Apr 10th, 2014
Using a financial advisor to help you plan for retirement can be a great choice: it can help you get a better grasp on your finances, understand specific goals and targets for savings, and provide you with information that you otherwise might not know. When it comes to Long Term Care Insurance, though, many financial advisors aren’t well versed in the details of policies and aren’t in a position to give accurate and helpful advice.
Looking Into Long Term Care Insurance
Because Long Term Care Insurance is such a specialized, small market, working with an independent insurance agent is the best choice when looking for a policy. Regardless of this fact, many clients turn to their financial advisors for advice on their Long Term Care Insurance policies and end up with information that is incorrect. We run into this sometimes and it can be a difficult issue to overcome because most people trust their advisors so much. A similar situation happened recently and provides a perfect example of why working with an experienced independent agent is so crucial to getting the best policy you can.
Jim requested a Long Term Care Insurance quote comparison several months ago in an attempt to find out more about planning for long term care and just how much a policy would cost. After we sent Jim the quotes, he let us know that he would be in touch with us to discuss moving forward after he met with and ran the numbers by his financial advisor. Fast forward four months and Jim met with his advisor, who had questions about how firm the rates were. We responded to let him know that the rates were fairly firm, as long as the client’s health hadn’t changed dramatically in the past four months, and the most it would change with a new application is 15%.
A month went by without a response, so we contacted Jim again to see if he was still interested in a policy because a new product was about to be released. When a new product is released, the premium rates are almost always higher, usually in the area of about 10-15% higher. When this occurs, we encourage clients to apply before the new product is released to help save money. After informing Jim of this, he let us know that he was still interested in a policy, but his financial advisor had some more questions. The advisor requested quotes from the top 3 companies for a policy that included a $150/day benefit amount and a 90-day elimination period. After sending them the quotes, again we were met with no response.
Choosing the Wrong Riders
After finally getting in touch with Jim a few weeks later, his financial advisor had some more requests. One of those requests was to resend the quotes with the Guaranteed Purchase Option (GPO) rider rather than the Inflation Protection rider. We responded with a lengthy explanation of just why GPO is not a wise choice for applicants of Jim’s age or anyone younger than 75, information that is vitally important to any one looking into buying a policy.
Without Inflation Protection, the policy might be worth very little when the time comes to actually receive care. Guaranteed Purchase Option provides the opportunity to increase your benefits later on, but if you opt for that choice, your premium rates will be based upon your attained age, not your age when you first applied. Essentially, if you choose to increase coverage later down the road, you can expect your rates to jump significantly based solely on the fact that you are older. On top of that, Inflation Protection is required for a policy to be eligible for the stat’s Long Term Care Insurance Partnership Plan, which means the policy Jim requested information on would not provide the benefit of a potential Medicaid spend down waiver should he need it in the future.
As our agent put it, “Recommending the future purchase option to someone in their 50s is like buying a car with no engine, but yet pouring all the money into pretty wheels or the color or the car. The priorities are out of whack in the design.”
Looking to the Experts
Our information and advice was met only with a statement that GPO is what the financial advisor recommended, and therefore is what the client was interested in. This isn’t to say that all financial advisors give bad advice, because that certainly isn’t the case, but it is to say that some might. Unless they work exclusively with Long Term Care Insurance, it can be difficult to know exactly which riders and benefits are important for a good policy.
Financial advisors may be able to help you with certain aspects of your retirement planning, but when shopping for Long Term Care Insurance, working with an experienced independent agent who focuses on that type of insurance can make all the difference. If Jim listens to his advisor, he will end up with a policy that won’t keep pace with inflation and won’t make him eligible for the state’s partnership plan in the future. Both of these are huge problems that may end with Jim spending money out of pocket for long term care, despite his purchasing a policy.
We strive to help provide our clients with the most up-to-date information about Long Term Care Insurance, which includes rate increase history of carriers, the best riders to choose, and other data that can help you understand the nuances of your policy. We offer no-cost quotes that include unbiased information about each provider and policy for you to review on your own time without a sales meeting.
Read more about why GPO isn’t a wise option for younger buyers or find out more about planning for long term care here. If you are interested in the cost of a policy, fill out this form to request a quote and we will be in touch with you shortly to help you navigate your options.