Don’t believe the commercials. Retirement in the 21st century isn’t always fishing trips, golf outings, and weekend brunches.
Rather, 70 percent of individuals age 65 and older will require long-term care, according to the U.S. Administration on Aging. And the Robert Woods Johnson Foundation reports just eight percent of all Americans hold long-term care (LTC) insurance policies, which means most of your clients need your help planning.
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First and foremost, expensive LTC insurance premiums deter interest. A policy including a daily benefit of $150, four to five years of coverage in home and institutional settings, and three percent inflation protection would cost $2,200 annually for a person under the age of 55. That’s a little over $180 a month when you get in early. But it doesn’t stop at cost.
Age isn’t just a number when it comes to long-term care policies. The older you get, the more expensive plans become. The cost of the exact plan outlined above nearly doubles to $4,200 per year ($350 per month) for a 70-year-old client. Carriers offer plans for ages 18 to 79; the earlier you can get your client covered with an LTC policy, the less expensive it will be. LTC premiums can rise for an entire class of policyholders, so the recent trends are something to consider with your client.
Also, keep in mind that pre-existing conditions are considered with LTC insurance, so purchasing early can protect those who end up facing medical hardships later in life. Those currently using long-term care services or who need help with the activities of daily living (ADL) at the time of purchase will not qualify. Clients with serious medical conditions might also find themselves ineligible. If they have a pre-existing condition, such as AIDS, Alzheimer’s, Parkinson’s, and metastatic cancer, LTC carriers will not issue coverage.
Education is key as well. Many Americans mistakenly believe that their health insurance or Medicare will cover the costs of long-term care. In fact, Medicare only covers medically necessary care, like skilled nursing or rehabilitation, not assistance with daily living. As their trusted advisor, it’s important to make sure your clients understand exactly what they can’t count on Medicare to provide.
How Do You Sell It?
Starting the conversation about an LTC plan can be challenging. Clients in good health now might assume that they’ll be part of the 30 percent who never needs long-term care. Others might not even want to think that far ahead. LTC plans are the ultimate “what if?” policy.
But now, the conversation has been made significantly easier with the many new life insurance and annuity hybrid products with LTC riders. These products have been designed to assuage clients’ fears of losing their money by providing a tax-free death benefit, leveraging assets for LTC coverage, and offering return of premium options.
Can your clients afford long-term care? Maybe they can’t afford to be without it. Because of the specifics surrounding enrollment, the answer is going to be different for each of your clients. Evaluating the cost, age, knowledge level, and pre-existing medical conditions will help you to determine that answer.