Featuring Carroll Golden, CLU, ChFC, CLTC, CASL, LECP, FLMI

Executive Director of the NAIFA Limited and Extended Care Planning Center

The COVID-19 outbreak has revealed a shortage of information on limited and extended care options, said Carroll Golden, Executive Director of NAIFA’s Limited and Extended Care Planning Center in a recent webinar. And even though the pandemic has brought these issues to light, it makes sense to address them by planning for the long term rather than with stopgap measures.

Long-term care services are or will be a major consideration in finances of most Americans. Some 69% will require some form of long-term care, with the average length of care lasting three years. The cost of services is increasing. The cost of a private nursing home has gone up by 57% since 2004. Assisted living facility costs have increased by 69%, home care by a health aide by 25%, and home care for homemaking assistance by 35%.

“At this point, we need to focus on what are the costs going to become?” Golden said.

These costs have major impacts on people’s savings, investments, retirement, and financial confidence.

Talking to Clients About Long-Term Care

The grim statistics about the cost of long-term care and likelihood that clients or their loved ones will need it tend to turn people off. They often do not facilitate meaningful client conversations, Golden said.

“What helps is when we listen to their story,” Golden said.

Listening to a client’s story allows you to gauge their interest, their subject knowledge, and how top-of-mind limited and extended care issues are to them.

An advisor can guide the client stories to address personal health matters, family situations, family health histories, financial situations, insurance coverage, and concerns and expectations regarding care.

Aligning Client Motivations With Actions

While listening to client conversations, advisors need to determine what motivates a particular client. Is she certain she wants to age in her own home? Does she understand how unexpected care incidents can affect cash flow, impact retirement plans, disrupt her loved ones’ lives, or have tax implications?

Some of the Options

Self insurance is an option for people with high savings or income levels. Health savings accounts (HSAs) allow owners to use HSA funds to pay long-term care insurance premiums. Government programs can provide some limited long-term care benefits through Medicare, Medicaid, and veterans benefits. These may be viable options for some clients. Many planners network with specialists in these areas to ensure their clients get the most out of them.

For people without traditional long-term care policies, borrowing against the cash value of existing life insurance policies may be an option. Life settlements, viatical options, and reverse mortgages may also factor into a limited and extended care plan. However, they are not right for everyone.

Insurance options include traditional long-term care insurance. These have gotten some bad press, due to problems with the first generation of the product. However, the companies have more information and can better position and price tradition long-term care policies, Golden said, meaning that they remain a viable option. Employers can provide long-term care coverage through group and multi-life products.

Hybrid solutions based on life insurance or annuity products with long-term care riders are popular now. These might include whole life, universal life, indexed universal life or single-premium annuities. A chronic illness rider can also cover some long-term care costs. Golden notes that long-term care riders and chronic-illness riders employ different IRS codes, and it is important to understand the requirements and application of each as they attach to an asset-based product.

All of these options have pros and cons and will work better for some clients than others. It is important for advisors to provide clients with guidance based on what they learn from listening to their clients’ stories. There are experts who specialize in all of these options and can help advisors who may not specialize in them work out details for clients. NAIFA's LECP Center is a good resource where advisors can connect with experts in all of these fields.