Static assumptions do not account for unforeseen risks

During a recent vacation, I was re-routed by my smartphone GPS app because of an accident that had closed the interstate. I was thankful that the app, unlike my dash-mount GPS unit from the early 2000s, had adjusted my route because of an unforeseen risk.

The planning that financial professionals offer clients has evolved similarly. In many ways, financial planning that ignores the impact of long-term care is like my old dash-mount GPS. The plan only works when static assumptions are realized. However, the entire plan could collapse if clients encounter an “accident” — or worse — along the way.

So how do financial professionals incorporate conversations around the risk of long-term care into their planning? Although the financial impact can be quantified by analysis, the focus first should be on the emotional impact on the family and the struggles of caregivers who would provide care.

Below are some positioning statements and questions to help your clients think through their potential future need for long-term care:

• “I was hoping you could share with me any experience you have with someone needing extended care or help at home.”
• “Tell me about your family’s health history; do you have longevity in your family? How do you think that will affect your planning?”
• “We can’t say there will be an event, but what’s your plan if there is? How do you want to receive care?”
• “If receiving care at home is important to you, it is important to the budget those costs into your retirement plan.”
• “Are you familiar with what level of assistance you can expect to receive from Medicare?”
• “Who in your family would take the role of caregiver if you were to need assistance when you’re older? How would their lifestyle be impacted?”
• “If you were to need care due to an extended illness in retirement, what assets would you liquidate for that care?”

The introductory client meeting will help discover how your clients feel about extended care and whether they have any experience with it. After you have identified the need and the clients’ desire to continue the conversation, you can begin discussing product options and which options best address their needs.

A range of options and benefits are available in today’s long-term care insurance policies, offering your clients coverage for the care services they require at a cost that fits into their budget.

Types of LTCi products available in today’s market

Traditional LTCi — This type of coverage is the most cost-effective way to protect against risk. Policies do not build cash value and generally do not provide a death benefit.

Hybrid life insurance with LTCi — This type of coverage offers long-term care protection, a modest death benefit and sometimes a return of premium feature. A hybrid life policy could benefit someone who is looking to reposition an existing asset or 1035 exchange proceeds from an old life insurance contract.

Hybrid annuity with LTCi — This type of coverage is good for someone looking to leverage an existing annuity to fund a solution or older individuals who may be looking for easy underwriting.

Life insurance with LTCi rider — This type of coverage is good for maximizing the death benefit while retaining the flexibility to address the costs associated with long-term care.

It’s vital to discuss the pros and cons of available products in order to find the right fit for your clients. Each of these product types can be useful in covering the needs of your clients, mitigating the risks to their retirement savings, and protecting their family’s future.

Remember, extended care is a life-changing event that could have significant, unintended impacts on your clients’ lives. Planning for long-term care can help your clients if and when the need arises.

Reggie Phillips, CLU, ChFC, CASL, is manager—insurance strategists at Truist Life Insurance Services. He may be contacted at [email protected].

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