A Closer Look at Long Term Care Insurance & Issues

Posted on | November 1, 2009 | No Comments

By Julie Hurst, MBA, CLTC, Consultant

Guest Blog Post

After age 65 Americans stand a 70% chance of needing some form of long-term health care. That means seven out of 10 Americans over 65 are likely to need care and only three out of 10 will not. Experts cite this consumer misperceptions as one of the top 10 threats that can hinder a comfortable retirement. 1

If you are like me I am hoping I end up with the three out of 10 group, but it would be foolhardy to ignore the reality of the risk. After working with thousands on long term care insurance options I’d like to have you consider what I see missing in the decision process.

Long term health care is a real and very likely scenario most will face to some degree in their lifetime. Long Term Care Insurance is NOT about coverage for the individual. It’s about support to a spouse and family. As with other mainstream products, people purchase long-term care insurance because they understand the consequences a need for care would have on those they love.

Long Term Care insurance is NOT about protecting assets. Clients work a lifetime to accumulate a portfolio that will generate sufficient income to maintain their standard of living during retirement. This includes keeping prior financial commitments. It is reasonable to assume that clients’ retirement income is matched with their retirement expenses. If nothing has been allocated to pay for additional care needs, the income must be reallocated. Where else can the money come from?

In its purest sense, long-term care insurance is no different than disability insurance — it provides a source of income. In this case, the income is used to pay for care. This allows the client’s retirement income to be used for its intended purpose, supporting lifestyle and keeping financial promises. Without this essential product, the family has few options, among them curtailing lifestyle, liquidating assets, or both.2

Long Term Care Insurance is about protecting the roles we live. Keeping a spouse a spouse not a fulltime caregiver; your son or daughter, your adult child, not a caregiver.

It’s NOT about keeping your wealth but buying time to later empower your spouse, kids or family to make good financial decisions after plan A, the insurance, runs out and we have to move to Plan B, utilizing wealth to pay for care. I very rarely meet a couple who is fully comfortable with the spouse or kids diving into the accumulated/invested wealth and making decisions under a stressful time regarding financial changes. Long term care insurance keeps the family out of the investments so they remain with your original goals.

If you pay for your own care you have to consider liquidating assets. That poses some serious issues:

• Is the portfolio liquid?
• Will there be tax consequences?
• What if the portfolio has to be sold in a bear market?
• Are there legacy assets? If so, which of them would be sold?
• Accelerating the draw down of qualified funds will shorten the payout.

Any one of these issues could threaten the financial viability of a surviving spouse or their children who may rely on an inheritance or goals you have for the grandchildren.

Long-term care insurance protects retirement income by providing an independent source of income which can be used to pay for care. By doing so it protects, not only lifestyle, but the financial integrity of the family.

The author, Julie Hurst, MBA, CLTC is a long term care insurance consultant in Indiana for over 15 years driven by her own personal experience with four relatives. She published her own book to help consumers: Long Term Care-Is your family protected? in 2007. Julie has spoken all over the U.S. to both consumers and financial advisors on the issues of long term care options and insurance. She can be contacted at 317-696-3050 or JulieHurst.LTC@gmail.com or visit WPSadvisor.com

1. LIMRA & Society of Actuaries, May 24, 2005

2. Long-term care insurance is for the wealthy

By Senior Market Advisor | Published August 25, 2008 From the Senior Market Advisor Extra Newsletter: August 26, 2008

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