ATLANTA BUSINESS CHRONICLE - Aug 25, 2016
Even though there is limited product and higher premiums in the long-term care policy space, retirement advisers are still urging clients to consider purchasing coverage for future medical expenses.
Just like with any insurance product, there isn’t a crystal ball that indicates how much coverage a person may need but as people are living longer, retirement professionals say this coverage can prevent financial devastation which could derail retirement plans or, even worse, leave your family in crisis.
Julianne Andrews, principal at Atlanta Financial Associates, said the space has evolved over the last several years but more of her clients are interested in coverage, especially those who have aging parents who are facing costly medical challenges.
“They know first hand how expensive medical problems can be,” she said. “But the marketplace has changed. Many carriers have gotten out, the premiums have gone up and the benefits have been curtailed pretty significantly.”
Whether or not to purchase long-term care insurance is a personal choice and many of her clients look at what they can afford, family history and how a major medical event will impact their life or the life of their spouse and family.
“People have to decide if they want to include this as a budget item in their retirement plan or if they just want to self insure and hope they will be fine,” she said. “I think it is most important for those folks in the middle — those who have saved well for retirement and done a good job but a big expense like a major illness could blow a hole in their long-term retirement plan. These also work well for married couples because the health care problems of one could devastate the other financially.”
Plus, married couples applying together typically receive a spousal discount. They can also redirect insurance dollars from life and disability coverage over to long-term care coverage.
“I am encouraging clients to make a decision sooner rather than later. Every year you get older, the premium goes up. You want to make a decision before age 60, 65 at the latest,” she said, adding that they can customize a plan that fits within a budget.
Peachtree Planning President Brad Stonecipher has also seen a lot of carriers get out of the market in the last 7 to 8 years and has seen a major move toward asset-based products, like annuities and life insurance, which have long-term care benefits attached to them.
“The industry is grappling with the problem like all the seniors are. They are having a tough time providing protection. There are higher instances of Alzheimer’s and dementia and higher costs of care in facilities. Insurers have had much higher costs than they predicted so they have raised the premiums on folks still out there on policies,” he said. “The premiums have gone up tremendously resulting in people dropping the coverage so then the insurance companies don’t have as many people in the pool so the rates go up even more. Every insurer has reduced benefits, raised their price or decided they aren’t selling these policies any longer.”
But these facts shouldn’t deter someone from getting coverage. They simply need to find alternatives.
With an annuity product, the income a person receives will increase for a period of time if they are in a nursing home. With permanent life insurance products, consumers can spend down the death benefit at some level for long-term care.
“We are now directing some level of assets or savings towards one of those products,” he said, adding they offer a lower standard of underwriting than traditional long-term care products.
He said long-term care coverage is something that is discussed with every client they plan for. “It used to be that the 65-year-old would come to us to talk about long- term care coverage – now it’s the 35- to 40-year-olds saying they have seen what has happened with their grandparents and parents and they don’t want to be in that position so it has become the focal point of retirement planning no matter the client’s age,” he added.
Bo Wilkins, president of Wilkins Insurance Group, specializes in using life insurance in different planning environments. He believes the life insurance products with the long-term care rider attached to them provide a good solution for those seeking some long-term care protection.
“This provides a bucket of cash for long-term care costs and has a death benefit that will payoff to help the surviving spouse have a buffer of retirement monies as the retirement pot may run out due to longevity of life,” he said.