Although they may look at LTC insurance in different ways, advisors agree it's important to discuss it with clients. Family relationships and medical history, assets, types of policies and their costs, and the nursing home charges in the area a client lives are among the topics often covered in such discussions.
"Long-term care is a part of retirement planning. When should it begin? At birth," says Chris Cooper, owner and founder of Chris the financial advisory firm Chris Cooper & Co. in Toledo, Ohio. He also has worked as a paramedic and nurse and owns Elder Care Advocates, a private geriatric care management and long-term-care consulting firm.
"Anybody with under $2 million in net worth needs to look at the insurance or they will go broke, especially because two-thirds of the persons availing themselves of long-term care have dementia, largely caused by Alzheimer's, and they can last 20 years," he comments.
Janice K. Hobbs, owner of Jan Hobbs Financial Advisors in Orange, Calif., says she believes 60 is a good age to consider LTC insurance. But it might be appropriate for a younger client depending on medical history, such as if adult-onset diabetes runs in the family, she adds. Many LTC insurance companies deny policies to people, no matter what their age, with various ailments. Also, an LTC policy might be appropriate for a younger client who is extremely concerned about having such coverage. "We're really big at being able to sleep at night," Hobbs says.
However, there can be a downside to purchasing coverage when you are younger, Hobbs notes. "Features and benefits and costs change over time, and you may end up with a policy that doesn't offer what you need. And the probability of suffering a chronic ailment is unlikely in your fifties. You're likely to be working and have disability insurance. So this is a different need all together and typically associated with old age," she says.
David J. Moran, senior vice president for wealth management firm Evensky, Brown & Katz in Coral Gables, Fla., says a big concern of his is that people don't have the amount of coverage they need. "That's a sales practice issue. It was hard enough to get people to buy, and then sticker shock set in, and the agent low-balled them because something is better than nothing. They may have bought their policy six or seven years ago with no inflation rider. Now someone comes in with an $80 a day policy. They now think they have a policy that will pay when they need help, but that's not going to buy lunch," he says.
In fact, policies and benefits vary widely. Two points advisors interviewed for this article agreed upon are that indemnity policies generally are better than reimbursement policies and an inflation adjustment rider is a must. Indemnity policies generally provide full benefits, say $6,000 a month, once you qualify, regardless of out-of-pocket expenses. With reimbursement policies, policyholders generally pay for expenses and then file claims to be reimbursed, which can lead to a potentially onerous claims procedure, advisors say. Not surprisingly, indemnity policies generally cost more than reimbursement policies.
"For the most part it's cut and dried," says Barschi. "For almost everybody, the same policy makes the most sense. Generally speaking, it's evaluating the price point of the policy. I look for the cost to benefit."
For many advisors, evaluating all the ins-and-outs of policies can be time-consuming. Hobbs uses a consulting company that does research on long-term-care insurance for financial advisors. "They keep up with all the new developments. All the pricing, all the specifics of the policies," she says.
Her firm does insist on at least A-rated insurance companies and policies that offer 100% coverage for home-health care. Most often, the policy's elimination period-the waiting period before one can collect benefits-will be 90 days, she adds. Two people applying together can save more than 20% in annual premiums compared with two individual policies, Hobbs says.