I am perpetually amazed at the degree of cognitive dissonance stirred up in my own mind every time I ask myself this most basic rhetorical question: “How can anyone in their right mind ignore the probability of an expensive and extensive need for care?” The absolute unvarnished truth is that no matter how well you have constructed your plans for retirement and the disposition of your estate, an extended need for custodial assistance can blow up all your carefully crafted expectations. A lifetime of savings and financial planning for retirement hopefully culminates in an introspective consideration of a classic estate plan that defines how assets are to be transferred to the people to whom you wish them to go, and when and under what circumstances you want them to go there. Wills, powers of attorney, medical directives and trusts establish the mechanics and basic structure. Insurance strategies should then arise to facilitate the preservation of assets, leverage risk more economically, address issues of fairness and ameliorate potential taxes.
After all that careful introspection, family soul searching, insurance leveraging and brilliant financial planning, why would anyone leave such a well thought out structure twisting in the wind of a highly possible catastrophic risk? Why would anyone question the validity of building a firewall around that plan? To paraphrase our good friends at CLTC “What is your Plan to protect the Plan?”
How can anyone governed by fiduciary obligations avoid a conversation about chronic illness risk? More important, why would an insurance professional not only avoid a clear and present danger to everyone’s hard work, but apparently blindly step away from the opportunity to review and illuminate possible insurance solutions and product revisions particularly in the light of the available plethora of combo policies that now come in all sizes, shapes and dimensions?
Readers of this column recognize that LTCI has never been the main insurance event—we have always seemed to turn up further down a client’s dance card. It just seems there may very well be some major considerations that have been overlooked. Therefore, in no particular order of significance, I humbly submit for your consideration:
- When an estate plan is under construction, that is the time to express concern about Living Revocable Trusts. “Incapacity” is the primary ingredient of that exercise, determining what happens if you cannot make your own decisions. Cognitive deficiencies are of course the most likely claim. When you are putting those decisions in place it might be nice to provide the monies to fuel the plan.
- Every interview begins with an evaluation of what is already in place. Policy review that considers ownership, beneficiary designations and whether original objectives are still progressing as planned should not avoid a conversation about chronic illness. A frequent point of departure is that new product has now become available. The PPA has given us license to 1035 freely in behalf of establishing chronic illness protection.
- Establish a relationship with a law firm that has estate planning expertise and a clear understanding of the importance of an estate plan protected by long term care/chronic illness protection. A reciprocal referral opportunity should be your goal as you move forward with common cause. Contracts and expectations are always subject to review.
- Establishing the ultimate availability of protection as early as possible is always our immediate goal. Health will change and premiums will rise. There are now term life policies that can guarantee insurability and conversion to the best permanent policy available that holds the most current definition of chronic illness that does not require a permanent disability. This conversion privilege is less than 10 percent of premium and allows an early planning and highly affordable opportunity to begin the conversation about ultimate mortality and morbidity.
- We now live in a world of creative and effective “supplemental benefits.” The concept of living benefits rolls smoothly off many tongues. Just make sure your definitions are the most current. I remain concerned that many still speak with forked tongue in this regard.
- There is a new market in development working diligently to address the reality that is the direct converse of our lack of success with stand-alone sales. The great and vast majority of Americans simply failed to plan at all. We simply cannot abandon those in greatest need. Medically underwritten single premium annuities, life settlements used exclusively for care, and reverse mortgages should be readily available in every agent’s briefcase.
Build it, leverage its purpose with life insurance, and then demand that the big bad wolf stalking the caregiving landscape continues to need an inhaler.
Other than that, I have no opinion on the subject.
