Show Notes
This is Josh Tirado. You're listening to Making Smart Decisions. And this episode, we're going to touch on longterm care insurance. So when it comes to the topic of longterm care insurance, there has become more public acceptance recently, but for a very long time, People did not want to discuss longterm care insurance.
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00:02:00] They would actually just rather discuss life insurance, longterm care insurance because the concept of being here and not being here was easier than the concept of being here, but being physically impaired in some way and needing longterm care. I started selling longterm care insurance and handling it from my clients about 20 years ago.
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00:02:18]the market for it has come. Full circle. it's come so far in 20 years. It is amazing how much better is now. It also amazes me, the understanding that the general public has and the need for it. And also the level of care. brief history when longterm care first started out, they were called nursing home policies.
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00:02:37] designed to cover the cost of a nursing home over time, though, that has greatly evolved in longterm care has actually become an anti nursing home or facility type policy where the purpose of longterm care is to help you stay independent and in your own home and deal with whatever has happened to you.
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00:02:54] And if possible, recover from it and go back to living, as opposed to saying, we're just covering the costs of what's going to happen for the nursing home. It's actually much more of a recovery and lifestyle enhancement type policy. So it will cover a number of things. But what I want to address is when it first came out, and a lot of people still have this preconceived notion when it first came out, I very much likened it to your auto insurance.
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00:03:20] You paid for it, you had it for your entire life, and you really hoped you never used it. And in the end. All that money for all those years was gone. You didn't get anything back, but you were happy that you didn't use it the way they structure longterm care insurance. Now, previously, that what I just described was a traditional longterm care insurance policy that only, I think, comprises about I'd say 10 or 20% of longterm care insurance that is put in place today.
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00:03:46] And out of my personal practice, I haven't used a traditional policy in over eight years. The new policies are hybrid policies. this is going to get a little technical, maybe a little nerdy, but you'll see why this is important.
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00:03:59] Just second longterm care insurance is governed by the laws for health insurance. premiums can be raised coverages, and things can be changed. The newer policies. Or a hybrid policy where it's a combination of a life insurance policy and a longterm care policy, but the base of it is life insurance.
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00:04:20] So the whole policy is governed by the laws that govern life insurance, not the laws that govern health insurance and those laws are night and day different. it's more advantageous for you as the consumers, the end-user to have it based on life insurance. You now have a base of life insurance with a longterm care insurance rider on top of it.
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00:04:39]And with that allows you to do is not lose out on your money. the way it works now is the money you put into that policy is going to stay there, and it will also provide longterm care. It will also provide a life insurance benefit. So he'll get from the standpoint of. If you need longterm care, this hybrid policy will provide you with longterm care benefits.
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00:05:00] If you passed away and did not use your longterm care, this hybrid policy will provide you with a life insurance benefit. If, at any point you decide, I don't want this policy. Either you're older, and you need or want the money out of it, and you don't want to use it. Or something has drastically changed within healthcare in this country.
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00:05:18] And longterm care is now paid for by the government or becomes passe. And you no longer need it at any point. If you want to cancel a policy, depending on which policy you have, you can get back a hundred percent of the premium that went in. Some policies give you back about 75 or 80% of the premium that went in.
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00:05:34] But there is a few more benefits. so there's a little bit of a trade-off with what direction you want to go in, but you can get back most or all of your premium. So if you think about it that way, what does actually becomes is a different asset allocation you think about, okay, where can I pull the money from?
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00:05:55] And what was it doing, where it was, and move it over into a hybrid longterm care policy. And that money is now providing me a life insurance benefit. It's providing me a longterm care insurance benefit. And if at any point I need my money, I can get my money back out of it without there being a penalty.
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00:06:13] your money's still sitting there as an emergency fund. Now you can look at and say; my money's not making a return when it's sitting in that policy. True. But at the same time, you're also no longer paying a life insurance premium, or longterm care premium is covered. Bring those for you at the same time.
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00:06:28] I can't say it's a no-lose type of situation, but it covers you. If you need care, it covers you if you pass away. And if at any point you want to get the money out and cancel the policy, you can take your money out. So the policies have come a long way from what they used to be.
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00:06:42] And. It is the fastest-growing insurance or investment product currently in the country. And if you look at the number of people that will need longterm care, at some point in their lives, it's yes, you have better than a 50% chance of meeting it. And the fact of the matter is statistics show women need it more often than men.
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00:07:06] That's just something because our life expectancy isn't as long, we tend to die first. And, oftentimes there's, a woman in the household to help take care of the man. So maybe he doesn't need the care. It's important for men and women, but there's a almost a 50/50 chance that men will need it.
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00:07:22] And there's a greater than 50/50 chance that women will need it. on a personal note, I put my mom's policy in place probably about 15 years ago. And it was before these hybrid policies came to be, so hers is still a traditional policy because it was that old.
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00:07:40], but from a personal standpoint, I did it because. My father had ms. I had ms for a lot of years and didn't need longterm care and needed that help before he passed away. And I can see what it can do to a family, one, the stress of having to care for someone and to the cost. So personally, I've always thought it was important, but it has become so important now If you are a fiduciary advisor to your clients, if you're a field near fee-based advisor, doing planning for your clients, the courts have even determined that longterm care is so important that it must be offered to your clients. So I know for a fact there's been a number of cases, one specifically in Texas, but there's been a few cases brought up, in recent years where.
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00:08:26] An individual or a couple has sued their financial advisor because the financial advisor did not recommend longterm care insurance to them. And then they had health conditions that required longterm care and how much it costs and the devastation it did to their net worth. They felt that if that person was a true fiduciary, they should have made them aware of longterm care.
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00:08:48]They brought suit against them, and the court sided with the clients, not the advisor. So in some States, if you are not recommending it for your, to your clients, and educating them on it, you are not standing up to your fiduciary responsibility. So I personally have a form that once new clients, assisting clients, whoever, if you're 50 or what, as soon as you turn 50 or over, we are having a discussion about longterm care.
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00:09:12] And I'm having to actually sign a form saying that you've been educated on it either you already have it, you've applied for it, or you've chosen. Not to take that route, and you do not want to get longterm care, but anyone 50 and over I'm absolutely having a discussion. I'm recommending him. Now, bear in mind that is an insurance product.
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00:09:30] It is still based on your health and your insurability. So it's not guaranteed that everybody can get it as you can't. There are things we can do to work around it, but I think it is very important, especially in this day and age, when Most times these hybrid policies you're paying for it out of already existing assets.
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00:09:46] You can get paid for it. Lump-sum, spread out over five years, 10 years. Some of them can even spread out over longer, but you're just reallocating money to this problem. You're not necessarily having to pull more money out of your budget to fund this and potentially lose the money. You're simply reallocating money.
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00:10:02] That's already there. And you can be used in a variety of ways. The other thing I just want to touch on briefly when it comes to longterm care, and it says so many people will need it. Oftentimes it's simply used for the short term. You might need it for a couple of weeks, couple months, maybe you're recovering from some sort of joint replacement.
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00:10:21] You're recovering from heart surgery, you fell, and something broke, or something happened, and you need assistance. Longterm care. Can come in after you've exhausted. The health insurance that pays for that, the longterm care can come in and help pay for that until you've recovered enough. And then you can go back of longterm care back to living your life, and then whatever's left there.
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00:10:43] The rest of the value of your policies is still sitting there for perhaps the next time you use it. So please don't think of it as a later in life or end of life situation. This can actually be very enabling to continuing to have a healthy and active lifestyle.