Answering Questions on LTC Insurance

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David R. Evanson

The Career Advisor, Winter, 2005

When a client asks if they need long term care insurance, this biggest mistake you can make is to answer this question outright. This advice comes from Deena Katz, principal in the wealth management firm Evensky & Katz, Coral Gables, Florida, and author of the book Long Term Care. “Before you can talk about long term care insurance, you must first talk about more general issue of long term care.” Insurance, she says, is simply a part of the solution to a problem that many clients will likely face.

The framework for your discussion about whether the insurance makes sense will focus on several areas.

First, says Katz, develop a fact finder which explores family health history, anticipated long term care needs, and most importantly, uncovers a clients desire for long term care insurance. Generally there are three: asset protection, estate preservation and finally plain old fear.

Second, she says, find out what, if any living estate arrangements have been made. Has the client designated a healthcare surrogate? Does the client have a living will or a living trust? If not these are tasks that your client will need to accomplish since they will play a critical role in the type of long term care services they will receive.

Third, and perhaps most importantly conduct a needs analysis. Given the client’s longer term financial goals, assets and likely need for care, what is the best way to finance this care.

“In many instances,” says Katz, “the needs analysis will show that long term care insurance can play an important role, but not always.” She adds that clients in the middle are most likely to need the kind of protection that long term care insurance can provide, while wealthier clients, depending on their long term goals, may want to self insure. Katz says for clients more motivated by fear rather than asset protection or estate preservation, long term care insurance, though offering peace of mind, might require them to forgo current spending in order to finance the likelihood of future long term care expenses.