What You Need to Know About Long Term Care Insurance, with transcript

What You Need to Know About Long Term Care Insurance, with transcript

William Wright is the founder & president of Financial Professionals Group and has been helping individuals, couples, and families … plan and protect their loved ones. 

He is a thought leader in the financial services industry and a sought- after speaker for educational events and conferences. He has a vast understanding of the core fundamentals that accelerate the financial planning process, including the required elements to addressing key financial concerns including longevity, legacy & long-term care. William has been recognized as an “astute and gracious collaborator” as his primary focus and the measurement of his own success are based on the achievements and value he brings to others.



Frank Samson:              Welcome to Boomers Today. I'm your host, Frank Samson, and I just want to thank everybody for joining us and especially want to thank everybody for all their support. I say this each and every show cause I mean it. We have William Wright with us today. William is the founder and president of Financial Professionals Group and has been helping individuals, couples and families plan and protect their loved ones. He is a thought leader in the financial services industry, and a sought-after speaker for educational events and conferences. He has a vast understanding of the core fundamentals that accelerate the financial planning process, including the required elements to addressing key financial concerns, including longevity, legacy, and longterm care.

William has been recognized as an astute and gracious collaborator as his primary focus and the measurement of his own success are based on the achievements and value he brings to others. I could tell you that I've interviewed many people on this podcast, as you know, and sometimes it's the first time I meet somebody on a podcast. But I've known William for a while now, and I have just tremendous respect for him and his knowledge in the industry. I'm just thrilled to have him joining us today on Boomers Today. Thanks joining us, William.

William Wright:            Thank you, Frank. Nice to be here.

Frank:                           Yeah. I'm glad you are. So I think I want to just start out pretty elementary here. Explain what the primary roles of a financial planner are. 

William:                       There’s several aspects to that role. You can go from one end of the spectrum, from investment management, and then all the way to the other, which would be more of the foundation of risk management. Then you've got cashflow management and tax management. But the two reigning areas that they spend the most time in helping clients is investment management and risk management.

Frank:                           Got it. And so they are not only giving just advice, but they may be providing advice on different types of insurance policies, right, to kind of help with that planning. Is that correct? And what specifically would those types of insurance be?

William:                       Yeah, the areas of risk management are as important as any other part of the financial plan. Some financial advisors consider it the foundation of the financial plan and really the beginning point. Here we're talking about things like legacy and longterm care, which are two pretty significant items. Obviously legacy is all about protecting your family and providing for the next generation when you're no longer here, which is not a matter of if, but when. And then there's longterm care, which has a high likelihood of occurring. In fact, it's something like 70% of folks age 65 and older will experience some type of longterm care event. And so those two areas, both protecting the family when you're no longer here, or protecting the family when you have some type of longterm care event, are very important parts of the financial plan.

Frank:                           When we're talking about a longterm care event, we're talking about somebody may need care, bottom line, longterm, just what the term says. It may be getting a caregiver at home. It may be assisted living. It may be memory care. It may be nursing. So that's what we're referring to. Right? They have an event. They're going to need some sort of care that's going to could be pretty costly.

William:                       That's correct.

Frank:                           And it is expensive. I had somebody on our show recently talking about this and the costs associated with this, and people are in sticker shock when they hear these costs. And that's kind of what longterm care insurance is all about. So what do you say to somebody? You've been in this a long time. They go, "I'm not worried about it. My kids will take care of me." How do you respond to something like that?

William:                       Yeah, that is certainly an answer we do receive. And I think the biggest question that we need to be asking ourselves is, "Who will care for you when you can't care for yourself?" And while we're thinking about the kids, the chances are the day will come when you won't be able to manage on your own. And assuming that the children or even the spouse are going to play that vital role is maybe not a fair statement, or maybe in some ways unrealistic to a certain degree.

Frank:                           I mean, I hear that all the time. As you know, I'm in the industry as well, and I hear it all the time. It's a nice thing to believe, but you're right, it's not reality. It certainly puts a lot of stress on that family caregiver as well, and they could be losing money. Cause that means that they may have to leave their work to take care of mom or dad, which way they might be willing to do. But that could be a loss of income, et cetera. So a lot of different factors. All right? So what do you think those that are listening to this show right now, what should they be asking themselves about longterm care insurance?

William:                       Well, kind of backing into it, why would you need longterm care insurance? There's really four big areas that we really need to keep in mind. First, longterm care insurance allows you to stay at home or in a setting of your choice. A lot of people might prefer some form of home health care if they could afford to have that. The second is it helps you maintain your independence and dignity so you're not interdependent on a family member or a loved one. The third is it can help protect your retirement assets or income. You know, it's said that you can nearly wipe out, 15, 20 years of savings with just three to four years of longterm care event.

                                    And then finally it helps relieve financial and caregiving pressure on your family, which like you said, that is a concern. In fact, it's been said, and I don't know the exact statistics, but the spouse that cares for that individual, that family member that requires longterm care, their actual mortality is shortened because of the additional impact on their financial, on their emotional and physical lives. So it is significant that we think about how and why we would even want to consider this in the first place.

