It was 7:28am on January 2nd (2018) when the email arrived from a client; the message read “I’ll call you at 9:00am, we need to get our long term care insurance application submitted.

The demand for long term health care funding continues to grow with the recognition that as we age the risk of needing care continues to rise; so why the drop in LTC insurance sales in recent years?

There are a number of factors, but the greatest is that many people don’t see the LTC risk until they either have a personal experience or an adviser brings it to their attention.

Many consumers consider LTC planning as part of their long term financial plan,  so they rely on their financial planner to address important areas of risk management within their plan.  According to an AARP report, 70% of people over 65 require some form of long term health care.  This is much higher than the likelihood of double digit inflation!

You likely have a fantastic adviser,  and if they are an Accredited Investment Fiduciary, this likely does not apply, and what I’m about to share doesn’t include any financial planner I know (and I know a lot).

If your financial planner suggests long term care insurance isn’t right for you, this could be what they really mean:

  1. “I want to invest your money.” Raise your hand if you think that makes sense.  Of course it does.  If your advisers product/service is investment advice and management, then he/she often wants to manage assets. However, unforeseen health care expenses can jeopardize any well intentioned investment plan.  To maintain assets for continued growth, a more balanced approach that includes long term care insurance would ensure long term goals are achieved.
  2. “I don’t understand why long term care insurance rates are higher today.” Long Term Care Insurance plans have been around for 50 years… but not over 100 years like life insurance and other product lines.  Insurance companies could not predict how long people would keep their policies, as well as a decade of falling interest rates. Consumers who purchase long term care insurance tend to keep it.  Generous provisions in older policies coupled with reduced investment earnings, rates had to rise. Current plans are built and priced based upon claim history, current data, better knowledge and a tougher economic environment.
  3. “I want to sell you a life insurance policy instead.” This occurs in two very different, yet subtle ways. There are traditional financial advisers who felt that permanent life insurance was a poor investment choice and long term care insurance was a good idea, only to now suggest that buying whole life insurance or universal life with a long term care benefit is a good option. The second is the financial adviser who works for a life insurance company, I’m not sure I need to finish that thought for you to see where that is heading.  If you believe you’re going to need care at some point in your future, what would you do?  You’d want a long term care insurance plan supporting your lifestyle decisions and protecting your assets… not spending down the assets.
  4. “I don’t think you will need care.” As mentioned above it is most likely that you will need care at some point in your life. If you need care, long term care insurance is the most economical way to pay for it.  The policy offers the most liquidity compared to most other investments in your portfolio. Advisers use the common misconceptions for not having their clients purchase long term care insurance – I’ll never need it.  It’s too expensive.  My family will take care of me. Marketing research from LIMRA has shown that I’ll never need it is not the main reason people are unwilling to purchase long term care insurance; it’s not knowing what to do.
  5. “While Long Term Care Insurance is expensive, you should spend more to cover multiple needs.” Life Insurance plans offer a predictable (and often guaranteed) outcome, and this comes with a cost. That cost may be in the form of benefits (inflation growth, longer care needs, spousal provisions), or in the form of the higher premium required to secure the coverage. When added to a life insurance plan, the long term care feature is often a fraction of the cost of purchasing the same amount of traditional long term care insurance. The reason is that the life insurance plan knows it will pay out at some point, and has priced mortality and morbidity (awesome industry terms) together. So, while life insurance with a long term care can address the “what if you never need it,” this will not address the concern that this risk transfer vehicle requires a larger upfront financial outlay. (aka “it’s too expensive”)
  6. “I am not certified to offer long term care insurance.” In many states, to offer long term care insurance, licensed insurance agents are required to complete specific continuing education which outlines state partnership long term care programs.  Financial planners and insurance agents who do not suggest long term care insurance may in fact not be certified by the state to provide this coverage.  Furthermore, purchase of LTCi today looks very different than it did five or ten years ago; staying current on the latest trends impacting the long term care marketplace gives consumers better information from which to base their planning decisions.

There is clearly a lot of noise in the marketplace, and new product innovation continues to cloud the issue.  The focus needs to return to making sure our core needs are met as we age.

If you have questions keeping you up at night with regard to things you’ve heard about long term care planning, talk with an experienced LTC specialist to get a different perspective.  You deserve a better night’s rest.