6 Things to Know for November (LTC Awareness Month)

Most of America will go home and see Mom and Dad at Thanksgiving. Many of these families will realize that Mom and Dad need some help with their daily routine. In fact, Black Friday is the day that LTC carriers experience their peak volume for new claims year after year. Sadly, many others will not have LTC policies to cover the cost for LTC services.

Many advisors I speak with address the difficulty of starting the conversation. Truth be told, starting the conversation is the easy part. The hard part is thinking about risk exposure your clients will be forced to endure if they have not prepared an LTC plan. Below are a few talking points to build your confidence around the subject of LTC.

1. LTC funding may be part of the solution.

LTC funding can come from a variety of resources, including but not necessarily limited to investment assets, retirement income, and reverse mortgage financing. However, do not discount the power of a traditional LTC insurance plan. This is still the most effective use of money when you compare the dollar of premium to projected benefit pool at age 85. Lifetime benefits may be a thing of the past, but we can still create a $1 million plan for just pennies on the dollar today.

2. Cost of care is still on the rise

The Silver Tsunami is approximately 500 miles offshore but continues to move slowly towards the coast. Despite wage stagnation, we have seen steady inflation in the healthcare field. Simple principles of Supply and Demand Theory suggest that the millions and millions of Baby Boomers will require LTC services at approximately the same time. The US government projects that 70% of 65-year-olds will require LTC services longer than 90 days. There is already a high demand for services in California and the Bay Area especially, resulting in monthly costs of over $10,000 for facility services. Imagine the constraints and rate of inflation with millions more in the system.

3. The insurance marketplace has vastly changed

If you haven't taken a look at LTC in two or three years then your attention is required. Traditional LTC is losing ground to Life/LTC hybrid solutions. We have been beating the drum on this trend for quite a while. Institutional investment advisors love these products because the money used to fund a single-premium solution is still accessible to the client. It can be withdrawn with minimal penalties, a tremendous advantage for those clients that do not want to part with their cash accounts. Furthermore, the backstop provided by a death benefit is a great objection to the "use-it-or-lose-it" nature of a Traditional LTC plan. And finally, the variable of rate increases is removed when you have sold a single-premium product.

4. Pivot points are working

Many clients finish paying for their kids' college tuition in their 50s, which is also the best time to purchase an LTC policy (if not done sooner). A portion of this "freed-up" savings stream should be put to good use to prevent against the threat of a long-term care scenario in the future. If you miss this opportunity then there is another natural transition when private health insurance expires in their transition to Medicare at age 65. LTC premiums will be much higher at this age, and underwriting may be more arduous, but there is still a chance to help your clients develop a plan going into their retirement years.

5. Get familiar with 1035 exchange rules

One of the most advantageous parts of a single-premium hybrid product is the possibility to use otherwise useless monies to fund a long-term care solution. Cash value life insurance without any LTC provisions may be transferable to a new LTC hybrid solution. If you sell life insurance then it may be a good idea to review your book and scan for opportunities for a 1035 exchange.

6. Family is everything

There are never enough reminders: We do this to help families. A long-term care plan is always in your client's best interest no matter how it is financed. The money is one aspect, but care coordination, peace of mind, and family unity are irreplaceable.

I wish you a bountiful Thanksgiving with your loved ones.

Maxwell Schmitz, MSFS