Policy Design - Crafting Funding Solutions In the New World of LTCi Bill Comfort, CSA, CLTC Comfort Long Term Care St. Louis, MO 1

Review People will live a long life A LOT of people … … a lot MORE people Needing care is a reasonable possibility Care is expensive Clients can’t afford it –Ever … … and continue to keep their financial promises

YOU ARE THE PRODUCT You must become the indispensible source of information, education and encouragement to PLAN for LTC … for clients AND their advisors.

CLTC 3-Step Planning Process 1.Establish the RISK The client must agree that needing care (being disabled) in retirement is a reasonable possibility. 2.Develop the CONSEQUENCES The client must agree that needing care – the kind of care they want – will have devastating effects on family and finances. 3.Plan for FUNDING How will you pay for it?

The Cost Myth We don’t need cheaper policies … … we need cheaper plan designs This is OUR fault –Mercedes vs. Malibu

The All-or-Nothing Trap “Perfect is the enemy of good.” Quoting too much, turns off clients Agents co-dependently HELP clients decide LTCi is too expensive by over- quoting Stop the self-righteous attitude ALWAYS quote less than you think the client needs and/or can afford Let the client “buy-up”

The Cost Myth We don’t need cheaper policies … … we need cheaper plan designs This is OUR fault –Mercedes vs. Malibu BUT what about: –Alzheimer’s? –Inflation? –Litigious kids? What if you don’t have LTCi?

Is Something Better Than Nothing? Something meaningful … … and affordable The 3x3 Plan: $3000/month 3-years 3% compound Use Shared Benefits for couples Modify for higher cost area: 6+3+3

3x3 1 st -dollar benefits Hold benefits & self-pay 1 st HC 4 hours, 5-days/week = $1,600/mo Plan lasts longer than 3 years Partnership guarantees assets in worst-case $432,000 for couple in 24 years

Partnership Is it necessary? No one plans on Medicaid Value-add for worst-case What about the client who says: “I don’t care about leaving assets to my kids” He/she just told you Partnership is not a priority If not Partnership, then what? Purchase option Linked Benefit (no inflation)

Purchase Options Starts much cheaper Can buy increases for 10+ years before equaling auto infl premium “Starter plan” Is it meaningful? Is it affordable? Consider starting w/higher $ But, but, but … Get your but out of the way

Purchase Options But it will become too expensive … It won’t be enough coverage … Let’s talk about life insurance Client needs $1-million to replace his income/lifestyle for family But he chooses to only by $500,000 Do we refuse to sell it to him? Will the family have to make some sacrifices? Are they still better off?

Purchase Options “Do you want to be in control of your benefits, or do you want the insurance company to be in control?” Auto inflation puts the insurance company in control of future benefits Purchase option lets you control coverage levels Turn increases “on & off” as needed Be careful of contract limits Opportunity for annual review

Linked Benefit Neither better, nor worse than “tradtional” LTCi … … a different way to pay What’s best for the client? Overcomes “Use it or lose it” Allows for guaranteed premium(s) “One-and-done” Make sure there enough LTCi $ to be meaningful

Linked Benefit Don’t just “check the box” Does the benefit fit the plan? Consider combining linked with tradtional $25, exchange = $200,000 $2800/mo Add a 3x3 traditional

“The policy is not the plan … … the policy pays for the plan.” It’s not your plan What does the client, want, need AND can afford? You can’t know without asking Stop “educating” (preaching, telling) Start listening … and planning