Cost Certainty & Long-Term Care Planning

With clients heading toward retirement, you probably understand that sickness, accidents, and death are eventualities that should be addressed by comprehensive planning.  Unfortunately, the eventuality most often overlooked in discussions about retirement is Long-Term Care (LTC), and that's a little surprising when (1) government studies indicate the majority of Americans (your clients) will need some form of LTC as they age and (2) Medicare excludes most Long-Term Care services.

With Long-Term Care being overlooked and likely, perhaps it's not surprising that, according to AARP, few Americans have implemented proper planning to cover these expenses.  An obstacle that's consistently mentioned that inhibits many from planning for LTC is the cost certainty, or perceived lack thereof, of potential insurance solutions.

In the past, implementing a LTC plan usually meant identifying an appropriate stand-alone LTC insurance (LTCi) policy, buying that policy, and keeping it tucked away until it’s needed.   However, for those considering LTCi today, the headlines in a Google search often highlight the potential flaw of these plans, which is the lack of any meaningful cost certainty…..Below are some of the articles your clients might find, so go ahead and click on a couple and read them:

Federal long-term care premiums rising by triple digits

How is a 90% long-term care rate hike OK?

Genworth Plans to Raise Some LTCI Rates 50%

CalPERS Considers 85% Rate Hike for Most LTC Policies



Helping clients plan for retirement income can be challenging, but it can be even more difficult by including the cost of LTCi and potential premium increases over time.  Some advocates of traditional LTCi solutions point to recent "rate stability" legislation or regulation of rates at the state level, but no matter how nice rate stability sounds, it is not a rate guarantee.  That lack of cost certainty undermines the value proposition of the actual LTC Planning and, given the reality that most clients hope they never have to use their LTCi policy, it greatly diminishes the consumer's desire to purchase a policy. 

Perhaps this is the perspective that many LTCi proponents are missing, and why the market has shifted to LTCi alternatives offering a "Live, Quit or Die" value proposition with cost certainty.  Conceivably we have witnessed The Evolution of LTC Planning.

Planning Solutions With A Strong Value Proposition...

Traditional LTCi may be a potential solution for some people, but market indicators overwhelmingly show that advisors are recommending clients consider Asset-Based LTC planning solutions.  According to LIMRA, "while we don’t expect to see a rise in individual LTCI sales soon, combination products are a great way to fill the gap the declining individual long-term care insurance sales has left while still meeting at least a portion of consumers’ long-term care needs," and recent industry sales and premium statistics from LIMRA illustrate that point.....

•  Traditional LTC insurance sales continue year-over-year declining premium and sales. 

• LTCi accounts for a year-over-year decline of the TOTAL premium volume in the market.

• Life/LTC & Annuities/LTC combo solutions continue year-over-year sales and premium increases.

Price Is The Determining Factor in The Absence of Value...

Some will argue that LTCi is an effective, low-cost approach to LTC Planning, however, no matter how the language is twisted, LTCi cannot promise the guarantees the consumer demands.  Conversely, while Asset-based LTC planning solutions will be more expensive than LTCi, the guarantees of cost certainty, residual value and some form of return of principal are clearly the advisors' preference for their clients.  

As you continue to help clients address Healthcare In Retirement, it's simply a prudent measure to discuss all of the available options and avoid "perfect becoming the enemy of good".  Ultimately, if your clients complete the LTC planning process, it is the right choice and will place them in the select company of proactive Americans who have a plan.  

Please contact us to discuss solutions offering cost certainty for your clients' LTC Planning. 

210303