The holidays are here, and your clients are likely spending more time with loved ones. Retirement planning and/or insurance planning questions might come up and we want you to be ready to have conversations specifically about long-term care planning. Here are a few key points to remember when recommending long-term care insurance this holiday season.
1) Context before quotes. Requesting a long-term care insurance quote for a prospect without knowing anything about their financial circumstances is like ordering lunch for a picky-eating stranger – a shot in the dark at best. Get a glimpse of where your prospects are coming from financially before quoting so we can help you present the best, fully customized LTC solution for them. That being said, if you really need a generalization, the average LTCi premium sweet spot is around $250/month per person—which has less purchasing power the longer someone waits to buy it.
2) Guaranteed benefits. Why not use investment income, real estate income, or an annuity for long-term care planning instead of long-term care insurance? First of all, investment and real estate income are not guaranteed to be profitable, let alone to keep up with simple annual inflation. Secondly, there’s federal, state, and/or capital gains tax to account for. A decent annuity would cost about six figures to supply someone a small (but steady) income stream for life; a decent annuity to cover long-term care for life might require a seven-figure investment. Long-term care insurance premiums cost significantly less up-front and can supply an immediate benefit (if needed) that continues to grow over 25-30 years. Traditional LTC products offer guaranteed growth and benefits, tax-free, and some hybrid products may offer guaranteed premiums as well.
2) Tax deductibility. You know those "retirees" who just won't quit working? While earning self-employment income from a side business or consulting in retirement is not a safe bet for long-term care planning on its own, that self-employment income could allow you to deduct LTCi premiums. Most self-employed taxpayers can deduct long-term care insurance premiums up to age-based limits. That’s over $9,000 per year of deductible premium for people ages 61-70 and even more beyond that.
3) BONUS tip for Californians! Consider this a fire-sale notice for advisors who sell long-term care insurance in California: The Department of Insurance has formed a California Long-Term Care Taskforce to develop a state-funded LTC program. If the program ends up looking anything like Washington state’s LTC Cares Fund, California W2 employees will have to secure eligible (tax-qualified) LTC policies to opt out of the tax. We have a feeling this will be happening soon.
These are just a few reasons to have the long-term care insurance discussion with clients this holiday season. Sometimes, three points are all it takes to convince a prospect to purchase a policy; if not, we’re prepared for that lengthier conversation, too.