Olin Wage, Senior Vice President and Long-Term Care Advisor for Stephens Insurance, is interviewed by Frank Thomas in this episode of Stephens Viewpoints. Frank and Olin discuss why long-term care insurance should be considered as part of a prudent retirement plan, the options available, and options for providing for long-term care needs and expenses.
[:44] Olin explains that long-term care addresses the needs of an individual because of a chronic condition, accident, or trauma, which requires assistance with the basic activities of daily living, including transferring, toileting, bathing, dressing, and eating.
[1:18] There are six activities of daily living. To qualify for a long-term care claim the individual needs assistance with at least two of the six activities. Alternatively, a cognitive impairment alone could qualify a person to receive benefits.
[1:39] Many researchers estimate that more than half of today’s 65-year-olds will need long-term care, at an average total cost of $138,000. A recent Forbes article says only 89,000 bought private long-term care insurance in 2016, a decline of 14% from 2015.
[2:06] Unfortunately, most people think that the government, their health insurance, or disability policy will take care of long-term care expenses. Some people assume that they can self-insure, without actually investigating the implications of using assets to pay for expenses.
[2:29] Medicare and Medicaid are not good for long-term care. Medicare is very limited and only pays for skilled care, up to 100 days. Medicaid requires a person to be financially poor to qualify.
[2:52] Purchasing long-term care in your mid-forties to mid-sixties is optimal. It’s important to act while you’re in good health, because the cost of long-term care is highly dependent upon your physical condition.
[3:14] It’s important to have long-term care insurance in place before you become disabled and dependent on care, even before your retirement age. Income from a disability policy won’t be sufficient to cover the long-term care expenses.
[3:44] In a typical long-term insurance claim, people qualify for benefits after 90 days. Benefit periods run from four to 10 years. The average length of care needed is statistically less than three years.
[4:17] Insurance companies are trying to minimize their risk to a sustainable level by reducing benefit durations and having a broader selection of inflation riders. Some insurance companies are offering life insurance policies with long-term care riders. Also, annuities have been used for long-term care benefits.
[4:56] Elder care costs continue to rise. Live-in facilities may cost in excess of $90,000 annually. Insurance companies adjust for increases in cost through inflation riders on the long-term care policies. Each year that you own the policy, the benefit increases.
[5:37] Stephens advises clients, both individuals and employer group clients to include long-term care in their overall financial plans. Having a long-term care policy protects their financial plan and their investment portfolio, and protects their family from becoming their caregivers.
[6:18] More and more employers are embracing long-term care benefits for their employees, largely because of the tax benefits associated with the deductibility of the premium for companies, and also the tax-free benefits for their employees. Some employers carve out their top executives and provide long-term care benefits for them.
[7:01] Olin is encouraged to think that long-term care benefits will become a common employer benefit offering as employers learn the tax benefits on both the employer and employee sides.
[7:33] Clients should make sure that they have a financial advisor that is well-versed in long-term care. Clients should involve all their advisors — attorneys, CPAs, insurance agents. When all are involved, it works for the betterment of the client. The need for long-term care is an integral part of their retirement plan.
[8:20] Retirement health-related risk could involve the need for long-term care insurance. If you are limited in the six activities of daily living, and you need help in that regard, there needs to be a means of paying for those expenses. Especially if you need multiple caregivers or 24-hour care, the expenses are higher than average.
[9:32] Another option beyond the traditional long-term care policy is a life insurance policy with a long-term care rider. Discuss this with your Stephens Insurance advisor and your other retirement plan advisors.
[10:00] For more information on this topic, please contact Stephens Insurance at 1-800-643-9691. To listen to more Stephens Viewpoints, check out our website.