Planning for Longevity is Smart, But Some Financial Advisors Say "No"?
More families than ever before have been affected by long-term health care. More focus has been placed on this issue because of the COVID-19 virus crisis. However, this is not a new problem. The advances in medical science bring longevity. With longevity comes the costs and burdens of aging. These health issues can be from illnesses, accidents, or just the impact of aging.
Caregiving is always hard on family members. The role of the caregiver is physically and emotionally demanding. You really can’t depend on a spouse since if you are older, so is your spouse. Adult children will have their own careers, families, and responsibilities. A recent poll by the Associated Press-NORC Center for Public Affairs Research says many young adults are already providing long-term health care services for older loved ones. It is not easy for them.
The poll indicates one-third of American adults under age 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 health care is high and increases as you get older. Once you get past age 40 you will notice changes in your health. You see changes in your body. As you get even older you see decline in your memory.
What this means is the chance of needing extended health care is less an “if” and more a “when” and “how long.”
The fact is the risk of needing extended health care is simple: it will either happen, or it won’t.
When you do need long-term care, someone will be responsible for finding a family member to provide care or purchasing care, 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 like 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 both a cash flow problem and a family problem.
Yet, some financial planners and insurance agents would rather you not explore Long-Term Care Insurance. Many don’t understand the product, underwriting, policy design, and the power of the LTC Insurance Partnership Program, which is available in 45 states.
Why? There are several reasons. Some are just ignorant of the facts. However, most of them are very aware of the impact of the financial costs and burdens of aging. So why not Long-Term Care Insurance?
There is a huge misperception of the cost of policies. You may have even read some of the articles. They point to high premiums or premium increases over the time.
The fact is premiums are very affordable for most people. Sure, if you are 75 when you get a policy, the premium will be based on that age and your health at age 75. However, people are adding LTC Insurance to their retirement plan prior to retirement, with the bulk being in their 50s. Most of my clients are age 45 to 67. At these ages, premiums are very affordable, especially if you are in good health and your policy is properly designed.
Premiums can vary over 100% between insurance companies for the same level of coverage.
Policy design is critical. Most claims are for in-home care, which usually costs less than a skilled nursing home. Policies pay for quality care in the setting you desire. There are several settings for long-term care services, including at-home, adult day care, assisted living, memory care, and a traditional nursing home.
The American Association for Long-Term Care Insurance says most claims are for services at home. The major companies, in 2020, paid over $11.6 Billion in benefits to American families. The policies work and work very well. They give families choice 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 buy just enough long-term care benefits to safeguard your assets without having to over-purchase and spend too much.
Some insurance agents and financial planners may want you to purchase expensive life insurance policies instead – or even worse – do nothing and self-insure.
Self-funding 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 specifically designed for long-term care. For some people this could be the best solution. But usually, a general insurance agent or financial planner is not the person to speak to about these options.
You need an experienced LTC Insurance specialist. There are a handful of specialists nationwide. These are people, like myself, 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 actually get used.
In my case, I have thousands of clients nationwide in the 21 years I have been helping people plan for aging. Remember, premiums are based on your age and health at the time of application, as well as the amount of benefits you wish to have. These policies are custom designed, which is why you need a specialist who works with all the major companies to help you find appropriate coverage.
So how about premium increases. Yes, it is true older policies sold decades ago have had premium increases. These “legacy” policies were priced and marketed prior to 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 consider low-interest rates, low lapse rates, and actual claims experience as well. According to the Society of Actuaries, today’s Long-Term Care Insurance plans have a much smaller chance for premium increases in the future.
Regardless of those facts, it is not easy for insurance companies to raise rates on the products being sold today. This should give consumers a lot of peace-of-mind as they plan a way to safeguard savings and reduce the burdens extended care placed on their loved ones.
Perhaps the biggest difference between a specialist in long-term care and a financial planner or general insurance agent is that they look at Long-Term Care Insurance as only a financial decision. Yes, money is important. However, a Long-Term Care specialist knows this is all about family, your family.
Yes, long-term care is a cash flow problem. However, the consequences of long-term care affect your family as well.
Without a plan that addresses your future longevity, your family will be responsible for everything. The first thing the adult children of my clients tell me at the time of claim is that their Mom or Dad’s policy gave them the time to be family. They are always grateful for the help which 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 is coming from or, worse, having to provide the care themselves.
Working with a specialist will allow you to get the accurate information you seek. 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 impact you, your family, your savings, and your lifestyle. LTC Insurance is Easy and Affordable Asset Protection. These plans not only protect your savings but reduce the burdens placed on family members. Allow your financial planner to deal with your mutual fund, stocks, and bonds. That is their expertise. Allow a general insurance agent to get you the best deal on your home and auto insurance. But for long-term care, seek the help of an expert. Act before you retire to take advantage of lower premiums and your overall better health.