There are approximately 7 million LTCi policies in force today and more than 65 million US residents are over the age of 65. This gap is staggering. According the morning star70% of these consumers will require LTC services and 48% will require some sort of paid LTC service in their lifetime.
It’s clear that most consumers haven’t anticipated this cost, and many advisors avoid the tough conversation. People are reluctant to discuss aging, but need to be prepared for what’s to come. Avoiding the conversation jeopardizes retirement savings and can have a dramatic impact on the client’s life as well as their family.
Compounding this problem is the troubled history of the LTCi product. Older products were mispriced by carriers who underestimated rising health care costs and other pricing factors. This has forced many insurers to seek large premium increases or reduced benefit options for policyholders. The abandonment of carriers has forced millions of people to face a difficult economic reality, if they cannot stay at home. According to Genworth Cost of care study, a private room in a nursing home costs more than $108,000 a year nationally. Alternatively, the hourly rate for an in-home caregiver is $27 per hour.
With an average demand for long-term care over two and a half years, it’s not hard to see the impact on the wallet. Let’s look at the math.
The average consumer has saved $141,000 for retirement and will likely live in retirement for 18 years, according to Avant-garde. How will this economic data cover a long-term care event?
With inflation and health care costs rising and retirement accounts impacted due to market volatility, the number of people who can pay for themselves is shrinking.
In truth, advisors who don’t discuss long-term care planning with clients run the risk that clients will become unhappy when their retirement accounts are depleted, leaving them scrambling to cover expenses.
Given this reality, what LTCi covers is often misunderstood. LTCi covers non-medical costs associated with age-related declines. These needs are centered on the six activities of daily living which include eating, bathing, toileting, dressing, continence and transferring.
LTCi policies kick in when policyholders need help with two of these six activities, or if they have severe cognitive impairment. Consumers who have had the foresight to purchase coverage may be reimbursed for expenses incurred for care in nursing homes, assisted living facilities or at home, where most consumers prefer to stay. To plan for these unpredictable costs, integrating LTCi early into retirement planning will provide sufficient coverage at a reasonable price and protect retirement savings. LTCi also allows a financial advisor to maintain a long-term investment strategy, knowing that these fees are covered by insurance.
There are other strategies available for financing care-related insurance policies. Employer benefits are one place to look – these policies are often less expensive than an individual policy. Financial advisors may also recommend funding strategies to pay annual premiums that might be less disruptive to a portfolio or consider combination products that combine LTC needs with life insurance or an annuity. Such products allow consumers to cover their potential care costs while simultaneously meeting other wallet needs.
New products offer integrated wellness programs. Instead of simply asking policyholders to wait for age-related issues to develop, these programs help people get ahead, with personalized, science-based interventions that help them live independently. the longest time possible. These products combine retirement planning, insurance and wellness into a single package that covers the three concerns mentioned above.
Is there a perfect solution to the SLD dilemma? Of course not. What is clear is that the gap between overall needs and those met continues to grow and must be closed. Addressing successful aging through both insurance coverage and wellness programs allows consumers to help close their own personal needs gap and age on their own terms.
Larry Nisenson is Director of Growth at Assured Allies. He can be contacted at [email protected].
© All content copyright 2022 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reproduced without the express written consent of InsuranceNewsNet.com.