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How To Advise Clients on Long-Term Care Options

LTCI is a very complicated topic, but, though you may not be able to provide expert guidance, there are ways you can start your clients thinking about this very important topic.

By Brian Gordon, CLTC®.

It’s very likely that someone turning 65 today will need long-term care at some point, according to government statistics. Today, a semi-private room in a private nursing facility may cost as much as $100,000 a year.  Home is where most people want to be, especially since the pandemic began, but home health care can also cost well over $100,000 per year.   

Even if your clients are saving for retirement, relatively few may have a plan to protect their savings from the cost of an extended illness or degenerative conditions such as Parkinson’s Disease or dementia. It’s something a lot of people don’t want to think about, let alone talk about.

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But the best way to deal with the uncertainty is to plan for it. With a plan in place, your clients are better able to preserve their assets, standard of living and independence.

The long-term care industry (LTCI) has undergone radical change over the past couple of decades. Insurance companies found out they weren’t charging large enough premiums, and, because the lapse rate was much lower than they expected, the cost of care was higher. Today, there are fewer carriers in the marketplace, meaning higher premiums.

LTCI is a very complicated topic, but, though you may not be able to provide expert guidance, there are ways you can start your clients thinking about this very important topic.

1. Ask them what their plans are for long-term care.

A lot of people hope to rely on unpaid family caregivers, who provide care worth $470 billion a year and are keeping millions of people out of long-term care facilities. Many family caregivers find the work rewarding because it’s an expression of love.

Even if there’s a spouse, child or other family member who’s willing to help a client with long-term care, it’s still not “free.” Caregivers sacrifice work hours and personal savings to care for loved ones, so ask your clients to think about how they might compensate a family caregiver.

Remind clients that neither Medicare nor most private insurance pays for long-term care. That leaves Medicaid, the federally-funded and state-administered source of LTC.

2. Advise them to start planning early.

Since long-term care insurance companies do not fall under the Affordable Care Act, they are allowed to base their decisions on a pre-existing medical conditions, or even family history, such as the presence of early-onset Alzheimer’s. The older someone is the more difficult it is for them to meet LTCI underwriting standards.

So if your client is in their 50s, or even their 40s, it’s time to consider LTCI, when premiums are more affordable. Besides, even a younger person can experience a debilitating illness or long convalescence from an accident or surgery.

3. Do their employers offer long-term care insurance?

More and more employers are seeing the benefit of offering LTCI as an option available to employees and spouses. Most employees say they would rather obtain LTCI through their employers than from a less-than-expert source of long-term care insurance, such as a broker offering all forms of insurance.

4. Remind them of the tax advantages.

Premiums for long-term care insurance are deductible as a medical expense for the purposes of federal income tax and benefits are tax-free up to $390 a day as of 2022.

5. LTCI is available in the form of “hybrid” policies.

Many policies today combine life insurance with LTCI. Typically, the life insurance’s death benefit is tapped first to pay for long-term care; once the death benefit is exhausted, the long-term care portion of the policy kicks in.

Unlike traditional long-term care insurance, hybrid policies have more flexible benefits, and beneficiaries get their money back for any partial or unused benefits. Best of all, the premiums are fixed for life and can be paid as one lump sum or over five to 20 years. [MA1]

The right fit depends on the client’s financial goals. If the purpose of life insurance is to leave a benefit to survivors, it may be better to have a separate LTCI policy.

Finally, I would advise clients that, before signing on the dotted line, they should consult an LTCI expert. There is a dizzying array of policies with a wide variety of daily benefits, limitations, waiting periods, types of inflation protection, benefit periods and premiums.

But as complicated as it is, you can help guide your clients to sound LTCI decisions.

Brian Gordon, CLTC® is president of Gordon Associates Long Term Care Planning, a nationally recognized firm in the Chicago area specializing in long-term care insurance. Contact him at 847.940.8866.  He would be happy to work with you or answer your questions.