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Planning for Longevity is Smart, But Some Financial Advisors Say "No"?
It is hard to find too many people today that have not been impacted by the costs and the additional family burdens of Long-Term Care. 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. 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 new poll by the Associated Press-NORC Center for Public Affairs Research that says many young adults are already providing long-term 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 elder family members, and another third expect to be called upon to do so within the next five years.
Many people are aware the United States Department of Health and Human Services says if you reach the age of 65 you have a 70% chance of needing some type of long-term care service and support before you pass-away.
This means this is less an "if" and more a "when" and "how long".
The better statistic is this one: it will either happen or it won't.
If this happens you will be responsible for either 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. This means you need help with normal activities of daily living or require supervision due to a cognitive problem like Alzheimer's or dementia.
Health insurance or, when you are 65, Medicare and your Medicare Supplement, will pay for only 100 days of skilled care services. This is why long-term care is such a 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 Long-Term Care 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 Long-Term Care 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 designed correctly.
Policy design is critical. Most claims are for care at home which usually costs less than a skilled nursing home. Policies pay for quality care in the setting you desire. This includes at home, adult daycare, assisted living, memory care as well as a traditional nursing home.
The American Association for Long-Term Care Insurance says most claims are for services at home. The major companies, in 2017, paid over $9.2 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 Long-Term Care policies provide additional dollar-for-dollar asset protection. This means you can buy just enough long-term care benefit 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.
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 long-term care 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 polices actually get used.
In my case I have thousands of clients nationwide in the 20 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 Long-Term Care Insurance policies have underwriting which is much more scientific and conservative than ever before. Premiums now consider low interest rates, low lapse rates and actual claims experience as well. Today's Long-Term Care Insurance plans have a much smaller chance for premium increases in the future according to the Society of Actuaries.
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.
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 ability to be family. They are always grateful for the help which allowed them to be loving and supporting. 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.
