Don’t let clients panic over long-term care needs

If we haven’t considered clients’ long-term care planning needs, we have left an important risk uncovered. In fact, it is important for every financial and insurance professional to consider that extended and long-term care planning is not just a value-added service; it is an essential component that helps ensure financial security and peace of mind. November is Long-Term Care Planning Month, making it an ideal time to start a conversation about planning for extended care. 

Americans are getting older. According to the U.S. Census Bureau, in 2020 about 16.5% of the U.S. population was 65 and older. By 2030, it is projected that this demographic group will rise to 20% of the population, and by 2060 it will reach nearly 24%. Not coincidentally, retirement planning has received a lot of press in recent years, and more and more people understand the need to provide a source of income for their post-work life. Many, however, still do not factor extended care needs into the equation.

As clients age, more and more will experience the need for financial, physical and psychological support. We all acknowledge that the cost of care comes with a hefty price tag. Many people want to age in place and avoid institutional care. According to the 2020 Genworth Cost of Care Survey, the average increase in year-over-year costs solidifies the necessity for LTC planning. 

Costs vary significantly by location and are expected to continue to increase. For clients who expect to age in place, relocate or retire to a less-expensive area, examining how that affects their budget is a good place to start the conversation about extended care planning. Clients without plans that cover care-related expenses may find their retirement planning, college funding, legacy planning or other individual financial goals derailed. 

Beyond the financial aspects, extended care planning helps alleviate the potential physical and psychological toll on both the individual and their family. 

With a well-thought-out plan, financial professionals can minimize client and family stress and help provide a sense of security. Caring for someone is a noble and loving endeavor.  Apparently, many clients may already be doing so and are now participants in the “shadow caregiving economy.”

According to the AARP Public Policy Institute’s “Valuing the Invaluable: 2015 Update,” the value of informal caregiver services had steadily increased from an estimated $375 billion in 2007 to $470 billion in 2017. In the latest report, “Valuing the Invaluable 2023 Update: Strengthening Supports for Family Caregivers,” the estimated economic value of family caregivers’ unpaid contributions was approximately $600 billion, based on about 38 million caregivers providing an average of 18 hours of care per week, for a total of 36 billion hours of care, at an average value of $16.59 per hour. This conservative estimate does not consider the financial cost of care (out-of-pocket costs and lost wages) or account for the complexity of care provided (i.e., medical/nursing tasks). 

The financial, physical and emotional strain on these caregivers can be immense, often leading to them compromising their own financial well-being and quality of life. 

Insurance and financial advisors have a variety of tools they can turn to when helping clients address long-term care needs. Different clients have different financial needs and resources, so it is important to consider solutions on a case-by-case basis. Some important planning tools include:

» Traditional long-term care insurance.

» Workplace/group LTC.

» Life insurance with LTC riders.

» Annuities with LTC riders and single-premium immediate annuities.

» Term insurance with LTC endorsement.

» Whole and universal life insurance (cash funding).

» Home equity conversion mortgages (reverse mortgages).

» Life settlements.

NAIFA’s Limited and Extended Care Planning Center (lecp.naifa.org) offers agents and financial professionals several opportunities to connect with leading experts on the full variety of care solutions. The center also provides research, industry trends articles, a blog, virtual and recorded webinars, a speaker’s bureau, and an extended and long-term care calendar of events.

The interactive Legislative Working Subgroup provides guest presenters and updates on important federal and state legislation (especially the publicly funded state LTC programs, task forces and study groups) and regulatory issues. 

I challenge every advisor to elevate limited, extended and long-term care to the top of their consciousness and, more importantly, raise awareness among their clients. During Long-Term Care Planning Month, and every month, it is a topic none of us can afford to ignore. 

Carroll Golden, CLU, ChFC, LTCP, CASL, FLMI, CLTC, LACP, is executive director of NAIFA’s Limited and Extended Care Planning Center. She is the author of How Not to Tear Your Family Apart: A Practical Guide to Caregiving and Financial Stability. She may be contacted at [email protected].