Frank:                           You know, I've seen this often. I know you have as well, that many times the family caregiver, whether it be a spouse, even an adult child, friend, they pass away before the person receiving care passes away because of that stress. There's a lot of statistics on that. It's kind of scary, you know?

William:                       I've heard that.

Frank:                           Right. So have you ever advised anybody that, "Hey, you know what? You might be in the position, financial position that maybe you don't need to get longterm care insurance"? Is there ever a reason why not to? And Their assets are going to probably have to be pretty large. All right? But has that ever occurred?

William:                       You know, it's a question and even some financial advisors will make that assumption. But we've done the number crunching, if you may. We've done the financial plans where we've did the projections out into the future, and we show the impact of what a longterm care event will cost and how it will impact their overall wealth or estate, if you may. And then we compared it to had they only purchased some form of longterm care insurance and the cost is so insignificant in the way of costs for the longterm care insurance, that it was far more efficient than actually using the assets later into the future.

                                    So, that's one side. Well, maybe financially it makes more sense to have the coverage. In some situations, there are folks who just don't feel the need to have it, and they're comfortable with that. And it's hard to say that they're right or wrong. It's more about what they feel best in doing.

Frank:                           You mentioned coverage. How does somebody figure what kind of coverage they would need? 

William:                       That's a good word for this. It depends. And it really is all that. But the kind and amount of benefits will depend on their budget. Geographic location or region is very important. Some places are more expensive than others. It'll also depend on whether you have any loved ones who want to play some role in your care. So that could certainly impact that kind of decision.

                                    But here are some of the important questions that we need to ask ourselves when we determine this amount of coverage and really what's right for us. I'm kind of going through a list here, Frank, so bear with me. But these are important things that we need to be asking.

                                    The first is what is the average cost of care in my area or the area where I plan to retire? The next is, do I want my policy to cover the entire cost of care, or can I afford to supplement the expenses from my retirement income and assets? And that's a pretty important one because just because we consider longterm care insurance does not mean we need to imagine covering the entire concern. It could be that we partially self-fund a portion of it, and then be responsible for the other part. And that's certainly a way to keep our costs down. Another area is, do longterm care illnesses such as dementia run in my family? We have seen very rare but unique situations where it just seems to, whether it's dementia or Alzheimer's, seems to just kind of run throughout the history of the family. And that's something just to be aware of because while it's not certain that it could happen to us, there is a percentage or a higher likelihood that it might.

                                    The next one is, has anyone in my family ever needed longterm care? So in some situations you have families that have great health history, and then that situation that's something to take into account. Then the next one is, what assets do I want to preserve and pass along to my spouse, partner, or even heirs? Because if we don't have any coverage, the likelihood, as I stated earlier, seven out of 10 will have some type of longterm care event. So then the next question is, well, how am I going to pay for it if I choose to self-fund it or be completely responsible? And in that situation, which assets do I really want to keep and which assets do I want to pass along?

                                    And then finally, how much of my care, if any, will be provided for, by my family members? This has come up earlier, and it's an important question that we need to certainly always take into account.

Frank:                           William, just so we don't run out of time, why don't you share with everybody how they could learn more about your organization. I know you have a lot of great information on your website. 

William:                       Thank you, Frank. Actually, what we've done is we have an ebook that we've created and I want to make it available. A lot of the things that I'm sharing are going to be some of the similar types of information that we're making available. So I'm going to give you a web domain site, website. It's fpgonline.com/boomerstoday. So I'm going to repeat that back. It would be your formal www.fpgonline.com/boomerstoday, so you can download that ebook. And that's a great way to connect with us.

Frank:                           Great. Well, thank you for that. Yeah. Well, thank you for that. That's great. That's great. We'll repeat that again before the end of the show.

                                    We really haven't talked about the costs of longterm care. Because I'm pretty familiar with it, I'm going to just give a real quick example of the very first client. When I broke into the business many years ago, the very first client that was referred to me was the daughter of a gentleman who had dementia, was being well taken care of in a memory care location in Northern California. And the reason why she was referred to me is because they were running out of money. They were running out of money and she shared with me that the amount that they started with was a million dollars.

                                    They didn't have longterm care insurance. A million dollars they were starting with. She thought that would be plenty, and they were running out of money. Okay? So, I mean, if people raise their eyebrows and go, "Really? That could be that expensive?" Yes. It could be that expensive and more. So I think it's just for people to understand the magnitude of what something could cost.. I think that, and I'm sure you heard this too many times, "Wow, longterm care insurance." They get a quote of how much a premium would be and go, "That's pretty expensive."

                                    But there's a lot of different options today. So maybe we could talk about those options. Well, number one, when should someone consider buying longterm care insurance? At what age should they even consider it, assuming they're in good health. You obviously want to be a good health. And then if we could talk about the different types of longterm care insurance that are available today, which I think there's just far greater options today than there once was.

