Since health care now figures in many financial plans, advisors are less willing to plan around uncertain and unstable insurance costs, says Newman, who adds that advisors may also be reluctant to address LTC because of the movement away from product-driven practices towards financial planning.
“Advisors are trying to move away from talking about insurance in general; part of that is the regulatory pressure,” Newman says. “It’s easier for them to tell a client that if they want to evaluate this kind of coverage, then go ahead and do it. I don’t think they’re being callous, I think they’re being cautious.”
Clients, at the same time, may not be receptive to talking about insurance that they may never have to use. Even though Genworth’s study found that the amount of claim benefits paid by LTC insurers is increasing, advisors are still troubled by the assumption that up to 30 percent of the retirement-age population will never need the coverage.
Newman also says that the barriers to eligibility for long-term-care coverage are so high that many clients no longer qualify once they reach an age where discussing such coverage seems appropriate to advisors.
Steve Cordasco, founder and CEO of the Philadelphia-based Cordasco Financial Network, generally avoids standalone LTC insurance.
“We prefer for our clients, who tend to have a higher net worth, to self-insure,” Cordasco says. “The real issue I have with the standalone long-term-care policies is that there’s no guarantee for what happens to them in the future. Not only is there a chance that they’ll never file a claim, but there’s also a chance that these policies will cease to exist in the near future.”
Ultra-high-net-worth families always have the option to self-insure and to use trusts to protect any assets they wish to set aside for a legacy plan, says Toumayants, but for other, less wealthy clients, there are two alternatives available.
Whole life insurance plans with a long-term-care rider offer clients a death benefit, a tax-advantaged investment wrapper and the ability to use part of that death benefit early to cover their LTC needs.
“Long-term-care insurance is a very difficult business,” says David Wilken, president of individual life for Voya Insurance Solutions. “Because of the challenges in offering stand-alone LTC coverage, Voya doesn’t offer these policies, but we think we offer a better option in our chronic illness rider.”
Voya’s Chronic Illness rider can be added onto certain life insurance products for an additional cost to cover nursing home, hospice, assisted living, medical equipment and home health needs in case of illnesses like Alzheimer’s, arthritis, heart disease, malignant cancer and diabetes.