coincide with when people have really high household expenses, right? For a number of our clients it’s the same period in life when they have kids at home and they’re saving for college and they have just a lot of things to pay for. So I think we do a very good job of helping people figure out a strategy that is both appropriate from a protection perspective, right, giving yourself some real benefit, but also aware that not everyone’s working with an unlimited budget and that’s fine too. 

And we can help people understand like, okay, well, maybe it makes sense to get in place like 50% of what you’d ideally like to have today. And then in the future, once you’re youngest is off to college, maybe we’ll revisit then. And there’s some risk in that strategy for sure, because health can deteriorate, the person might not be able to qualify in the future. And those are all great reasons to kind of go ahead and get it done if you’re in a place where you can financially today. 

But I think just realistically we have to live in reality and help people with the situation that they’re currently living in. And not everyone has the budget in their forties for the type of long-term care setup that they’d ideally like. But it’s really important not to let perfect be the enemy of the good. And it’s so high impact to have something in place versus nothing in terms of your own peace of mind and just like the gratitude that your kids will feel that you thought about this and set something up in advance. 

Bonnie: Yes, the burden on kids is huge. 

Wallis: Yes. And I think if I’ve made one insurance mistake myself in my own life, I really wish that I had been thinking about this back when I was a young professional in my twenties at Goldman. I wish I’d gone to my parents and been like, my gift to you with my bonus is going to be a long-term care policy for you, because it’s a lot to navigate and that was something I just wasn’t, it wasn’t even on my radar screen. 

Bonnie: Well, it’s like people don’t know about this stuff. You know what I mean? There’s just not enough education. That’s one of the reasons why I have you on, so you can talk about it. 

But one thing I want to ask specifically is, okay, so you said around 40 is maybe when someone should start looking into it, at least getting quotes and educating themselves about it. And you’ve talked a bit about the cost. Now, obviously I know you can’t give us what the cost is, but I’m sure you have averages, right? And do they do, is there a full medical underwriting involved, kind of like for life and disability? 

Wallis: It’s a great question. So the underwriter always has the right to require those things. But in general, for most people it is not as heavy a lift. Oftentimes people do get waved through without a medical exam. Again, it’s very individual and the underwriter always has the right to require it. 

Bonnie: Yeah. 

Wallis: We see a lot of clients getting approved without needing to do that. One thing that came out of Covid that’s actually been a benefit for the life, disability, and long-term care industry is that carriers got much better at using electronic stuff. 

Bonnie: Everyone, yeah. 

Wallis: The benefit is that they’re better at accessing medical information and they can pull somebody’s report, obviously with the client’s authorization, right? As part of applying, you authorize the carrier to go out and look at the data they can easily get access to. And the reality is that if the carrier can get comfortable with your health profile using that information, they don’t really want to pay to send a person to your home to draw your blood either, but they’ll do it if it’s a necessary step for them to understand you as an applicant. 

But thankfully for a lot of folks, the information’s already out there, right? They had a physical a year ago, they have data about them that can show that what they’re saying about their health is correct. And it just kind of sails through smoothly. I would say on average, it’s a much easier process than life or disability. 

Bonnie: Yeah. 

Wallis: All that said, life and disability has gotten a lot easier as carriers get better at electronic stuff to the point where we now have carriers who will approve people the same day with no labs. 

Bonnie: Oh, wow. 

Wallis: At the rates that you would get with a full medical exam. And obviously not everybody qualifies for that accelerated path, but a meaningful chunk of folks do. 

Bonnie: So can we talk, I guess, a range, like for example because people ask me, like, oh, how much was your disability insurance? And I can tell them what mine costs. But again, as you know, it depends on, you know, I didn’t get it until I was, I think, 38 years old. I got it in New Jersey, not California, for example. It hurts my soul when that $7,000 leaves my account every November, but it’s like a $15,000 a month benefit, and that’s post-tax income. And so I pay it because until I’ve got a gazillion dollars in the bank, it doesn’t make sense for me to relinquish it at this point. 

Wallis: Yeah, no, that totally makes sense. And I think that with a lot of these disability and long-term care products, you want to try and encourage yourself to hold it with the energy that you do with your homeowner’s insurance. It’s so interesting to me that very few people who own a home are like, I don’t need that insurance. Like if our house gets destroyed, I’m going to tell my spouse to start working more, right? 

