LTC Strike Price: When to Advise Your Client to Obtain a Long Term Care Policy

You’ve been diligently managing your client’s assets for years.  Protecting those assets from future risk is all but in your job description.  Your client’s assets are their long-term plan for their retirement, lifestyle, and legacy.  Beyond market turns and economic forecasts, however, lies an even greater risk to their financial well-being: their health.  It’s an unfortunate fact that as we age the risk of needing expensive care rises.  In fact, over 70% of people age 65 will require long-term care at some point in their life.  The challenge for you is to determine when is the perfect moment for them to consider a Long Term Care policy?

What your clients risk without a Long-Term Care policy in place

At the heart of considering a long-term care policy is liquidity.  With long-term care costs skyrocketing, a senior client who requires nursing home care, in-home assistance, and hospital stays related to chronic care needs can expect to pay between $50k and $150k dollars per annum to cover these expenses.  Depending on the severity of their ailment, the duration of these needs could last for many years, draining their assets.  This opens up the very real possibility that your client might have to liquidate their investments to cover medical expenses.

Health insurance doesn’t cover these needs

Standard health insurance and federal plans don’t come close to covering the costs associated with long-term care needs.  The only true vanguard available to protect your clients’ assets is a long-term care policy.  Given the unfortunate reality that the odds of avoiding these costs are stacked against every senior, an LTC policy is an important piece of their long-term financial planning.  Years of careful investment can go out the window as funds are liquidated to cover care.  

Long Term Care costs change over time picture of a river delta in flux

The Cost of Waiting: Long Term Care Needs Can Happen at Any Age

As an insurance policy, the costs of LTC fluctuate dramatically depending on the age and health of your client.  Statistically, a person over the age of 50 is at greater risk for declining health.  Each year past 50, the risk increases.  Accordingly, long-term care premium payments begin to rise faster the longer they wait to obtain a policy.  Delaying the purchase decision by several years can result in diminishing options and overall return on value.

The best time to purchase an LTC policy is…the moment your client can afford it

Your client should purchase a long-term care policy the moment they can afford it.  While the prices of LTC premiums fluctuate based on age and health, you might think that finding the best value based on age would be prudent.  However, life simply doesn’t work that way.  Your client could experience long-term care needs at any point in their life.  

We tend to think of long-term care as being a need for the elderly.  While it is true that increasing risk factors as we age lend some weight to this perspective, the reality is that a 40-year-old could experience significant asset loss should they require long-term care.  The burden on your client’s family and assets would be absolutely devastating.  

What type of policy should your client buy?    

Long-term care policies offer some flexibility in terms of price, benefits, and payment methods.  Here are some things to consider when finding the best solution for your client.

Traditional long-term care policies (LTCi)

Traditional LTC (LTCi)  policies offer benefits solely for the purpose of paying for care.  Unlike other products designed for Long-Term Care benefits, there are no death or legacy benefits with these policies.  While they generally offer lower premiums, the premiums may be subject to price increases over time.  However, a traditional LTC policy may be a good fit for someone who has less aversion to risk or does not have the budget for a single or short-pay solution.    

Linked Benefit or Hybrid policies 

These policies are best for clients who want a great return on their premium dollars for long-term care offering both guaranteed benefits and guaranteed premium stability.  Like Traditional Long-term Care (LTCli) many of these products offer inflation protection and, in some cases, unlimited lifetime benefits.

From a cash-on-hand standpoint, clients who opt for linked benefit and hybrid policies will need to have a budget that allows for a single or short pay scenario in order to obtain one.  Historically, these products utilize a simplified underwriting process that may be less stringent than individual long-term care policies but benefit from prequalification.  In short, while these policies require more money upfront, their benefits, stability, and less-invasive qualification process make them an attractive choice for clients who want the best of both worlds.

Permanent Life Insurance Policies with LTC/CI riders

If your client wants to keep some flexibility when it comes to long-term care needs and is primarily looking to leave a substantial death benefit to their heirs, adding a rider to a life insurance policy could be the answer.  The rider could give them access to the cash value of the death benefit should they need to pay for medical costs and needs.  Additionally, unlike most traditional LTC policies, the premiums for a life insurance policy with a rider can be guaranteed to stay the same over time.  

Adding an LTC/CI rider during the purchase of a permanent life policy will, however, will modestly increase the premium costs.  This increase buys your client the ability to avoid the ‘use it or lose it’ nature of traditional LTC buy giving them access to the death benefit, dollar-for-dollar as needs arise.  It should be noted that the benefit does not grow along with inflation and the benefit they buy today will not grow over time.  

Options such as guaranteed premiums and benefits make these robust policies a great fit for a client that may already have a need for permanent insurance.  

Mettle Insurance helps risk advisors picture of a snowy mountain top

Mettle protects your best work

Mettle values your client’s financial goals.  This is why we leave no stone unturned when researching policies that protect both your client’s current assets and their long-term security.  After a comprehensive analysis and review of their needs, we can help you craft a long-term care plan for your client that will leave their assets in place in any eventuality.