By: Mark D. Milbrod, CLU, CLTC
Vice President, ASG

A forecast is always helpful. It helps us prepare for events that can severely impact our lives. That’s why millions of us look to The Weather Channel when there is a storm coming. We want to know the facts. We want to know what is headed our way so that we can not only stay safe but properly prepare so that we can mitigate risk. So why should this be any different?


As a leading General Agency, we feel an obligation to you, the advisor, to provide you with insights and resources to guide you through “the storm” that we all face every day. To that end, we feel very strongly that the coming years will bring unprecedented challenges to you and the clients you serve. The Boomer generation is facing a huge crisis that we refer to as “The Silver Tsunami.” By the year 2030, it is projected that there will be over 72 Million older Americans over the age of 65. Of that, it is predicted that 70% of them will require some type of Long Term Care and over 40% will need a nursing home at some point in time.


The math is staggering.


If nothing is done to prepare for this, it is apparent that many lives will be changed. Not only will the seniors requiring this care be affected financially, but the families around them will be as well. After all, less than 10% of the care provided will be from paid caregivers. So, what does that mean? Family members will be providing the large majority of care which will have a negative financial impact on them as well. Considering that almost 50% of children of retirees expect to eventually take care of their parents, it is even more impactful.


So, where is the money coming from to pay these expenses? Sure, it can come from personal assets, but we all know how that story ends; it’s gone before you know it. Why would anyone want to deplete a lifelong nest egg and sacrifice all they have worked for and built over the years when there is a better, more economic approach to mitigating that risk?


The answer is that today we have so many ways for you to provide products for your clients that can provide a full circle of benefits to protect against the threat of a Long Term Care event. They range from Stand-Alone LTC Policies, Blended Life Alternatives and Life Insurance with Long Term Care Riders.


The standalone marketplace has just seen even more contraction with additional carriers exiting the space. This leaves only a few players left. The long term sustainability of these types of policies does not look promising as the costs are not guaranteed and it is difficult to sell to a client when the premium structures keep going up. This has led the way for LTC Planning Alternative products that have been offering viable options to this marketplace.


The Blended Life designs are attractive havens for lump-sums of money that can be heavily leveraged to provide large Tax-Free pools of LTC benefits. There are several carriers offering these types of products on both a Universal Life and Whole Life chassis. Further, depending on the carrier, product and state of issue, there are a host of options available such as reimbursement or indemnity style benefits. There are also options available on a Survivorship Life platform with blended age ratings that can be used for Spouses, Same-Sex couples and Parent/Child variations. There are even provisions for un-capped lifetime benefit pools.


The next plan design, and probably the most popular, is the use of Guaranteed Universal Life with Long Term Care Riders. Unlike standalone LTC policies, the rates for these plans are guaranteed and do not have a “use-it or lose-it” approach as they relate to potential claims. If you never go on claim for the LTC benefit, there will always be a death benefit payable to your named beneficiaries. These are also available as either reimbursement or indemnity style and may also be available with certain carriers in a Survivorship GUL form.


The last plan design that is starting to get a lot of traction are Annuities with LTC provisions.  These products can allow some insureds who normally could not qualify, much needed LTC benefits.  In addition, they are PPA compliant, allowing for tax free benefits for otherwise taxable annuity distributions via 1035 exchanges.  


Keep in mind that not every client will qualify for the Long Term Care/Life products outlined above. However, it’s important to note that it is possible to offer sub-standard rating classes for some of the above designs. In those cases, where clients would not qualify for the LTC options, there are also Chronic Illness variations available with some carriers that can provide similar types of benefits.


By utilizing these products, there a number of creative approaches that can be employed to help you guide your clients and their families through the risk management process of potential Long Term Care events. Every client has a different story and we can help provide solutions for a large number of them. Some of the techniques may include the repositioning of assets, such as Social Security benefits and “lazy cash positions.” Without getting too complicated however, paying smaller annual premiums to provide a guaranteed pool of money to guard against these threats can be the best approach.


As the forecast mentioned earlier, there is a Silver Tsunami approaching. Like any disaster, being forewarned gives us an opportunity to prepare. You will be able to get your clients ready for the coming storm and with the resources we can provide and properly protect them from the risks they can likely face.