And yet we hear that logic with respect to disability insurance, right? Like if I get disabled, I’m going to tell my spouse to go back to full-time, right? And it’s just like that way of thinking about it is really just not a good idea. Like when that collides with reality, there’s a lot of hurt and anger in a situation that’s already difficult because of the health deterioration. It’s like you just really don’t want to set your future self up for that type of thing. 

But with long-term care, I think this is a situation too where like, and having gone through it with my father-in-law, the stuff that’s happening at the time that you’re filing a claim, it’s just difficult, right? Like people end up in the circumstance in different ways, right? Sometimes it’s an accident. Sometimes it’s a long-term degenerative illness that people see coming. Other times it’s really sudden. 

But the common theme is that it’s hard, not just on the person experiencing it, but the people around them who love them and who are trying to help support them through this clearly difficult time in life. And so I think that at least if you do the financial planning piece of it before you’re there, you can remove one really significant source of stress and it just makes it so much better for everyone. 

But to go to your question about an example. 

Bonnie: Do you want to just use me as a case study? I don’t know how easy it is to find a quote entering some info. 

Wallis: Yeah. Yeah, so it would take me a few minutes to pull up a quote for you. I certainly could do that if you wanted to. But I also happen to have a quote up for an actual client. 

Bonnie: Yeah, yeah, let’s go with that. 

Wallis: And it’s a male/female couple. And to be clear, male long-term care rates are lower than women’s on average, all else equal, because as women, we are both more likely to need long-term care. And when we do, it’s also a longer need, on average. And if you’ve ever been inside of a nursing home, you might have noticed that a significant portion of the residents are female, right? And so that’s why the rates are different by sex. 

Bonnie: Kind of like disability. 

Wallis: Exactly. Exactly. We have lower life insurance rates because we live longer, but for long-term care and disability our prices are higher. 

So this is a male/female couple, and they are both in good health. Not perfect health, but definitely very good health. And this is a policy that looks at a $5,000 a month starting benefit, and it would be covering both of them, right? So theoretically, they could both be on claim at the same time, each drawing $5,000 per month. 

Bonnie: Oh, so you can get a policy for a couple? 

Wallis: Yes, in fact, some of the best stuff on the market now is shared. It’s not always the case. 

Bonnie: Do you have to be married? 

Wallis: So the short answer is no, but there does have to be some reasonable evidence of a committed partnership. 

Bonnie: Versus just picking a rando and just being like, let’s get this because it’s cheaper for both of us. 

Wallis: Totally. Yeah, it’s like as a 44-year-old woman, I’m like, hey you, young man, get over here. No, it has to be kind of like a reasonable relationship. 

Bonnie: Yeah, yeah. 

Wallis: Committed partnerships, absolutely no problem. One of the things that we enjoy doing at AboveBoard is like pushing the envelope too. Like if something is reasonable, but maybe a little bit outside of what’s normally done, we’re totally happy to advocate for it. But yeah, absolutely. Like we work with couples who aren’t legally married, same-sex couples, absolutely no problem for the insurance industry. 

Just want to be clear that the insurance industry, for as kind of old school and backwards as it can seem sometimes, is absolutely excited to welcome couples, however they define themselves. 

And so the product that I’m talking about starts with a $5,000 benefit. And that benefit grows at 3% per year. And now, unlike most disability insurance policies where the inflation adjustment only starts to happen once somebody’s already on claim, with long-term care it works differently. The inflation adjustment, in general across most carriers, starts the moment you get the policy, which is super important because when you’re in your 40s and you’re planning for things – 

Bonnie: It makes sense though, right? 

Wallis: Right. You’re probably going to, in practice, need this thing 30 plus years from now. And so you want something in the policy where your idea of what you think you’re buying today is kind of matched up with what you’ll likely actually end up with. 

Now you can choose different inflation adjustments. Like I’m running this with 3% compound. There’s also a choice for 5% compound. One thing I’ll footnote here is that you want to be careful with inflation adjustments because sometimes they’re quoted only lasting for 20 years. And so for me as a 44-year-old, if I bought that policy, I’d get an inflation adjustment until age 64, but then nothing, right? And that’s not very helpful either. 