William:                       You know, while it's true most longterm care insurance claims are made when people reach those golden years, but there's a misconception that you should wait until you're approaching retirement to buy that policy. The thing we have to keep in mind is waiting too long to purchase a policy can be very costly because rates are based on age and health. It's really best to start shopping for a policy, if you may, when you're young and healthy. So a good time to consider, if you may, purchasing that policy is when you're in your forties or fifties. You can certainly buy a policy when you're in your sixties or even older, but just expect to pay more than you might have when you were younger. Plus if you wait too long and develop a health condition that may require longterm care, you could become uninsurable.

                                    That’s very important. When someone acquires this insurance, they're insuring two things. They're ensuring the possibility of a longterm care event, but they're also ensuring their insurability so that they can now secure it and no one can take it from them. 

Frank:                           Based on the statistics that you shared before, once someone turns 65, they probably have somewhere in the 70, 75% chance that they're going to need some sort of longterm care. That's what statistics show. Several years ago, you could buy life insurance, but not long-term care insurance. Now, there are insurance plans that are a hybrid of the two. Can you explain these to use a little more?

William:                       Certainly. And I'm going to digress just slightly and go back to that point you just made about that life insurance and longterm care. There's actually four different types of coverage. The one that’s best for you really depends on the individual and what we're trying to achieve. So I'll explain, kind of give you a brief description of each of the four types, and then in some situations it makes sense to even combine them, in some family circumstances.

                                    The first type is the one that you alluded to, and it's really that even traditional type of longterm care where you simply pay the premiums, and you pay the least amount of possible. But you have some form of coverage in place when you need it. That's your traditional type longterm care, and still a very viable plan, although there are many carriers that have left the industry and we only have a few left in that traditional longterm care space.

                                    The second is the one that you mentioned there. And that's the hybrid. And the hybrid is really the life insurance and the longterm care built in together. So that in some ways you know that all those premiums, if you may, that are set aside to protect you, that should you not require the longterm care insurance, that you'll be assured that your heirs will receive a legacy benefit. And so that's very assuring. That's why these hybrids, I think, have come along and that's why they're so attractive.

The third one is called asset-based. And forgive me for these industry jargon words that are being used, but asset-based is really all about a lump sum solution where you have that 50,000 sitting aside. You're 60-years-old and you move it into an asset-based longterm care. What's unique about these is that 50,000, and these are just hypothetical, could turn into 250 to $300,000 in a bucket that's now set aside to address your longterm care needs into the future. But the same asset-based policy also has a death benefit, and then it has a feature that essentially says that you can get your money back.

Now there's a lot of different types of policies and they all have different features. So some give you 100% back. Some give you 100% plus interest. But for the most part, these asset-based longterm care policies give you three benefits. One, a longterm care insurance bucket of money. Two, a legacy benefit when you're no longer here. And three, the ability to change your mind, and get a greater portion of your money back, if not all. So that's the third type.

And then the fourth is actually an annuity with a longterm care provision built in. Annuities traditionally are built for folks who are nearing retirement, who are retired. They are safe money vehicles that many times provide some form of guarantees in the way of accumulation or income distribution. But you have the ability to add a rider to it that it actually enhances the income distribution or the payout should you have some type of longterm care events.

So you've got four types. You've got your traditional. You've got your hybrid, which is life insurance with longterm care built in. You've got your asset-based, which is your single premium. And then you have the final, which is the annuity with an LTC rider. So I couldn't tell you which is best, but I can tell you that there are four great solutions when it's appropriate.

Frank:                           That was the best explanation I've ever heard from anybody talking about the different types. Thank you for that. I really appreciate it. So somebody is listening to this going, "You know what? It's been on my mind. Maybe that is something I should look into, and William just explain these four types. What is the first step they should take to getting one?

William:                       The ebook that we're offering is a great first step, because anytime you're acquiring this type of coverage, we're talking about a very serious part of our financial lives. So this ebook that's been created is a great place to start. It's what you need to know about longterm care insurance. It doesn't have recommendations. It doesn't have suggestions. What it does is it gives you a place to begin to understand the kinds of questions you need to ask yourself and some of the options available to you.

So that would be the first step. Go to the web address I shared earlier, fpgonline.com/boomerstoday. Download the ebook. My phone number is in that, in this particular ebook, and if you're in a particular state throughout the country, we certainly have advisors all over that we can certainly recommend someone in your area. So that would be the first step, Frank. And that's how we could begin to help them.

Frank:                           Great. Great. William, wow. Thank you so much for joining us on Boomers Today. Wealth of information. We're going to have you back again. Thank you so much.

William:                       Thank you, Frank. Appreciate being on today.

Frank:                           And I want to thank everybody for joining us on Boomers Today. Just be safe out there and we'll talk to you all soon.


What You Need to Know About Long Term Care Insurance, with transcript