Protecting Your Client’s Assets: The Importance of Long-Term Care Insurance
Life isn’t scripted. While we plan for the expected, it’s equally important to prepare for the unexpected. As a life insurance agent or financial advisor, this is a foundational aspect of your business in protecting your clients. However, one aspect that often goes overlooked in financial planning is the need for Long-Term Care Insurance (LTCI). In this blog post, we will explore the risks associated with not having LTCI, backed by current statistics on the likelihood of needing long-term care. We will also examine real-life examples of asset erosion when individuals must pay for long-term care out of pocket. As your clients age, the need for strategies that utilize LTCI becomes paramount to their financial well-being.
The likelihood of needing long term care in the United States
Long-term care refers to the assistance required for individuals who have difficulty performing everyday activities due to illness, disability, or the natural challenges of aging. It includes services provided at home, in assisted living facilities, or in nursing homes. The statistics in the United States are compelling:
- According to the U.S. Department of Health and Human Services, approximately 70% of individuals aged 65 or older will require some form of long-term care during their lifetime.
- The average duration of long-term care is about three years, though it can vary significantly based on individual circumstances and in some cases last longer than 10 years.
Don’t waste their hard work: Long term care destroys assets
Without proper planning, the cost of long-term care can quickly erode your client’s assets, potentially leaving them financially vulnerable. The devastating effect of asset erosion on your client’s legacy cannot be understated. It affect many areas of their life and overall financial picture.
Depletion of Savings
Long-term care can be expensive. For instance, the average cost of a private room in a nursing home was approximately $105,850 annually in 2020. If your client has to pay for this out of pocket, it can rapidly deplete their retirement savings.
Selling Assets
Many individuals are forced to sell their homes, cars, and other valuable assets to cover long-term care expenses. This can have a significant impact on your client’s overall financial well-being and their legacy for loved ones.
Reduced Inheritance
If your client’s primary goal is to leave an inheritance for their heirs, the costs of long-term care can substantially reduce the assets available for distribution, leaving their loved ones with less than they intended.
Strained Family Relationships
When family members are responsible for covering the costs of your client’s long-term care, it can lead to financial strain and tension within the family, potentially affecting their relationships.
One size does not fit all: LTCI options
Recognizing the risks associated with not having long-term care insurance, let’s explore the various options available:
Traditional Long-Term Care Insurance (LTCI): This is a standalone insurance policy specifically designed to cover the costs of long-term care services. It provides financial protection and flexibility in choosing the type of care your clients need, such as in-home care or facility-based care.
Hybrid LTCI Policies: These policies combine long-term care benefits with life insurance or annuities. If your client doesn’t use the LTC benefits, the policy pays out a death benefit or provides income through an annuity. Hybrid policies offer the advantage of not “wasting” premiums if your clients never require long-term care.
Short-Term Care Insurance: Designed for individuals who anticipate needing care for a limited duration (typically up to one year), short-term care insurance provides coverage for shorter-term needs.
Long-Term Care Riders: Some life insurance policies offer LTC riders that allow your client to access a portion of their life insurance death benefit to cover long-term care expenses. These riders can be a cost-effective way to add LTC coverage to their life insurance policy.
Medicaid and Self-Funding: While not insurance options, Medicaid is a government program that can cover long-term care costs for eligible individuals with limited assets. The issue here is that Medicaid and Medicare do not sufficiently cover the vast cost of long term care.
The time to talk to your client about LTCI is always today
Long-term care insurance is not just about financial protection; it’s about ensuring that your client maintains control over their future, their assets, and their dignity in times of need. As the statistics show, the need for long-term care is a very real possibility for many individuals. Without proper planning, the costs can be exorbitant and can significantly erode their hard-earned assets.
Your clients rely on you to help them make informed decisions that help mitigate risk to their financial and familial well-being. Don’t wait until the unexpected happens; take proactive steps to protect their assets and secure their legacy. Regis Financial Partners has helped countless agents and advisors design robust risk mitigation strategies for their clients. While LTCI is yet another tool to hedge against future risk, with the tremendous expense of long term care in this country, it may be one of the most important tools we have.
