It is hard to know what is going to happen with health insurance in America these days.
Obamacare still exists in some form, despite continued attempts by President Donald Trump and the Republican-led Congress to change it or eliminate it entirely. The concepts of Medicare and Medicaid are always considered in play legislatively, as Republicans seek to have the government spend less to fund those programs and Democrats fight to maintain its funding and perhaps expand it to reach a larger and perhaps full market of eligible Americans.
Is LTC a topic you like to discuss with your clients?
According to the Spectrem study The Convergence of Health and Wealth, paying for health issues is the greatest concern among working investors, even greater than running out of money in retirement (which would happen quicker if health issues are significant).
Financial advisors spend a great deal of time discussing the finances of eventual health care with investors and thus Medicare comes up into conversation. For some investors, the topic of long-term care insurance is broached.
Long-term care insurance is designed to provide financial coverage for individuals who someday may suffer a health setback that requires massive amounts of expensive health care. Designed to cover the prohibitively high cost of long-term care for in-home assistance, assisted living or nursing homes, long-term care insurance is itself prohibitively costly.
To make the concept work financially for insurance companies, they must charge consumers a great deal of money upfront and depend on actuarial tables which say what percentage of consumers will actually need such financial support. As a result, many people who purchase long-term care insurance never use it due to an untimely or sudden death of the insured.
How can advisors assist clients on the decision whether to buy long-term care insurance?
According to Spectrem’s study Investor Attitudes and Ownership of Insurance Products, only 19 percent of investors with a net worth between $100,000 and $25 million own long-term care insurance. Among the investors who own long-term care insurance, more than half (52 percent) do so because they do not want to present a financial burden to their children. Future guilt is a powerful motivator.
So, future guilt can always play a role in deciding whether to invest in long-term care insurance. But does it benefit the relationship between advisors and their clients to have their clients purchase long-term care insurance?
According to the Spectrem study, 40 percent of investors who do not own long-term care insurance consider it too expensive and 32 percent believe they can self-fund any health care costs when they come up.
Advisors should determine whether an investor and his family can financially survive a significant change of health without the benefit of long-term care insurance.
Knowing that health care costs are a major concern for even the wealthiest of clients, any effort made to educate clients to provide them with an understanding of the costs of insurance against the funds available in a client’s portfolio would be appreciated. Knowledge of the financial risks involved and the level of protection they have already will alleviate concern and will be appreciated by the client, who might be able to worry less about that unexpected pain or cramp that pops up.
© 2018 Spectrem Group