Bonnie: That’s like fine print stuff you need to be aware of. 

Wallis: Exactly. It’s like super sketchy fine print and the reality is that you don’t have to run the quote that way. So even though it makes it look cheaper, we never run quotes that way at AboveBoard because I think that it’s misleading. 

Even if people know that that’s technically what’s happening, it can be hard for them to conceptualize what that means if they have a claim when they’re 80 and they’re like16 years past the end of the inflation adjustment. It’s just not the right way to talk about the product in my opinion. And so we always run our quotes with lifetime inflation, at least 3% compound. 

And then the other thing you have is a choice with long-term care is how long you want benefits to last for. There are very few unlimited products in the market today. 

Bonnie: That makes sense. 

Wallis: Mostly because of what I said earlier. Yeah, mostly because of what I said earlier about how some companies really blew themselves up over promising stuff. 

There is one product still out there that’s unlimited. As you might guess, it’s pretty expensive. We do work with that carrier and have done that before. With these policies you have a choice about how long you want the benefits to go for. And oftentimes for an individual policy, it’s just as a one person choosing the maximum benefit period you would want. But then for these shared products, you can actually share the benefits with your spouse, which I really like because the reality is that we don’t have a crystal ball, right? 

Bonnie: So like you can share 10 years? 

Wallis: Exactly. 

Bonnie: So like one person can use it all or you can share it. Is that kind of what you mean? 

Wallis: Exactly. Exactly. So in the case of this product, it is an eight-year benefit period product, but it can be divided up between the two people however they need it, right? So if both of them need it simultaneously for four years each, that works. If one of them has an extended memory care experience that goes for like seven or eight years for that one individual, that person who needs it can use all of it. 

And so it’s a nice product because you don’t know what the future holds, but you know that eight years between the two of you is statistically very likely to cover most scenarios that you would encounter. 

Bonnie: And you have that data in terms of how much time you would recommend per person? 

Wallis: Yeah, we can definitely walk people through that. And so just sort of in round numbers, the average male long-term care need runs for about two years. On average for women, it runs for about three. The challenge is when you get into those tails, right? And so for women, about 18% of women who see age 65, end up needing long-term care for five or more years. And then for men it’s 10%, right? So it’s meaningfully lower for men. 

So we actually have a table where we run the math for couples based on the gender identity of the couples, the people in the couple, and just talk about like, well, what are the odds of the two of you as a couple encountering this scenario versus that scenario? And it helps people get in touch with what their future selves might experience so they can make good choices today so that if they end up in that situation, they feel like, okay, I know what’s happening here. We’re ready for it. 

Obviously any scenario where somebody’s needing long-term care is not the dream scenario, but it can be so much better when you feel financially supported through it. 

So going back to this. This is set up so it’s 5,000 starting benefit a month, 3% compound adjustment for life, maximum eight years of benefits shared between the two of them. And the cost of that, if you wanted to pay for it in just over 10 years, right? So sometimes people, I personally subscribe to this view, feel like I don’t want to be 77 years old and needing to open the mail or log in and make a payment. Like I could get a lifetime pay policy, but I don’t want to deal with that. 

And so in this case this couple felt like, yeah, in retirement we just want to be like chilling, hopefully having fun and good health and be done with this long-term care stuff. And so for this 47 and 45 year old couple, they were looking at a 10 pay strategy. And so for 10 payments, it would be $13,002 per year for 10 years. So in total $130,000 in round numbers. 

And then that benefit pool projected forward, right, it would continue to grow. And so by the time that they’re statistically more likely to be needing this stuff, let’s say that mid seventies is when they would access it. They would have a total benefit pool that’s over $1.25 million. 

Bonnie: Mm-hmm. 

Wallis: And they could draw that between the two of them. And then if they don’t need this until they’re in their mid 80s, that benefit pool would have grown to approximately $1.7 million. And so they’re basically done paying for this thing after 10 years, and then it just grows. And those are really attractive IRRs, right? Like you should not be betting that you’re going to get a brokerage account return that would even come close to that. 

