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Your Asset Exposure

Many highly experienced financial advisors are unintentionally offering clients unsuitable recommendations regarding long term care and the risks associated with it.  Some of the most common messages being offered by FA’s are as follows:


  1. “Premiums are expensive and can be a waste of money since premiums aren’t refunded if the benefit isn’t used.”
  2. “Invest instead.  That way you can use the funds for other things if you don’t need LTC.”
  3. “Your insurance agent is trying to make a sale for something you probably won’t need.”


The “tried and true” advisor that leans on these dated arguments most likely is not an expert at the subject of long term care.  They, in many cases, are not licensed by the Illinois Department of Insurance to sell or advise on long term care insurance.   License exams on LTC are challenging and rigorous and only those who are licensed should offer advice on this subject.  


Inadequate advice in this field has recently spurred a wave of lawsuits against a number of advisors.    The suits are being filed by their clients’ beneficiaries.  Heirs are upset that their parents’ estate is being depleted to fund extended stays at LTC facilities, and that public facilities are not up to the standard of living their parents earned in their working years.  


Additional investing, as opposed to paying insurance premiums, may have been effective for both clients and the advisors in the distant past.  However, in recent history and moving forward, it would have been, and will be, mutually beneficial for all parties involved to commit a portion of a client’s portfolio towards a long term care insurance policy.  When a client taps into invested assets to cover the expense of long term care it has a negative impact on both the client, their spouse’s retirement, the children, and the advisor’s portfolio of assets under management.  A small portion of the pie (sometimes as little as $150/month) being redirected towards a long term care policy would have insulated all parties.


Some additional considerations that your financial advisor may not have told you

  1. Health insurance does not cover the cost of long term care.


  1. Medicare maxes out the costs of coverage after only 30 days, and only specific circumstances qualify for this short period of coverage under Medicare.


  1. There is public assistance to help with the costs under Medicaid. However, many, if not all of the patients’ choices are made by the state, including the facility he or she will inhabit. Additionally, the following conditions must be met to qualify for public assistance:


  1. All liquid assets are depleted to a value of $2,000 (less the primary home and one vehicle).  This can include cash value life insurance.  Which means even death benefits may be at risk.


  1. Qualified funds such as IRA’s, 401(k)’s can be depleted to $118,000.


  1. Long term care premiums are qualified.  This means that depending on your age and tax bracket, some of the premium may be tax deductible.  You should seek the consultation of a tax professional for your personal situation.


  1. Qualifying for a long term care insurance policy is difficult.  With age comes the decreasing likelihood of underwriting approval.  While, people commonly get approved in their late 50’s and early 60’s, securing a policy in your late 30’s and 40’s will increase your chances and offer you piece of mind.