Prioritizing health and legacy
by Hari Srinivasan
Hari Srinivasan is the Founder and CEO of iCover, a Missouri-based InsurTech company that has designed the “Best Life Insurance Buying Experience” with the industry’s first non-reflexive e-App and AI/Algorithmic Underwriting Engine.Medical expenses present a major risk for financial advisors’ clients, and this exposure mounts as they age. As hard as it might be for them to contemplate the necessity of long-term care, the reality is that the majority of Americans will need it, with the U.S. Department of Health and Human Services stating that 70% of adults aged 65 years and older will require long-term care.
The high cost of long-term care can drain an entire family’s wealth. For that reason, financial advisors should educate their clients on the benefits of investing in long-term care (LTC) insurance.
In my experience, many people assume Medicare will cover the cost of their long-term care in an assisted living facility or nursing home, but Medicare only covers the cost of a skilled registered nurse for patients who medically require one. Regarding skilled nursing facilities, Medicare only covers a portion of the cost, and then only up until day 100, after which it won’t cover any facility costs.
Of course, it’s not possible to foresee exactly how long a given client will need to stay in long-term care. The statistics from the U.S. Department of Health and Human Services, however, show that Americans’ average stay in long-term care is three years. Women tend to require longer stays than men — 3.7 years compared to 2.2 years, respectively — and 20 percent of long-term care residents will live in a nursing home for longer than five years.
That means, on average and in general, Americans should expect to fund their long-term care for at least 995 days, if not longer.
Meanwhile, the average cost of a typical nursing home is between approximately $7k and $10k per month. (The price tends to vary in different markets, and private rooms are more expensive than shared ones.) Since Medicare will only cover part of the cost for the first 100 days, and since the average stay lasts three years, we can estimate the average total cost as somewhere between approximately $228,600 and $326,600 for any given patient.
That’s a lot of money. The good news is that long-term care (LTC) insurance can help.
What Is Long-Term Care Insurance?
LTC insurance is a specialized type of insurance that can provide coverage for a variety of medical needs often associated with aging. It can be used to cover both skilled nursing care and facility costs for home health or nursing home care, assisted living, therapy, and personal or adult day care. It can pick up the bill when Medicare or other health insurance policies run out, or for things other health insurance won’t reimburse.
LTC insurance can also cover the cost of having someone come into your home to help you with basic activities of daily living (ADLs). For instance, these include bathing, meal preparation, taking medication, and getting in and out of bed, among other things. Having this option can allow people to stay in their own homes longer.
The Necessity Of Long-Term Care Insurance
Neglecting to obtain LTC insurance can be financially devastating, as the above numbers demonstrate. If one of your clients suffers from a disabling condition without adequate LTC insurance, the resulting expenses can place a major burden on their family. While some may be in the fortunate position of having family members who can provide the necessary health care or financial support, your clients may still find themselves with limited options for their futures.
LTC insurance covers some or all of the cost of home health or nursing home care, assisted living, therapy and personal or adult day care. In this way, it protects your clients’ families and prevents these kinds of expenses from draining their resources.
Helping Clients Purchase The Right Long-Term Care Insurance Policy
While LTC insurance can be a complicated product, financial advisors should strive to keep the process simple for clients. Some education is usually required since many people don’t know much about this kind of insurance. Presenting the statistics I mentioned above, followed by the benefits of LTC insurance, helps most people understand the necessity of these policies, however.
After this initial informative phase, I recommend presenting a range of coverage options. Offering coverage possibilities at different price points can help your clients choose the package that would be right for them, giving them peace of mind without negatively impacting their budget.
While some clients might feel like they need to choose between purchasing either life insurance or LTC insurance, keep in mind that hybrid products can combine the strengths of both these kinds of policies. Some provide annuities, and there are also Whole Life products with LTC insurance riders.
Help Your Clients Protect Their Legacies
LTC insurance coverage should be a key part of financial advisors’ longevity planning for their clients. Given the large population that will require long-term care and the paucity of Medicare’s provisions, many clients will need to draw upon these policies over the course of their lifetimes. Meanwhile, neglecting to obtain this coverage can expose their families to unexpected major expenses.
To help your clients protect their legacies, educate them about the necessity of LTC insurance and the potential tax benefits. They and their families will thank you.