Now, in a scenario where they live the dream and so they live into their 90s, they’re like those people you hear about that are still active gardening and going to like weekly readings at the library their entire lives, right? It’s just like, we actually have some neighbors that kind of fit this profile and they’re like my icons of aging well, but that’s not everyone’s future. 

But for people who it is, this product has a death benefit so that you basically get back a very modest financial return that you can pass on to either your loved ones or organizations you care about. In this example, the death benefit is 180,000 if you never touch the long-term care benefits. And if you use a little bit of long-term care but not 180,000, then you get paid back the remainder. 

And this product also has a minimum death benefit. And this is back to the hybrid life LTC, it has like a $18,000 death benefit even if you max out all eight years of benefits. So it’s kind of a cool product because when we run the numbers on this, it’s a really interesting edge for that scenario where one or both of them has meaningful long-term care needs and it allows them to like – 

Well, they will pay for it in 10 years. You can also choose to make a lump sum payment for a discount, right? That’s an option too, because sometimes people just want to be done right now, never have to think about this again. And that’s possible too, but it can be a really smart strategy for people to move this risk off their own balance sheet so they’re not sitting there thinking like, oh man, we would love to make this gift to our alma mater and have this chair named after us. But she’s like, if we need long-term care, could we afford it, right? 

It really frees you up to live the way you want to live with your money, knowing it’s really yours for what you want to do. 

Bonnie: Yeah. I mean, even just hearing those numbers, like for most people, and even just my thoughts, it’s like, yeah, that’s basically, they’re spending a little over $1,000 a month. And most people are probably like, well, I don’t want to pay, you know, like in your words, it is a meaningful amount of money. It’s not like it’s 250 bucks a month where most people are like, oh yeah, that’s fine. 

Yeah, my disability insurance, I guess, I think it comes out to $583 a month. And that’s just me, so I guess if I double that, it’s not that unsimilar, right? So I’m guessing that many people listening might be like, well, that’s more than I want to spend right now. But then what I really like about your approach is it’s a lot of math and data, but just showing what’s at risk if you don’t consider getting it earlier. 

And that’s the same thing with life insurance and disability insurance, right? A lot of people, I feel like people understand life insurance because everyone knows they’re going to die. But disability insurance, I see a lot of people are like, well, I don’t really need that. And then for some reason, everyone thinks they’re invincible until they’re not, right? 

Because, you know, a car accident, which you don’t have control over can happen and that could become a, you know, maybe not a lifelong disability, but can significantly impact your ability to make money as a physician, right? Especially if you’re a surgeon. I just think there needs to be a lot more education about potential costs because even the scenario you gave us, and thanks so much for giving us some specific numbers, like even on mine I’m like 5k a month, isn’t really a lot. 

Wallis: So 5k is a very meaningful contribution to the difference between your existing lifestyle and the extra support that you would need if you needed long-term care. And some of our clients do choose to do more than 5k, you know, because obviously if you’re planning for a long-term care need in Manhattan, like 5k is probably not going to get you what you’re going for. 

But in terms of thinking about, well, if you live the dream, right? You still have household expenses, but then if you also have one or both of you needing meaningful support in the form of long-term care, it’s going to cost more. And so the way that we think about what the long-term care benefits should be is not necessarily your total expected cost if one or both of you needed long-term care, but looking at the difference between that cost versus living the dream. 

Because you should be saving for retirement separately from planning for a long-term care need, right? And then hopefully you do live the dream and just have normal household expenses, travel, good meals out, whatever it is that brings you joy in retirement, right? There’s just like expenses associated with that baseline of living. 

And then for the long-term care benefit, we recommend thinking of it as what like extra boost would you want to take off your balance sheet where it’s not your problem if that comes up? And so for some people, they say like, oh yeah, no, I’d want to stay fully set up in my situation and just be able to go visit my spouse in a really lovely $15,000 a month long-term care facility near our home. And if that’s the analysis, then yes, $15,000 a month is the right benefit number to use. 

For certain people they kind of feel like, you know what? That sounds great and I would love to do that if I had the ability to afford it. But again, you can’t let the perfect be the enemy of the good. And wow, for like $5,000 a month, that would cover an assisted living facility in a lower cost of living area. It would also cover a meaningful amount of in-home care, even in the New York City area, right? Like it’s very helpful support in that situation. 

