6 Tips to Kickstart Succession Planning with Your Business Owner Clients
Here are 6 tips you can share with your business owner clients to help kickstart their succession planning.
In our last blog, we addressed the obstacles you may face when discussing long-term care (LTC) planning with your clients and how to overcome those objections. Once your client is on board, it is important to help them choose LTC coverage that best fits with their overall financial strategy.
Common questions that clients may have are:
The cost of LTC coverage depends on factors including age, sex, and health of the insured as well as planning details such as the amount of coverage, whether inflation is added, and whether or not the LTC plan will be paired with a financial product. The variety of products available today can provide an opportunity to match a policy with a client’s budget and other potential planning needs.
While basic coverage is universal among most policies, it is important to read the contract for small details and variances in coverage. Contractually, all policies cover the basics such as:
However, the type of LTC benefit payment model the policy uses may also help to establish what other LTC services the policy benefits can be used for, and/or how much of the benefit dollars will be available to be spent for a particular type of care service.
While there are many variations, LTC benefits models generally fall into two categories – reimbursement and cash indemnity plans.
These policies only reimburse the actual cost of qualifying care, up to the issued policy benefit amount. Bills and receipts must be submitted each month to determine the amount of reimbursement. Keep in mind that reimbursement policies may have limitations and do not cover all expenses a person may consider necessary for their care; thus there may be items or services on a bill that will not qualify for reimbursement (i.e. hair care from the facility’s beauty parlor, massage therapy, or upkeep of the home that care is being received in). Such expenses will have to be paid for out of pocket.
These policies are generally more flexible than reimbursement plans. Once LTC benefit payments begin, there is no monthly paperwork required, and the full available LTC benefit is paid each month. The insurer places no restrictions on how LTC benefits are used for care. Benefits can be spent on whatever care services are desired. This would include using 100% of the LTC benefits to pay for unlicensed care (including immediate family members) as well as to pay for ancillary care needs such as prescriptions, home maintenance, laundry, etc.
Choosing the best coverage for your situation is a multi-step process. It starts with looking at your overall financial strategy, both current and future. This would include:
Once you have determined these planning points, you can move forward with product choice. There are several ways to fund for a long-term care event, including:
Each one of these solutions work differently, address different concerns, and provide their own unique way to pair with an overall financial strategy. These differences may even affect when to buy to buy long-term care insurance.
This policy only pays if a qualifying LTC event occurs. While often providing the most LTC coverage for the least cost, premiums are not guaranteed. There may be more flexibility in choosing options such as elimination periods, benefit periods, and inflation. With most carriers, only life-time premium payment schedules are available and generally, these policies only pay LTC benefits by reimbursement.
This solution may be valued by people who:
This solution is for people with a life insurance need, but who also have LTC concerns. This policy can help provide family protection now, but if life insurance needs diminish in the future, the policy can transition more into being long-term care protection. LTC benefits are paid as an acceleration of the death benefit, but if LTC benefits are little used or never needed, any remaining death benefit will be paid to the beneficiary. Some solutions can guarantee both the premiums and LTC benefits (as long premiums are paid as scheduled). There is a multitude of premium schedules available, and both reimbursement and cash indemnity benefits are available depending on the carrier chosen. This solution provides the best leverage of death benefit, but may not provide the most amount in LTC benefits compared to other products.
This solution may be more desirable for people who:
These policies are for people whose primary need is LTC but want cost recovery if LTC is little or never needed. This policy has two benefit pools linked together:
These policies have options more similar to traditional LTC coverage such as choice of benefit periods and inflation options. Policy premiums and LTC benefits are guaranteed (assuming premium is paid as scheduled). These policies can be purchased with a single premium and limited pays such as five or 10 years, and some insurance companies offer longer premium schedules such as 20 years, pay to age 65 and pay to age 100.
This coverage is good for people who:
Long-term care planning may be one of the most important parts of a retirement strategy. There are more options than ever for finding LTC coverage that can fit into a client’s budget, as well as their current and future financial approach.