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Navigating Long-Term Care Insurance with Clients

Long-term care insurance is a difficult product to discuss for advisors to discuss with clients. Although price may be one factor, many Americans forego this insurance because they don’t think they’ll need it.

We need to shed light on the reality that AARP research finds more than half of Americans retiring today will require long-term care, and will need to cover it in advance due to rising health care and nursing home costs. By providing a clear picture of the need for and benefits of long-term care insurance, and the different options available, we can help our clients cover this significant threat to a dignified retirement.

Set The Scene

Many Americans depend on retirement savings or their family and friends to finance their long-term care, but these are not reliable solutions for future retirees. With cost-of-living increases and the elimination of corporate pensions, personal retirement funds will likely need to be allocated elsewhere.

On top of that, future retirees will be able to depend less and less on younger family members to share funds as those younger individuals face their own rising expenses and savings needs.

These growing restraints have made it challenging for couples without long-term care insurance to afford to have one spouse living in a nursing home and the other living a more typical retirement lifestyle. Some choose to forego needed custodial care or go back to work to pay for the other spouse’s care — especially because Medicare doesn’t cover long-term care — but this creates another difficult dynamic for the couple.

Gender plays a role in long-term care concerns. A lack of coverage makes it harder for men to retain their dignity as they age since their health usually declines before their wives’ health does. Women, in turn, become the full-time caretakers for their husbands and sacrifice their independence when they lack insurance to pay for professional caretakers.

Preserve Dignity And Independence

Explain to your clients how long-term care insurance can provide the dignity and independence they deserve. With insurance, they won’t have to depend on family or friends for financial support. The professional support they could then afford will give both those needing care and their spouses a wider range of freedom and options.

After you have your client’s buy-in, tackle the logistics. Even if your clients are older, they can qualify for insurance if they’re still in good health. Encourage your clients to share honest assessments of their current health to help you navigate the options before formally applying for coverage.

New, Versatile Options

Of course, it’s not possible to perfectly time an insurance purchase, or to guarantee coverage for the rest of your client’s life. However, there are some new options on the market that can alleviate clients’ worries and simplify the process of purchasing long-term care insurance.

Some companies now offer life insurance policies with long-term care riders, which allow policyholders to draw upon death benefits to pay for long-term care expenses. This can make navigating both issues easier for clients and provide them with some peace of mind. Share this option with clients when you discuss both long-term care and life insurance, and also have this discussion with clients whose life insurance will soon expire.

Additional options are available to clients concerned about not getting a return on their investment. For example, some long-term care policies return parts or all of the premium payments if the policies are cancelled. This can help people who have liquid savings transfer them into a policy, which creates a pool of money much larger than their initial deposit to use even if they have a long-term care event. If they die before using the money for long-term care, there is an income-tax-free death benefit for the client’s beneficiary. Talk with clients about policies that enable them to leverage savings, the option to cash in the policy or allow unused benefits to become untaxed death benefits for their beneficiary.

Long-term care insurance remains an intimidating prospect to many of our clients, while others remain unaware of their potential need for it. But as it becomes more necessary, and with expanded options, we have an opportunity to provide clarity and comfort around a topic that too often brings a clear threat to retirement dignity and dreams of leaving a legacy to loved ones.

Philip E. Harriman, CLU, ChFC has worked with family-held and non-profit businesses in the areas of retirement planning, business continuation arrangements and estate planning for more than 30 years. Phil is a 30-year MDRT member with 17 Court of the Tabl [email protected].

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