LONG-TERM CARE
Holistic planning
drives the hybrid LTC market
“To quote an old
cliché, failing to plan
is planning to fail.”
As advisors strive to adopt a more holistic approach to planning, the topic of risk
management is quickly becoming a regular part of client meetings. While the risk of death or
disability during the working years is regularly discussed, there seems to be even greater client
concern relating to health care/long-term care in retirement.
Whether it’s concern about one’s own healthcare in retirement or potentially caring for
a loved one, the topic of long-term care is appropriate to address with clients of all ages.
Those who have witnessed a loved one receiving care are commonly the most proactive in
planning and have the greatest desire to insure against the risk. AARP and many other senior
organizations, along with the government providing tax and other incentives to the public for
obtaining insurance, fuel the discussions and have proven helpful in initiating a necessary and
important discussion.
Change in purchasing direction
Years ago, traditional long-term care plans represented the vast majority of policies
purchased while hybrid plans (life insurance policies with long-term care riders) were only
a small part of the market. Today, that has changed, and traditional plans are now a much
smaller part of the market, while hybrid plans flourish. Highly publicized rate increases on
existing blocks of business, in combination with the “use it or lose it” design with most policies
have led many clients to see greater value in hybrid plans. Generally speaking, hybrid plans are
attractive to many clients because of the rich benefits of:
Premium amounts guaranteed not to change
Benefit amounts guaranteed not to decrease (may be guaranteed to increase)
Liquidity features (including full return of premium options)
Michael Tessler is the president of
BUI and has served on the board
of directors of LifeMark Associates,
Inc., LifeMark Partners, Inc., NAIFA,
and the Life & Health Foundation for
Education. He also is a past Chairman
of the Board of Directors of NAILBA.
Death benefits that exceed the amount paid into the plan
Live, Die, or Quit
Advisors who have the most success in long-term care insurance planning with their
clients tend to communicate these products in a very simple, straight-forward manner:
Live, Die or Quit.
Live — If you experience longevity, there is a large pool of funds available (growing
with inflation) to provide care.
Die — If you pass away prematurely, your family will benefit from an income tax
free death benefit.
Quit — If you have an emergency or you feel in the future that there is a better
planning method available, you can surrender the plan and receive a refund of
most or all your money.
Fiduciary documentation
Some advisors report that they are asking clients to review long-term care insurance
options and either:
1. Purchase the needed protection; or
2. Sign a document indicating that insurance options had been presented and declined.
14
Perspectives
Q4 2019