Twenty-five years ago, the average age of our clients purchasing long term care insurance was sixty-eight. The average age at the time of claim was about seventy-nine years, or a mere eleven years into the future. Claims were averaging about 2.8 years in length, and a three-year policy was usually more than adequate to address these needs. Today, the average LTCI purchaser is fifty-six years of age, and may not require access to these benefits until age eighty-one, some twenty-five years into the future. Fueling the drop in the average purchase age are increased inquiries from clients in their 40s and 50s. Also noteworthy is the fact that stays in care are growing longer for a variety of reasons that we will address later in this piece.
For the same reason that so many people we encountered for years and years did not have a will, durable power of attorney, healthcare power of attorney, or had not made any plans regarding their estate, nobody wants to confront their own mortality, and much less their morbidity, hence the lack of long term care planning. This is changing due to the dictates of Society, and the ever-changing ratio between those requiring care and the number of available (paid and unpaid) caregivers.
Fortunately, or unfortunately, the Baby Boomers are now firmly recognized as the Sandwich Generation. Often caught between the need of financially supporting and/or providing care for their aging parents, as well as financially supporting the higher educational pursuits of their children, as well as potentially welcoming some post-college age children back to the family nest, they are being forced to address their own future needs. This has prompted a great deal of thinking about the future and not wanting to in turn be a burden on their children.
Elder Law and Estate Planning attorneys, as well as financial advisors and insurance producers, are being asked about long term care insurance as a means with which to address this critical aspect of the estate plan to shelter assets to pass on to family, to qualify for Medicaid, and to remain in control of their lives.
We are hearing the “I can save money by waiting to purchase a policy and keep the money in a savings or money market account,” less and less now because, no matter how long the client pays for the insurance coverage, they will see virtually all the premium money invested returned within the first 90-120 days of claim. Also tempering this argument is the knowledge that health can change in the blink of an eye, and the greatest cost of waiting is often eligibility for the desired coverage.
For all the foregoing reasons, the long term care industry certainly remains a niche market ignored by large segments of the insurance, financial advisory, and legal planning communities. This needs to change because more clients are recognizing the need for this planning and will seek out those professionals who are in the position to advise them on this critical planning product. In other words, if you are not able to provide this desired coverage to your client, it is incumbent to forge strategic partnerships with qualified LTCI providers that will allow you to retain these clients.
Because of new and innovative advances in medical practice and procedures, combined with extensive advances in the pharmaceutical industry, life expectancy continues to climb in our country, leading us to live longer and to die slower. While increasingly long term care insurance claims continue to originate in the home, now fully 73 percent, there are more assisted living, memory care, and skilled nursing facilities being constructed and dotting the landscape. Many of these facilities offer a full spectrum of continuing care ranging from independent living to full-blown nursing care. What they all have in common is an ever-increasing price of admission.
While remaining at home and “aging in place” is still the most desired choice of those requiring assistance with their activities of daily living, these facilities are often the alternative elected by patients and families alike, when it becomes evident that they are required for older adults to maintain their physical, mental, emotional, and social health as they continue to age, and the family is simply not in the position to provide this care.
The same advances that allow us to continue to live longer are often predicated upon earlier diagnoses, which can often lead to even longer periods of required care. Longer periods of treatment, whether at home or in a facility, come with an ever-increasing price tag, as long term care costs continue to rise at about four percent per annum.
The Baby Boomers who have been unpaid caregivers to the tune of approximately $470-$600B last year or endured lost wages, promotions, or Social Security benefits totaling some $3T, are now committed to planning for their own futures and precluding the need to burden their own children with the onus of their own care.
For the wealthier client who has previously believed that they can shoulder the financial cost of this burden, these costs are often higher than for their middle-income counterparts because they are not willing to sacrifice the quality of either their standard of living or the nature of care received. As a result, the wealthy more often spend far more money for their care by virtue of their choice of caregivers or the facility in which they elect to reside. A long term care insurance policy allows them to temper this scope of these costs.
To these wealthy clients we offer the alternative of insuring their portfolio against catastrophic loss associated with long term care by leveraging their return on investment or income on savings with the purchase of a modest policy. Likewise, we can assist them by putting in place a “stop-loss” measure in which the purchase of an asset-based life insurance policy with a qualified long term care insurance rider will often provide them with a fivefold increase of long term care protection on their investment, while allowing them to retain a growing cash value in the plan and a desired death benefit.
Some twenty-five years ago I sat with a retired orthopedic surgeon who suggested to me that “given twenty-four hours he could put his hands on ten million dollars in cash.” This very elegant gentleman and his wife owned three homes, several cars, enjoyed country club memberships near each home, and clearly could afford to absorb the costs associated with their long term care. The premiums for the modest plans that I had designed were “chump change” for them, and as a result begged the question of why they were seeking this coverage. When I posed this question to him, he looked me square in the eye, and said, “Look. If my wife suffered a stroke tomorrow, I could take care of her as a doctor. But as her husband, I know that I would be an emotional basket case. I like the idea that with one phone call,” he mimed picking up a phone, “you guys will be here to put together a plan of care, install grab bars, raise the commode, and widen doorways if necessary. That is why we are purchasing these plans today. Besides which, as you have ably shown me, the annual premium for this insurance is a whole lot less expensive than the monthly costs that we would incur.” The interview with this gentleman and his wife remains one of my most pleasant memories from the industry because, once educated and given all the information necessary to make an informed decision, he did just that (and referred several of his friends to me) because of the perceived value that I had brought to him.
First, the reason most cited by clients who are investigating their options pertaining to containing future long term care costs or more accurately to enact a plan that addresses access to quality care, preservation of assets, maintaining independence and decision-making ability, is the overwhelming desire not to be a burden on their family and friends. Secondarily is the desire to retain their dignity when forced to seek out assistance for activities of daily living or because they are experiencing some level of cognitive impairment.
As both an attorney and a long term care insurance advocate, I have found the “I don’t want to be a burden on my children” to be the most viable means by which to begin and/or entertain the long term care planning discussion. As a four-generation unpaid caregiver in my own family, I for one have a decided peace of mind knowing that the policy that I purchased some twenty-five years ago with a five percent compounding inflation rider has grown to more than one million dollars of benefits. While I love my children, I have no desire for them to be anything more than care managers for my wife and I and take comfort in the knowledge that we will be able to avail ourselves of professional caregivers that will allow us to remain in our home for as long as possible and in a facility of our choice should that become necessary.
Another reason more and more clients are seeking out long term care insurance protection is a greater awareness of the limitations inherent to both the Medicare and Medicaid programs, as more and more political candidates are now willing to approach these traditional “third rail” topics during their respective campaigns for elected office and openly discuss hypothetical changes to all entitlement programs previously viewed as untouchable. Long term care insurance is an additional arrow in our quiver that allows us to create options for our clients.
Long term care is an event. We do not know when it will occur, but only that the certainty of it occurring is growing greater and greater as we continue to age in place as a Society. Long term care insurance is an option with which to address this growing need. More than just a product, it is a flexible solution to the many issues that our clients are facing as they begin to plan for their own retirement.
I have had the opportunity to deliver only a couple of life insurance death benefit payments to the family of departed clients. Conversely, I have had more opportunities than I could desire to help long term care insurance clients initiate claims for benefits. The main difference is that with the life insurance policy, my client was no longer living; with long term care insurance, our clients are very much still alive. By making long term care planning part of annual reviews, new client intakes, and the conversation regarding estate planning, not only do we serve our clients but also potentially their children and grandchildren, who in turn will often desire to become your clients for this much needed niche product as well as the services regularly provided by your practice.
