The new LTC basics

Opinion

The staggering cost of long-term care coupled with the high likelihood that we or a loved one will require services make for a difficult financial dilemma.

In both my personal and professional life, I’ve seen too many people and their families affected by a lack of savings for long-term care (LTC).

Hindsight is only 20/20 if we leverage what we know to plan ahead: Use the data out there to educate every one of your clients on the costs of long-term care and then help them with a plan that can pay for or mitigate those likely expenses.

Here are the basics of obtaining a long-term care policy to get you and your clients started. When it comes to helping your clients plan for the possibility of long-term care, the old adage “don’t put off until tomorrow, what you can do today” should serve as your mantra.

Who can and cannot obtain an LTC policy – The time for your clients to consider and apply for a policy is while they are still healthy and eligible.

For that reason, it’s never too early to proactively educate your clients on LTC funding and make recommendations that work for their long-term goals.

I see so many younger faces purchasing LTCi to help protect their assets and their families should their health luck change in the future. Work with all of your clients by educating them about long-term care, the likelihood they will eventually need it, and the best options for them to pay for those services.

You may have clients who aren’t eligible for an LTCi policy.

Due to their high risk, people with a history of stroke, dementia, Parkinson’s, multiple sclerosis or who already require LTC are not candidates.

Increasingly, insurers are also turning away high-risk individuals with chronic conditions such as osteoporosis and diabetes.

A call to a licensed long-term care insurance specialist can help clients determine if they are likely to be eligible. Importantly, work with these clients carefully so that you can ear-mark appropriate funds for that care elsewhere in their portfolios to protect them and their loved ones.

Understand policy differences – Policies and insurers differ greatly from one another as do clients and their respective needs. 

The mandatory LTCi Shopper’s Guides, which licensed agents of LTCi are required to give to consumers by law, are a terrific resource for you and your clients. They provide unbiased information that can help best determine their needs.

Because there are various factors to consider when deciding on LTCi coverage from personal risk (eg. family and health history) to financial considerations, I encourage every advisor to work closely with your clients and bring in LTCi wholesalers and specialists to provide further insight during the education and application process.

Determine the right amount of coverage – Premiums are an important consideration when electing LTCi coverage, but it’s not the first determination.

The first question to ask is how much money your clients are willing and able to spend from their accumulated assets towards long-term care services in the future. Then, find out cost of care around the country (Genworth’s Annual Cost of Care Survey interactive map is a great start). When compared to the average costs of LTC services that your clients are likely to face, LTCi policies often make financial sense.

Don’t assume that the most expensive policies which offer the largest payouts are the best choice for any client.

I like a tuna fish sandwich every now and then, but I wouldn’t want to be eating it every day just so that I could afford my premiums! The only way to know the policy that makes the most financial sense is to crunch the numbers. Go over asset allocation with your clients to determine a policy they can afford to keep and not afford to let go of.

Build the right policy – When building a policy with a client, there are a number of factors to consider and decisions to make -- many of which will require your expertise. From elimination periods to inflation protection, there is no one-size-fits-all formula.

Many advisors inadvertently lead their clients astray by assuming certain things that don’t always hold true for everyone. Offer inflation calculations so your clients can see the pay-outs that they may get and plan accordingly.

What to expect during the application process – Applications for LTCi policies include detailed health questionnaires. What’s more, most LTC insurers may also require phone interviews with applicants and may require paramedical exams.

In my experience, this process is beneficial to both the client and their advisor. Everyone gains a better and more realistic understanding of potential future health concerns so that you can plan accordingly.

Once the application is submitted, an underwriter will decide whether to offer coverage to your client. Address any lingering questions to the underwriter’s hotline or your licensed long-term care insurance specialist who can offer additional insight. Most importantly, your client has 30 days to make any changes to the policy upon approval so ensure that you and your client have zeroed in on the coverage that suits their needs best.

Bottom line – Long-term care and how to pay for it requires thoughtful discussion with your clients.

For clients who aren’t eligible for an LTC insurance policy, it falls to you to educate them on the expenses they may well face in future.

For clients who are eligible for a policy, act now. With your help, clients should know what they want and then find a policy that is designed to achieve this.

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