When experts talk about long-term care in this country, the word crisis can quickly enter the conversation. The problem isn't so much with what long-term care insurance covers, although that also weighs in. More importantly, it is the growing numbers of Americans that need long-term care insurance at a time with more providers are getting out of the game. Retirement planner Susan John, founder and president of Financial Focus Inc., in Wolfeboro, NH, discusses what is happening in the market, and how advisors can best help their clients understand this vital part of a retirement portfolio.
Q: When retirement planners talk about long-term care, what exactly are they talking about?
Susan John: We're talking about issues that affect many, but not all, people towards the end of life. Or issues that affect somebody with a debilitating long-term illness. Nursing home care is the obvious thing, and that certainly is what most people think of when you say long-term care. But we know some people who at a young age contracted things like multiple sclerosis or had an automobile accident whose life is not going to be the same and who need special assistance with their activities and daily living. They will need care for a longer term than some elderly people that we know.
Q: When the advisors within your practice are meeting with a client for the first time, does the topic of long-term care generally enter into a first conversation or is that something that they deal with later in the process?
Susan John: It depends. Sometimes that is an issue that brings the customer to look for financial planning services: they have or they anticipate a need, and they have concerns about how that will impact their future. It's usually not the first question, but sometimes in the initial interview it does come up. When we are working with a client doing a total financial plan of course we always bring it up.
Q: We hear a lot about long-term care being in crisis right now. What is that all about? What is happening with long-term care that retirement planners need to be aware of?
Susan John: For one, there are fewer insurers than there were, and that attrition is something that happens regularly within an industry. Years ago it was disability insurance, where a number of insurers left the marketplace because they failed to anticipate the effect of certain new definitions of disability that were in their policies. That's a natural thing that happens, but it is a real concern. You don't know, for example, if you're customer is with one of the smaller carriers if their policy is going to be sold off to another, to one of the survivor firms.
Q: Is there a danger that a customer's policy could be sold off to a company that doesn't maintain long-term coverage and they would lose it that way?
Susan John: There's likelihood that it might be tweaked in some way if the insurer is unable to meet its obligations. Planners have to be aware of the size of the insurer and whether or not that is a major business for them. If not, the chance of the insurance company being consumer by a larger company is greater.
Q: Regarding the typical experiences of your customers with long-term care, what trends have you witnessed?
Susan John: It's interesting. There are a lot of factors involved. There's family history. When you're dealing with retired people oftentimes the survivor has a different view of things if their spouse had a period of prolonged illness. Also, there's the type of assets that they have; what their desires are to leave money to their family.
Q: If a client is in a situation where they or their spouse need long-term care, what are some of the decisions that a retirement planner must help them with?
Susan John: I will give you an example. Nobody wants to go to a nursing home. That's like the last ditch effort. So what we help clients that have not previously purchased long-term care insurance to find the appropriate level of help in-house so that the care giver doesn't become exhausted. The person that needs the care gets a better quality of care than just having one family member be responsible for everything. It's totally exhausting for one person to be doing that. That is one thing. If we're recommending the purchase of long-term care insurance for somebody we want to make sure that they've got a home health care rider in there so they can get those at-home services.
Q: How does a retirement planner bring up these topics in conversation in the most effective way because obviously some of them are very sensitive, and it's not a pleasant topic?
Susan John: By the time we get around to this topic we've got a pretty good idea of what a client's retirement assets look like, what's important to them as far as lifestyle is concerned. You get a pretty good feel as to what sorts of legacy they want to leave to their kids. So it's easy to bring that topic up. It's one of the 'what if' things that can happen to you in life and that is usually the way that we approach it – what if something happens?
Q: What do clients ask your advisors most often regarding the topic?
Susan John: They usually ask us if they need long-term care insurance and if they can afford to pay for it. The affordability is always a big question. The answer to that question depends on what they've got already.
Q: If you have a customer that is very challenged to come up with the money for long-term care coverage, but thinks it is really something they should have, what advice can you offer?
