Our world is full of complicated information. And the insurance industry is notorious for creating products that can be hard to understand. I’m sure we’ve all had clients suffer from “analysis paralysis” when trying to decide between multiple solutions. But it doesn’t have to be scary.
As advisors, we experience success when we can break down the complexities into a strong solution that the client can understand. And, believe it or not, it IS possible to simplify the way we help our clients fund a long-term care plan.
Once you’ve talked with your clients about long-term care and helped them understand the value of a written plan, it’s easy to stall out. But a written plan is only half the story. If they decide to use an insurance strategy to fund the plan, they will need our expertise to figure out the best way to proceed.
To keep it simple, there are four main categories to consider when finding the funding. Learning about your client’s complete financial picture will be your guide when deciding which funding option to recommend. And, once you’ve got that figured out, your Ash team is perfectly positioned to help create an individual solution for each client. The key is to choose a funding method that won’t force the client to sacrifice lifestyle or other financial goals.
Let’s look at each option, and which type of client it is most likely to fit best.
As advisors, we’re juggling lots of moving parts to create a solid financial plan. The upside is that by understanding the complete picture we’re in the perfect position to take assets from vehicles that don’t meet the client’s needs and use them to fund a long-term care plan. Because without a solid plan for long-term care, the entire retirement plan is at risk. And that’s something to be afraid of.
I get it.
Long-term care isn’t something you work on daily. You’re not comfortable discussing the subject, and you’re not confident you can answer all your clients’ questions.
If you take one lesson away from me, let it be this: Long-term care IS overwhelming. And that’s EXACTLY why you need to help your clients create a plan. You’re accountable to them and their families. Your ability to handle complex topics is exactly why your clients work with you.
Here are a few questions to get started:
Look at this from another angle. Yes, the planning conversation can be hard. But what kind of conversation will you be having with your client’s spouse or children if you don’t help them create a plan?
It will be far more overwhelming to help them make decisions and find funds in the middle of a care event. I can promise you that.
You don’t have to have all the answers. You just have to ask the right questions. Still not ready? That’s where we come in.
If you have ever ridden a roller coaster, then you have a pretty good idea of what the long-term care market has gone through over the last few years.
Carriers have gotten out of the market.
Costs have gone up.
And let’s not even get started with rate increases.
Now that I think about it, maybe a roller coaster isn’t the best analogy. Instead, anyone up for a little whitewater rafting?
Be prepared for some scary moments and the chance of experiencing a face full of water when it’s least expected. Or worse, there’s that one person who falls out of the boat. (Although, with all the safety precautions taken, hopefully that scenario is less likely.)
And throughout the whole ride, the river guide is giving advice to help you make it through the rough patches, with the promise that all will be smooth in the end.
There’s some anxiety when going through the rapids, and you might even have second thoughts whether you should have even come along for the ride. Despite that, one thing remains certain: You NEVER, NEVER, NEVER, just jump out of the boat. You stick with it, ride the ups and downs, and know that there will be a change to the flow coming up soon.
It’s the same with LTC planning. We all know that pricing has changed. Carriers made assumptions that were incorrect and mispriced blocks of business. Not only that, they gave the farm away with 5% compounding inflation and lifetime benefits. How can a carrier ever be profitable when trying to manage an unknown risk? But, what happened, happened.
We can’t hide from the mistakes of the past. Instead, we need to keep our eyes forward and focused on the end goal. We need to adapt to the changing market, not jump ship. We can’t try to sell policies the way that we used to. We need to be better, plain and simple. But how do we do that? What can we do to keep us in the raft?
Let’s start by changing our recommendations to our clients. Most often, we lead with the Cadillac plan. Buy the most coverage they can get because the cost of care is through the roof and continuing to rise. But how has that approached worked out?
Here’s what typically happens: The client says, “Wow, that is too expensive, and I could never afford that!” They walk away not doing anything. As advisors, have we done anything meaningful for our clients in that situation? No. We just wasted their time — and our time as well.
Don’t just check the box on a conversation.
Use the resources available.
Nobody wants to go to a nursing home and they are likely to do whatever they can to stay out of one.
So, that leads us to look at the way that we are designing cases. It’s time to change our mindset. Some coverage IS better than no coverage. Yes, if we show a smaller policy we probably won’t cover 100% of the cost of the care. But have you ever had a client send a check back because it wasn’t enough? I haven’t.
There is no silver bullet when it comes to developing a plan for LTC, but there are a lot of different options out there. Being better means being open to different planning scenarios. Remember – the product is just the funding option for the overall plan.
So the next time you are having a long-term care planning discussion, don’t jump out of the boat. Be persistent, relax and know that your guide will help you get through the rapids to the calmer waters that await you.
Need a guide?
Become a part of the Just Ask movement.
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Chad Eyrich is proud to help keep families together with long-term care planning. He helps advisors and their clients avoid the potential financial devastation of an LTC event by providing strategies around traditional, asset-based and linked-benefit insurance. In addition to earning his Long-Term Care Professional (LTCP) and Certified in Long-Term Care (CLTC) designations, Chad has a life and health insurance license, and a property and casualty insurance license.
Let’s put things in perspective first: according to Genworth’s Cost of Care Survey for 2018, the annual national median cost of care in 2018 ranged anywhere from $18,720 to $100,000, depending on your needs. Breaking that down to monthly costs, that’s between from $1,560 - $8,364 a month to provide care for you or your loved one.
Where is this money coming from? How does this affect your portfolio? More importantly, if you need care for an extended period, how much will be left for your spouse to live on (or even fund their own care)?
Annual National Median Costs 2018
Homemaker Services:1 $48,048
Home Health Aide:1 $50,336
Adult Day Health Care:2 $18,720
Assisted Living Facility:3 $48,000
Semi-Private Room in a Nursing Home:4 $89,297
Private Room in a Nursing Home:4 $100,375
Now, let’s look at the cost of having a plan in place. If a 55-year-old couple were to purchase a $4500 monthly benefit, three-year policy adding inflation, the cost per month is just under $300. That would total $108k if paid for 30 years. Yes, $108 thousand sounds like a lot, but is it?
Since we wisely added inflation to the policy, our pool of money has grown to $393,216 per person!We spent $108k over 30 years to get $786,432 to spend on care.
The truth behind the numbers is simple. It’s more expensive NOT to have a LTC plan in place.
Don’t trust these numbers? I’ll get you your numbers, specific to you. #just ask
Genworth 2018 Cost of Care Survey, conducted by CareScout®, June 2018
1 Based on 44 hours per week by 52 weeks
2 Based on 5 days per week by 52 weeks
3 Based on 12 months of care, private, one bedroom
4 Based on 365 days of care
The best planning for long-term care is to amass long-term wealth, correct? Not really. If your clients are considering self-funding, you need to walk them through the numbers.
Take, for example, a 65-year-old married female in Texas. By repositioning $100,000 of her assets today, she can create a total pool of $507,819 in 20 years to spend on qualified long-term care expenses. P.S. Those benefits are tax free.
To me, this is a no-brainer!
Why would a client choose to use their own money when they could leverage it with insurance? Why pay full price when you can pay the discount amount? Do you self-insure your car? No, because why pay 100 percent of the costs if you don’t have to?!
Let’s not forget: Self-funding means leaving not much, if anything, to the loved ones left behind.
For a more in-depth conversation around leveraging your assets to fund LTC – Just Ask. Use my calendar link to schedule a time that’s convenient for us to talk.
© 2018 Ash Brokerage LLC.