Planning for longevity is smart, but some financial advisors say “no”?
More families than ever before have been affected by long-term care. More attention has been placed on this topic due to the COVID-19 virus crisis. However, this is not a new problem. Advances in medical science bring longevity. With longevity come the costs and burdens of aging. These health problems can be due to illness, accidents, or simply the impact of aging.
Caring is always difficult for family members. The caregiver role is physically and emotionally demanding. You can’t really depend on a spouse because if you’re older, so is your spouse. Adult children will have their own careers, families, and responsibilities. A recent survey by the Associated Press-NORC Center for Public Affairs Research says that many young adults are already providing long-term health care services for older loved ones. It is not easy for them.
The survey indicates that one-third of American adults under the age of 40 have already provided care for older family members. Another third expect to be called upon to do so within the next five years.
The risk of needing long-term medical care is high and increases as you age. Once you pass the age of 40 you will notice changes in your health. You see changes in your body. As you age, you see a decline in your memory.
What this means is that the likelihood of needing prolonged medical care is less of an “if” and more of a “when” and “how long.”
The fact is, the risk of needing prolonged medical care is simple: it will happen or it won’t.
When you need long-term care, someone will be responsible for finding a family member to provide or purchase care for you, either at home or in a facility. The clear majority of long-term care services are custodial in nature. Custodial care is when you need help with normal activities of daily living or require supervision due to a cognitive problem such as Alzheimer’s or another type of dementia.
Health insurance or, when you are 65, Medicare and your Medicare Supplement will pay for only 100 days of skilled care services. Long-term care is as much a cash flow problem as it is a family problem.
However, some financial planners and insurance agents would prefer that you not explore long-term care insurance. Many do not understand the product, underwriting, policy design, and power of the LTC Insurance Partnership Program, which is available in 45 states.
Why? There are many reasons. Some are simply ignorant of the facts. However, most of them are well aware of the impact of the financial costs and burdens of aging. So why not long-term care insurance?
There is a great misperception of the cost of policies. You may have even read some of the articles. They point to high premiums or premium increases over time.
The fact is that the premiums are very affordable for most people. Sure, if she’s 75 when she gets a policy, the premium will be based on that age and her health at age 75. However, people are adding LTC insurance to their retirement plan before they retire, and most are in their 50s. Most of my clients are between 45 and 67 years old. At these ages, premiums are very affordable, especially if you are in good health and your policy is properly designed.
Premiums can vary more than 100% between insurance companies for the same level of coverage.
Policy design is essential. Most claims are for home care, which typically costs less than a skilled nursing home. Policies pay for quality care in the setting you want. There are several settings for long-term care services, including home, adult day care, assisted living, memory care, and a traditional nursing home.
The American Long-Term Care Insurance Association says the majority of claims are for services in the home. Major corporations, in 2020, paid more than $11.6 billion in benefits to American families. The policies work and they work very well. They give families options and reduce the tremendous burdens placed on loved ones.
Partnership LTC policies provide additional dollar-for-dollar asset protection. With a Partnership LTC policy, you can purchase enough long-term care benefits to protect your assets without having to overbuy or spend too much.
Some insurance agents and financial planners may want you to buy expensive life insurance policies instead, or worse yet, do nothing and insure yourself.
Self-financing is not the best way to address the future costs and burdens of aging.
There are a handful of outstanding “hybrid” policies available. These are life insurance policies or annuities designed specifically for long-term care. For some people, this might be the best solution. But usually a general insurance agent or financial planner is not the right person to talk about these options.
You need an experienced LTC insurance specialist. There are a handful of specialists across the country. These are people, like me, who represent all the major companies, understand policy design and underwriting, know the power of the partnership program, and have processed claims, so they know how policies are actually used.
In my case, I have had thousands of clients across the country in the 21 years I’ve been helping people plan for aging. Remember, premiums are based on your age and health status at the time of application, as well as the amount of benefits you wish to have. These policies are custom designed, so you need a specialist who works with the major carriers to help you find the right coverage.
So what about premium increases? Yes, it’s true that older policies sold decades ago have seen premium increases. These “legacy” policies were priced and marketed before the rate stabilization rules that are now in place in most states.
Today’s LTC insurance policies have underwriting that is much more scientific and conservative than ever before. Premiums now take into account low interest rates, low expiration rates, and actual claims experience as well. According to the Society of Actuaries, today’s long-term care insurance plans have a much lower chance of premium increases in the future.
Regardless of those facts, it’s not easy for insurance companies to raise rates on products sold today. This should give consumers a lot of peace of mind as they plan for a way to safeguard savings and reduce the burdens that prolonged care places on their loved ones.
Perhaps the biggest difference between a long-term care specialist and a financial planner or general insurance agent is that they view long-term care insurance only as a financial decision. Yes, money is important. However, a long-term care specialist knows that it’s all about the family, her family.
Yes, long-term care is a cash flow problem. However, the consequences of long-term care also affect your family.
Without a plan that addresses your future longevity, your family will be responsible for everything. The first thing my clients’ adult children tell me at the time of a claim is that their mom or dad’s policy gave them time to be family. They are always grateful for the help that allowed them to be loving and supportive. This way, they can spend quality time with mom or dad and not worry about where the money comes from or, even worse, having to take care of them themselves.
Working with a specialist will allow you to get the precise information you are looking for. There are several reference websites for research:
LTC News offers articles and resources: http://www.ltcnews.com
US Department of Health and Human Services: https://longtermcare.acl.gov/
Long-term care will affect you, your family, your savings, and your lifestyle. LTC insurance is easy and affordable asset protection. These plans not only protect your savings, but also reduce burdens placed on family members. Let your financial planner take care of your mutual fund, stocks, and bonds. That is your experience. Let an P&C agent get you the best deal on your auto and home insurance. But for long-term care, seek the help of an expert. Take action before you retire to take advantage of lower premiums and better overall health.