SAN DIEGO -- "This is an industry where your clients really need an advocate." 

When it comes to long-term care insurance. Individuals don't need to talk to an insurance provider about long-term care, argued author and consultant Allen Hamm; they need to talk to a financial advisor.

In particular, clients need help figuring out how they will pay for LTC, Hamm told a packed room of planners at the annual NAPFA conference here. 


Your responsibility, he told advisors, is to help clients determine whether they should rely on LTC insurance or on their own assets to fund end-of-life care.

According to Hamm, there are four ways to pay for LTC: family help, Medicaid, personal assets or insurance. But two of those -- family help and Medicaid -- are generally the result of an emergency, not part of an individual's plan. Paying through these methods usually "arises without them planning for it," taking them by surprise, Hamm said.

Presumably, that leaves two options for clients working with planners: Fund the care from their own assets or buy insurance.

But thanks to a number of industry trends, Hamm said, LTC insurance is appropriate for fewer and fewer clients. Fewer companies are offering coverage, and  it has become more difficult to obtain. Meanwhile, premiums are rising for new and existing policyholders -- and even more for women. Additionally, benefit choices are narrowing, particularly the maximum lifetime benefit, Hamm told planners.

In fact, Hamm predicts that, in the coming years, individually issued traditional LTC insurance will no longer be available for new applicants; companies will continue to honor policies, but no new policies will be issued.


So what's a client to do? Hamm said there are four key ways advisors can help clients through this challenging topic:

  • Comprehensive LTC planning. Though Hamm believes traditional plans may disappear, but coverage will be available in some form -- and every client should go through a comprehensive LTC planning process, he said. This includes the need for detailed documentation, he said. (Hamm's firm, Superior Long-Term Care Planning, specializes in this type of planning.)
  • Policy audits. This is not just for new policies -- planners should periodically go back to review existing policies as well. "When things change with an existing policy, they do have options," Hamm said.
  • Claims. "People need an advocate when it comes to claims," Hamm said. Since they're often deterred after just one conversation with insurance representatives, clients need assistance when they file claims.
  • Medicare. Since most people don't understand how limited care coverage is under government plans, many would benefit from a Medicare consultation explaining the scope of coverage.


Planners are intensely interested in the topic -- though they don't necessarily agree on how to address it. 

The gap that clients will likely need to pay is "much less than what an insurance broker would be telling" them, argued Frank Napolitano, a JD and CFP. "If you're planning for retirement, you've already planned for consumption spending," he said in a conversation following the session. The money that you would've spent on consumption instead goes to the assisted living or nursing home facility, meaning that much of the cost may already be covered by what clients have budgeted for.

"If you really need long-term care for long periods of time, you're going to sell the house," said Napolitano, a San Diego-based advisor with Sensible Financial Planning, a Boston firm. "The annual cost of the house that you planned for, that's a form of savings. So now you're really talking about the cost of care minus all these other savings."

On the other hand, another San Diego planner, Chris Cooper, has seen clients benefit from having insurance in place. He has seven clients currently in nursing homes, he says;  three have long-term care insurance, and it's paying for a huge portion of their care, he said. The four others "are slowly going broke." 

Even so, he's undecided on the best approach: "I don't necessarily like the product we have right now, but we don't have anything else."

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