Earlier this week during LTC Coffee Break Espresso Shot, we dipped into the mailbag and answered the question “Fisher – why do you talk about lifetime benefits so often.” Well, it is because we can. There is more to the story, give it a view and listen to Michael’s insight.
Get a new idea Tuesday when Michael Florio and I drop a new episode of LTCcoffeebreak.com.
As Michael mentioned, many people (clients, advisors, agents, carriers, etc.) question the relevance of lifetime benefits. Well, it is relevant. In the August 21, 2021 Fridays with Fisher “Did you know – Monte” – I share a scenario and quick analysis of a few scenarios of success (or failure).
Simply, all thing being equal – a moderate to long duration long term care event will directly impact income producing assets. And, the success or failure of that income strategy can be mitigated by redeploying monies into a defensive posture via insurance.
Here is simplified look at durations of care and impact. In this discussion, I will exclude inflation on care as well as the type of care that is required. We will also assume that there IS an insurance solution in place. The three insurance strategies assume “average duration need” (3 years), “average times 2” (6 years), and a long duration need (6+ years). Each strategy will pay the maximum annual tax free LTC benefits of $5,000 / month ($60,000 annually) for the full duration of the strategy. And, premiums are not part of the discussion as we are focusing on benefits.
Let’s look at the “Average” strategy. If the policy is utilized for 3 years of less, then the client does not invade their income producing capital or emergency fund. Once that need expands beyond that, you can see the direct impact that it has on the balance sheet. Being average is great as long as you are average, but do we know who is average?
In the next scenario, the “Average time 2” fares a better if the need extends beyond average un up to 6 years. In this scenario, if the client owns a moderate duration policy or has the ability to tap into a “shared care” pool, the retain $180,000 of capital in their portfolio. This is all well and good provided that the long term care event is moderate duration (6 years or less). And, we still risk the invasion of our capital position for a long duration need.
Finally, a long duration event demonstrates the value of the unlimited duration plan. With no cap on duration of care (or the pool of benefits), the impact to the income producing assets, emergency fund, and other positions is mitigated.
Now, many of you are going to say “Fisher – lifetime benefits aren’t what my clients want” or “costs to much for lifetime benefits” or “not everyone needs lifetime benefits”.
Making this personal, if my godmother had an unlimited benefits plan, her experience would have been far better than the “average” policy that she had. But, I guess, someone will say something is better than nothing. To which I say, that little something ended up leaving nothing.
Don’t shortchange your client’s and assume that an unlimited duration insurance strategy is not what they need or want.
And, I say this because I can.
For questions about OneAmerica, case design, strategies, or asset-based long term care solutions, please contact me via email at firstname.lastname@example.org or call me at (678) 512-9627.
And, as always, get a new idea every Tuesday when Michael Florio and I drop a new episode of LTC Coffee Break. If you become a subscriber to the LTC Coffee Break Channel, we will send you your own LTC Coffee Break mug.