Have you ever considered whether long-term care or critical insurance is better for your client? This has been a very popular question lately and fortunately, in my opinion, the answer is simple: neither product is "better" than the other. Both products are imperative yet both have their place.
These products do not compete and should not be presented that way. Each product has a specific place and advisors need to understand where that place is. Critical insurance protects the retirement portfolio during the Asset Accumulation stage of life, whereas LTCI protects the retirement portfolio during the Asset Preservation stage of life.
For clarification, the Asset Accumulation stage is made up of people between ages 30 and 60 who are building towards retirement. Tthe Asset Preservation stage is made up of people aged 60 or older who are now in retirement. Our responsibility as advisors is to determine which stage of life this client is in, what each client's unique planning needs are, to educate our clients about those needs and implement strategies to protect their plan.
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Long-term care insurance primarily reimburses expenses that are incurred from a plan of care, such as home care costs, assisted living and nursing home expenses. There are products available that will pay a cash benefit each month to the insured instead of reimbursing expenses, but for a client who is young and building towards retirement there is little need for nursing home, assisted living or home health coverage. However, there is a definite need for money. What we need to consider is what the net present value is of that money and what the difference is if the money was received today versus each month for a certain period of time.
For an older client who is close to or currently in retirement, the need for money is not as great. They are no longer in their income earning years; they are usually getting Social Security and are now covered by Medicare. Remember, these are clients who have already built their retirement and are hoping to not outlive it. Everyone can use money of course, but we need to make sure that every dollar our client spends has a purpose and is spent wisely.
Critical insurance is usually cost prohibitive to people who are 60 and above and most companies will not even issue coverage to clients above the age of 65. For the premium dollar during this stage of life, clients are much better off with LTCI because they get more benefit for their premium dollar and because it is the costs of care from nursing homes, assisted living facilities and home care that deplete savings the most for people who are retired.
Keep in mind that there certainly are young people who need home care, assisted living and nursing home care, but overwhelmingly, younger people need coverage that provides them with money. Critical insurance answers this need for this stage of life better than LTCI can. A tax free, lump sum allows clients to be in control of their care because they now have options as to where they get their care. If a person who was just diagnosed with cancer wants to get the best alternative, naturopathic treatment, they can realistically look into it or if they want to see the best specialist available, they now have that option. This coverage also allows clients to have more control of their finances as tax-free money can be used for anything the client needs it for. With LTCI, this simply would not be an option.
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