When it comes to long-term care insurance, individuals don’t need to talk to an insurance provider about long-term care, they need to talk to a financial advisor.
In particular, clients need help figuring out how they will pay for LTC. The responsibility of the advisor is to help clients determine whether they should rely on LTC insurance or on their own assets to fund end-of-life care.
There are four ways to pay for LTC: family help, Medicaid, personal assets or insurance. But two of those – family help and Medicaid – are generally the result of an emergency, not part of an individual’s plan.
Paying through these methods usually arises without planning for it, taking them by surprise.
Presumably, that leaves two options for clients working with planners: Fund the care from their own assets or buy insurance.
There are two types of long-term care insurance. One is pay as you go, referred to as a traditional policy, and there is asset-based long-term care.
For many that are already retired, asset-based is a far better option. Premiums are not wasted if care is not needed and may pass on to the heirs, it might offer a lifetime benefit, and rates cannot be raised by the insurance company.
But, thanks to a number of industry trends, LTC insurance is appropriate for fewer and fewer clients. Fewer companies are offering coverage, and it has become more difficult to obtain. Meanwhile, premiums are rising for new and existing policyholders – and even more for women.
Additionally, benefit choices are narrowing, particularly the maximum lifetime benefit. Hence the benefit of an asset-based policy.
So what’s a client to do? There are four key ways advisors can help clients through this challenging topic:
- Comprehensive LTC planning. Traditional plans might disappear, but coverage will be available in some form – and every client should go through a comprehensive LTC planning process with a trusted advisor.
- Policy audits. This is not just for new policies. Planners should periodically go back to review existing policies as well. When things change with an existing policy, they do have options.
- Claims. People need an advocate when it comes to claims. Since they’re often deterred after just one conversation with insurance representatives, clients need assistance when they file claims.
- Medicare. Since many people don’t understand how limited care coverage is under government plans, many would benefit from a Medicare consultation explaining the scope of coverage.
Allen Freeman, CFP provides financial planning to retirees and widows. www.allen freemanfinancialplanner.com