Elder law attorneys may not be properly explaining the benefits of long-term care insurance to their clients, said long-term care insurance expert Harley Gordon during a recent ElderLawAnswers conference call on "A Second Look at Long-Term Care Insurance'”Post-DRA." In describing the long-term care insurance option, Gordon said attorneys need to present it not as coverage for an individual client but as a way for the client to protect his or her family from financial disruption or ruin.
Gordon -- who is a founding member of National Academy of Elder Law Attorneys and, more recently, a founding partner of the Corporation for Long-Term Care Certification, which grants the CLTC or "Certified in Long-Term Care" designation -- said elder law attorneys and other financial professionals need to sit down with clients and talk about the catastrophic consequences that not having a plan could have on the people they care about most '“ their spouse and children.
When presented in this way, Gordon said, long-term care insurance suddenly becomes affordable for many people and they will find a way to pay for it just as they find a way to fund a child's college education. He characterized it as a product primarily for those in their 50s and 60s, and that the children of people in their 60s can help with the purchase, since they will pay one way or the other anyway.
"Reasonable people will look for ways to protect the people they love," Gordon said. "Reallocating a retirement portfolio to pay for long-term care has a devastating effect on lifestyle. Long-term care insurance will allow people to keep promises to their children and spouse that they will still have a life and that the retirement portfolio will still execute properly."
Gordon added that second marriages are also an ideal selling opportunity if the couple wants to keep their assets separate, with long-term care insurance serving as a firewall if care is required. "There are so many opportunities to sell this product if you're selling a plan to protect families," he said.
But Gordon believes that attorneys selling long-term care insurance is a conflict of interest. Better, he said, is for attorneys to develop a relationship with people who are selling it and look for referrals in return. In finding such people, he said he hoped elder law attorneys would turn to graduates of the Corporation for Long-Term Care Certification, which stresses teaching professionals how to approach clients about protecting their future.
Gordon takes a dim view of the alternative of divesting all assets for the "privilege" of going on Medicaid. In order to divest, taxes may have to be paid on qualified funds and low capital gains bases may be lost. In most states, all this will buy only "the thing your client is likely not to want or need '“ nursing home care."
Gordon said that long-term care insurance has had a deservedly poor reputation for much of its 30-year history. But increased policy standardization and a recent shakeout among providers has made it a much firmer financial product. On the brokerage side, he said the top three survivors are John Hancock, MetLife and Genworth, and all three have decided not to raise premiums on their existing book of business. The industry got into trouble, Gordon said, because it priced products too low initially, seeking market share through pricing. Products are now priced correctly, although premiums appear steep compared to yesteryear.
At the request of a caller, Gordon outlined the basic ingredients of a good long-term care insurance policy:
To listen to the entire conference call, held April 18, 2006, click here.