LTC as “Anti-Nursing Home Coverage”

Who wants to end up in a nursing home? Not me, not you, nor any of our clients. A long term care policy with a good home health care option helps clients stay out of the nursing home as long as possible with the ability to receive care and benefits within the comfort of their own home.

Let us say a couple has $400,000 in retirement savings and their proposed LTC premium would be is $4,000 a year. Some clients will say $4,000 is a lot to pay for a new insurance bill. Agree with them; however, help them overcome this objection by thinking top down—$4,000 is only 1% of a $400,000 portfolio per year— rather than thinking bottom up—$4,000 in premium.

Currently a stay in a nursing home costs approximately $47,000 per year, and home health care for 8 hrs a day would be around $40,000 per year. Paint the following picture for your client. (Assuming that their portfolio will grow at the same rate as LTC costs, you can use present dollars in the example.) “John and Mary, let say 10 to 20 years down the road one of you needs long term care for 4 ½ years: two years of home health care every other day, two years of home health care every day, followed by 3 months in an assisted living facility and 3 months in a nursing home. The combined costs under this scenario would be $144,000, cutting your portfolio down to $256,000. If you were using the interest off your $400,000 portfolio to help support you, you would see your monthly income almost cut in half. This would be devastating financially at a time that would already be difficult and stressful for you both. I am therefore recommending you spend 1% of that portfolio per year to purchase the protection that long term care can insurance afford that portfolio.”

(1) Annuities or other assets from which clients are not taking income.

(5) Bills which will be dropping off in the next year or so (college tuition, 2nd mortgage, car payment, or some other installment loan). For example, a client has a $350 car payment which will end in 9 months. “John and Mary, why don’t we take $200 a month from the $350 that is going to be freed up when the car payments end to pay for your LTC premium? The policy can even be dated 2 months from today, so we are only looking at an overlap of about 7 months before the car payment drops off. Why don’t we take an application today to see if you both would qualify.” (Note: when an LTC policy is dated 60 days out from date of application, the client should know that they are not conditionally covered during the 60 days.)

In reality LTC insurance is extraordinarily cheap compared to the cost of long term care. To help your clients see this reality, try the following in your first meeting with a current client or new prospect:

You: John and Mary, I commend you for addressing this issue of long term care with respect to your overall financial security. I don’t have an exact quote for you, but I would say that the cost for you is going to be about $3000 to $5000 a month.

John and Mary (jaws dropping to the floor): A month! You mean a year don’t you?

You: No, a month, and that is only for one of you. For both of you it would be in the range of $6000 to $10,000 a month.

John and Mary: Well . . . that’s crazy, we could never afford that.

You: I agree. What we are talking about here is the cost of long of term care, and I agree that a $3000 to $5000 bill per month would eventually devastate your finances. The cost of long term care insurance is actually a bargain in comparison, and will probably be in the range of $2000 to $4000 a year [depending on their ages]. By owning long term care insurance, you are spending ”pennies to protect dollars”, or more accurately, you are spending “dollars to protect thousands of dollars.”

I am sure you would much rather spend 2 to 4 a year over the same amount or actually more each month. By the way, the benefits of purchasing long term care insurance are much greater than what I just described. In twenty years, your premium is scheduled to still be $2,000 to $4,000 thousand dollars a year, but the cost will have soared from around $4,500 a month to $12,000 a month, and that is just for one of you. Can you imagine twenty years having to come up with twelve grand a month, on top of all your other regular living expenses? (Wait for answer)

This is why I commend you for coming in to talk with me today about protecting your future through long term care insurance. Let’s talk about your overall budget and start to design a plan of coverage that will best suit your needs.