As a society we are living longer, and we are living with medical issues longer. This places greater need for long term care insurance policies – insurance that covers the gaps left by Medicare and other assistance programs.
At the same time, a growing number of insurance companies are getting out of the long-term care business. Quite simply, it has become nearly impossible to forecast what individuals will need for health assistance, and what that assistance will cost, 20, 30 or 40 years into the future.
That makes it especially challenging for retirement planners to stay abreast on long-term care, and to advise their clients on the best plan for them. But long-term care is an important retirement tool for many, especially if they have assets to protect. The keys are to help your customers really understand what a policy covers, how flexible the policy is, and the criteria for receiving payments.
“Long-term care insurance is intended to do exactly as the name says – to care for you when your Medicare or your other health insurance benefits stop,” said Helen Stephens, a certified planner with Aspen Wealth Management in Fort Worth, TX. “Medicare is very limited in what it will pay for beyond 20 days. It will cover skilled nursing for 20 days, and it will do partial for up to 100 days, but after 100 days you’re really on your own.”
Stephens advises all financial planners that deal with the retirement market to include long-term care as part of their advice overview. This is especially important with couples. Without this insurance, should one spouse require long-term medical care, they could quickly burn through the couple’s estate’ leaving nothing for the other spouse.
What policies cover
As noted by California Health Advocates, long-term care insurance policies are not standardized. The retirement planner needs to advise clients on the type of benefits that a policy will pay, the care that will be covered, and how easily the individual can access and start using long term care benefits.
Key points to long-term care insurance you will need to advise customers on include:
- Duration of benefits
- Benefit triggers
- Waiting periods
- Daily benefit amount
- Maximum policy benefits
- Inflation protection
How long benefits last
Long-term care policies are typically sold for periods of 12 months or more, but can cover any length of time up to for long as the individual lives. Obviously, the longer the duration of the policy, the more expensive the policy premiums will be for your client.
“The average long term care policy is about five years, “ said Pam Dumonceau, a financial advisor with Consistent Values Inc., in Greenwood Village, CO. “Family history is definitely a driver. For example, those that have Alzheimer’s in their family history should definitely be looking into this kind of insurance.”
Using the examples of activities of daily living (ADL) is the best way to explain long term care insurance to customers, according to Dumonceau. They are the benchmarks for determining when somebody qualifies for assistance and benefits are paid. Those daily activities include the ability to dress oneself, feed oneself, make a meal, bathe oneself, recognizing the need to relieve oneself, personal grooming, and functional mobility. ADLs also include cognitive impairment or dementia caused by Alzheimer’s disease or other conditions.
“As people need long-term care, the company will use those as benchmarks. For example, you can do a couple of those things but you can’t do them all. When you can’t do four out of five, or three out of four, that’s when you actually quality for a claim,” Dumonceau said.