And so it’s ultimately like an individual analysis about what do you envision for your future self? What options would you want to have? And then also like, what are the realistic budget constraints, right? Recognizing that you don’t necessarily need to get straight A’s to get your diploma, right? We’re trying to get the diploma here, right? Like it doesn’t have to be this fantastic, perfect thing on your first try. 

Maybe you start with something that puts you on a good path. And then if later circumstances change and you can get a little bit closer to your ideal, that’s great. But at least you laid the foundation to not be flying without any parachute. 

Bonnie: Yeah. How quickly can we talk about Medicaid? Maybe not physician families, but I think they might have parents where they’re like, well, they’re going to be eligible for Medicaid. And people kind of use that as their safety net. So I’m sure you have thoughts about that. 

Wallis: I do. I do. So, I mean, Medicaid is a tremendously helpful safety net for people who don’t have other options, right? So I don’t want to in any way belittle Medicaid as an option that can provide meaningful support to people who would be in a far worse situation without it. 

That said, I think people need to understand that Medicaid is not just the government covering the experience that you’d otherwise pay for yourself. There are some very meaningful constraints if you’re relying on Medicaid. And sometimes, especially when it’s clients’ parents, right, where they’re already in their 70s or 80s and kind of the time to make different choices is unfortunately already passed, right? Sometimes that is the only option. 

But to be clear about Medicaid, a number of nice facilities will not accept Medicaid patients. And then also a number of facilities limit the number of, like “Medicaid” beds they have available. And so if you’re relying on Medicaid, you might find you’re in a situation where you end up an hour and a half drive from your children in a neighborhood you don’t know and don’t like. And you kind of have to go where there is availability and you’re at the mercy of the bureaucracy that’s deciding where they have space for you. 

And yeah, I think for people who are kind of more at our stage of life and are earning and still have time to plan, I’d encourage you to try and connect with the way that you think about planning vacations, right? Are you kind of like, I’m going to go to the cheapest hotel I can find on TripAdvisor, 100%, sort by price, cheapest. I’m doing it, right? It’s like, is that how you plan? Or do you plan for the kind of experience that you’d like to have involving some comforts or things you enjoy? 

Bonnie: I’m pretty sure the latter for my listeners. 

Wallis: Yeah, I was sort of guessing that was probably the case for most people. I’m like, if it’s the latter, you should really bring that mindset to your own long-term care planning and think about it like, I don’t want to be staying at a nursing home that looks like a hotel I never would have chosen in my 40s. 

Bonnie: Yeah. 

Wallis: And on a personal note, I have a dear family friend that passed away a number of years ago, but she was kind of like my adoptive grandmother growing up in Ohio. And she was on Medicaid and I visited her in the facility that she was in. And it was frankly horrible. 

It was in like a nice suburb of Cleveland, but just not very nice. Like not a place where, you know, she passed away when I was still kind of in my early 20s. But I was like, man, I’m like, this is not the thing I would want for my future self. And so I think that people should really think about pursuing options other than relying on Medicaid if those options are available. 

But recognizing that sometimes, especially for aging parents who are kind of already at that moment in life, like it is the best option available. So you just kind of have to deal with it. But if you have time to make a different choice for yourself, really try to prioritize that because it makes it so much better. 

Bonnie: Yeah, no, that totally makes sense. What’s the best way for people to find you? 

Wallis: Yeah, so we have a website, aboveboardfinancial.com, that folks can always come visit. I mean, also feel free to just drop me a note. My name is a little bit funky, so I would suggest just dropping a note to [email protected]. And my entire team and I have access to that email, so we’ll see it. Just mention that you heard me on this podcast and we can help you get pointed in the right direction, help you figure out what you’re trying to navigate and really work with you to develop a solution that makes sense for your situation and goals. 

Bonnie: Yeah. Well, thank you so much for your time. This has been really educational for me since we first connected, and so I definitely will probably seek out a quote as well. 

Wallis: Awesome. Well, we look forward to helping you. And thanks so much for having me on, this was really fun. 

Bonnie: Great, thanks so much.

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