Sensible Perspectives

“Mind The Gap” When Purchasing Long-Term Care Insurance… And Speaking To The Press

Posted by on June 2, 2015

Last month I attended the National Association of Personal Financial Advisors (“NAPFA”) Spring Conference in San Diego, CA. NAPFA is the largest financial planning trade organization for fee-only financial advisors. (Sadly, the attendees, some visiting San Diego for the first time, were treated to a uniquely southern Californian phenomenon called “May Gray” for the duration of the conference. I offer a rare piece of event-planning advice: never schedule a conference in southern California in May.).

Conferences such as this provide an opportunity for financial advisors to catch up on the latest industry knowledge through intensive workshops. They also let us network with peers to share ideas and brainstorm solutions. Over dinner one night, I got into a rather detailed discussion about long-term care insurance with the people at my table.

The woman sitting next to me wanted to know my thoughts on long-term care insurance and how it fits into the financial planning process. After making what I thought were some good points, I asked my neighbor what she thought about the topic. Actually, she told me, she was an editor for Financial Planning and asked whether she could quote me in an article she was writing. Naturally, I agreed. Any press is good press after all.

Two take-aways from my experience (and hence the title of my blog): One, when purchasing long-term care insurance, your benefit need only fund the gap, i.e., the difference between the total cost of care and other savings. For example, if you required nursing home care (the most expensive type of long-term care), assets set aside to fund consumption could be used to offset the cost of care. So while the total annual cost of care may seem daunting, it is likely less than the data (or an insurance broker) might suggest. Two, when speaking about a complex subject, it’s important to mind the perception gap, or the difference between intent and how you are actually understood by others. In my case, I tried (unsuccessfully) to communicate a complex idea in short form. What seemed like an intuitive idea to me, namely that savings elsewhere can reduce the out-of-pocket cost of long-term care, was obviously misunderstood, as the author in her article contrasts my views with an advisor who recommends long-term care insurance to his clients.  Not my intention, since Sensible Financial® does recommend long-term care insurance in some situations.

For a fuller treatment of long-term care insurance, I recommend you to Rick Fine’s article on this month’s blog, “Assessing Long-Term Care Insurance”.

I also encourage you to check future newsletters, where I will delve into some of the topics I learned about at NAPFA’s spring conference, including the relationship between money and happiness and how longevity insurance (guaranteed income that doesn’t start until later in life) works. I will of course do my best to mind the gap.