Getting Clients to Act on the Long-Term Care Conversation

An effective plan will educate clients as to what the three major planning behaviors are in response to long-term care costs. Just lay out honestly how people act. Then they can see where they fall on the list.

The first planning behavior is when people ignore the issue and hope for the best. Sometimes the magnitude of the conversation is just too worrisome to confront. The second planning behavior is that a person accepts the statistics that they will need care but then choose to self-insure.

The consequences are the same for people in each of those first two behavioral categories. The first thing that happens is they must start liquidating assets. They can do this while the assets last. They also must pay all the subsequent taxes. Recall those huge unknown variables of the stock market, interest rates, and inflation; this is the time when people are reminded that those are realities over which they possess absolutely no control.

Do you know how a person can make long-term care costs significantly more expensive than they otherwise would have been? They can get sick and need help during a down stock market or low-interest rate environment. Nobody gets to pick what’s going on in the world when health issues arise.

Then once the assets have been depleted far enough, they can then go sign up for the government plan which is called Medicaid. Looking at this path, when it comes to self-insuring, even if a person can self-insure, why would they want to?

Finally, there is a third planning behavior where people act by choosing to hedge the risk. What does hedging the risk look like? One way to hedge risk is through traditional long-term care insurance. The planning challenges to this approach are that policies often will be “use it or lose it.” The costs can go up, benefits are mediocre, and underwriting is vigorous. Remember that there are plenty of health issues which can make people more likely to need long-term care but that do not necessarily shorten life expectancy.

However, what has proven to be a more popular hedging solution is a hybrid approach using life insurance with an accelerated death benefit rider. This approach turns the previously unattractive value proposition on its head. Now at worst, the client’s beneficiaries are going to receive a tax-free death benefit. Kansas City Life Insurance Company’s applicable solution is the robust Enhanced Living Benefits (ELB) rider.

Can a person own a life insurance policy and be their own beneficiary without dying? Yes, and knowing that fact will significantly increase the chance that they purchase a policy!

Through the accelerated death benefit provided by the ELB rider, a person may be saved from being forced to liquidate retirement accounts. Easing the financial impact is a big deal. So is reducing the physical impact of family members providing care.

Independence can be preserved by staying in their own home. The money can pay for receiving in-home skilled nursing and making necessary home modifications such as widening doorways, installing ramps and rails, or updating their bathroom for easier use. This is why Tom Hegna calls it “anti-nursing home insurance.” The ELB rider may be able to provide the resources to keep clients in their own home.

Perhaps the most crucial benefit could be family harmony. No parent purposefully makes a decision that results in their children never speaking to one another again. When kids are little, they fight, then take a break or a timeout, and are best friends again an hour later. However, when adult siblings fight, they may become estranged. Failing to adequately plan for these expenses makes that outcome considerably more plausible.

In real life here’s how the conversation goes, “You make all the money with your big career, you should be paying for mom’s care, so she doesn’t have to go into a facility,” or perhaps someone yells, “You stay at home while your spouse works; you should be taking care of mom or let her move in with you,” or another could declare, “We had to move away for our jobs, but you still live in the same town as mom. You should be going over to help her every morning on your way to work and again on your way home from work.”

It does not need to be that way. Using a Kansas City Life IUL policy with the added Enhanced Living Benefits (ELB) rider may be the perfect tool for you to change someone’s family legacy.  

To find out more about Kansas City Life’s IUL products with the Enhanced Living Benefits rider, click here.