By California Broker Magazine

Your clients may think Medicare or private health coverage is all they need to cover their healthcare expenses for life. However, many policies don’t cover long-term care. If your client develops a chronic illness that prevents them from functioning normally or if they have a disability, they may have to cover their own medical expenses.

Long-term care insurance covers these services. If your client needs to relocate to a nursing home or if they need long-term home care, for example, insurance provides an important safety net for paying long-term care expenses.

How to pay long-term care expenses

Medicare doesn’t cover long-term care services such as personal care assistance, home-delivered meals and adult day healthcare. Your clients may be able to pay for some of these services through Medicaid or pay out of pocket. Some states also offer subsidized senior housing and other elder care services through various agencies. Your best bet is to recommend long-term care insurance.

What is covered under long-term care insurance?

Depending on the policy, long-term care insurance covers a range of services that improve the quality of life for people with chronic illnesses or disabilities. You can recommend a comprehensive policy that lets your clients use their benefits for different services such as:

• In-home healthcare

• Hospice care

• Respite care

• Assisted living

• Nursing home

• Memory care

Home healthcare services covered by these policies include skilled nursing, occupational therapy, speech therapy, rehabilitation, and help with personal care.

Options for long-term care insurance

To cover their long-term care expenses, your clients have three primary options:

• Standalone insurance: This is a specific policy that only covers long-term care costs

• Hybrid insurance: Your clients can choose this option to bundle long-term care coverage with life insurance or an annuity

• Life insurance with a rider: Your clients may want to add this to their life insurance policy to cover long-term care costs with their death benefit

Long-term care requirements in California

California has enacted requirements designed to benefit residents. The state has a partnership that helps connect Californians to policies that meet specific standards. To be eligible for this partnership, an insurance company’s policy must be tax qualified, include inflation protection and guarantee asset protection.

“Long-term care insurance is a must for millions of aging Americans.”

Tax-qualified policies

A tax-qualified policy allows your client to deduct a portion of their premium from their income taxes. They can claim it as a medical expense based on their age and their medical expenses. Most tax-qualified policies require your client to wait at least 90 days before they receive their benefit.

Asset protection

California offers a Medicaid Asset Protection Trust that keeps Medicaid and other insurance providers from counting a person’s assets when assessing them for eligibility. These trusts keep Medicaid and other insurance providers from tapping those assets to fund long-term care. Your clients can make sure they have enough to leave to their loved ones instead of risking their financial legacy on unexpected medical bills.

Limitations of long-term care insurance

It’s important to understand a long-term care insurance policy before recommending it to your clients. For many, long-term care insurance doesn’t cover everything they need, and they or their loved ones end up paying the difference out of pocket.

In the past, industry professionals have underestimated their clients’ life expectancy and their realistic needs for long-term care insurance. If your client is buying a policy when they’re in their 60s and in relatively good health, they may opt for one that covers less only to be surprised later in life. Explain the benefits of having coverage for in-home care services and other items your clients may not think they will need.

Not everyone is eligible for long-term care. If your clients are over 70 with a chronic condition or if they are already in long-term care, they may be denied coverage. It’s important to start these conversations with your clients earlier so they can get a policy before they develop a disease.

Average costs

Multiple factors influence your clients’ insurance premiums, including age, gender, location, and health. People in good health who keep up with preventive care are cheaper to insure, so their premiums are usually less. On average, a couple, both aged 55, can buy $800,000 worth of coverage for about $5,000 a year each.

Your clients can save money with a policy linked to their health insurance or life insurance or by adding a rider to their life insurance policy. Encouraging them to wait longer before the benefit kicks in will also help your clients save money on their premiums. If your clients are healthy, pick a policy with a 90-day benefit period.

Financial planning for long-term care

After leaving the workplace, many seniors find themselves living on a fixed income and needing to stretch their finances. Adding long-term care costs to the mix is stressful and can be avoided with a solid financial plan.

Meet with your clients before they retire and discuss options for long-term care insurance. Walk them through the average costs of nursing homes, assisted living, and other care services. Take time to explain each potential policy and how it will meet their needs, including what services are covered with each option.

If you’re recommending a hybrid policy for your clients, become familiar with the terms and conditions so they understand how their beneficiaries are impacted if they do use some of the death benefit to cover long-term care costs.

Long-term care insurance is a must for millions of aging Americans. As a trusted client advocate, you can outline the benefits of adding long-term care coverage to an existing insurance policy. By doing so, you can keep your clients from shelling out all their retirement savings on long-term care and help them protect their assets for their loved ones.