Often Overlooked: Are Life and Long-Term Care Insurance Missing from Your Legacy Plan?
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Often Overlooked: Are Life and Long-Term Care Insurance Missing from Your Legacy Plan?
Published March 26, 2024
70% of Consumers Say Longer Life Expectancy Impacts Planning for the Future
More than 70% of people say that the potential of a longer life expectancy has impacted the way they think about their future, according to a recent Newfront survey.1 Americans are aging—nearly 90 million of us will be over age 65 in 2050, compared to only 48 million in 2015—and preparing for long-term care needs is a common worry.
Despite these concerns, fewer than half of people are setting aside funds for future health costs.2 The good news? It’s never too late to start saving, and today’s consumers have more options than ever to supplement traditional retirement accounts. Financial planning experts suggest considering additional tools like life insurance or long-term care (LTC) coverage for extra support.
“In addition to 401(k) accounts and other retirement savings tools, legacy savings tools like LTC and life insurance should be added to everyone’s arsenal of savings solutions,” says Steve Cain, National Sales & Business Development Leader at LTCI Partners.
Newfront hosted experts from Ladder and LTCI Partners at a recent virtual event to discuss how these two options can be used to complement your financial wellbeing strategies.
Life Insurance
Nearly 40% of consumers purchased life insurance policies for both financial and final planning reasons in 2023, up from 30% in 2022.3
“In the context of legacy-building, life insurance plays an important role in the financial security of those we love, especially during prime earning years,” says Janette Angelini, Outreach Lead at Ladder. “Purchasing life insurance can make sense to help build off a mortgage, pay for kids’ education, support aging parents, or maintain the lifestyle of your loved ones.”
Misperceptions about life insurance prevent consumers from purchasing the coverage or not having enough coverage, according to Angelini. Common myths include:
I have a life insurance policy through work, so I don’t need more. “The life insurance that you get through work likely covers 1-2 times your annual salary or caps out at a fixed amount,” Angelini says. “Experts recommend 10 times your annual salary for an adequate financial net for your family.” Newfront survey data shows that only 55% of consumers have purchased additional coverage on top of their employer-sponsored option.
It takes too long to get it done. According to Angelini, the process is much more speedy than in previous years—digital applications now take 5-10 minutes.
If nothing happens to me, life insurance is a waste of money. Term life insurance policies, while more affordable, are not an investment product, but whole life insurance policies can offer a cash value or money-back option.
Life insurance is for older people. I’m young and healthy. “When you’re young and healthy, the most likely cause of death is being involved in an accident,” Angelini says. “If you have people who depend on you at all, it’s important to have at least basic life insurance in place in case of an expected death.”
Long-Term Care Insurance
Consumers report that outliving their assets is a top concern as life expectancy grows, according to the Newfront survey. Life insurance strategies should be paired with long-term care consideration for full protection as people live longer, Cain says.
“When thinking about retirement, healthcare is someone’s No. 1 risk when it comes to protecting our income and lifestyles in retirement,” he says. “If you drill down further, long-term care is the largest piece of this.”
Long-term care is both a family and a financial issue, according to Cain. Health insurance and disability insurance do not cover costs associated with LTC needs, such as outliving your income or chronic illness in retirement years, and Medicare only covers 10 percent of LTC claims.
“It’s a common misconception that Medicare or Medicaid will cover all expenses,” he says. “The truth is you’ll need to be able to cover much of the costs yourself in the form of either cash or private insurance.”
That’s one reason why experts recommend planning now for long-term care needs. Others include:
Consciousness about healthcare: Now more than ever before, consumers are concerned about their acute and long-term health. Even after a record year in 2021, the industry has experienced growth in LTC insurance sales in 2022.
Personal experience: Demographic shifts are impacting baby boomers and their caregivers. Most of us now have personal experience with Long-Term Care and understand the financial, caregiving, and emotional challenges associated with these events. People are now motivated to plan.
Financial wellness: While most employers are helping their employees save and plan for their retirement, a Group LTC Insurance plan can help protect a 401(k) or other retirement plan.
Legislative activity: States are beginning to take legislative activity on LTC, including a taxpayer-funded program in the state of Washington. Numerous states have created task forces or committees, have submitted bills to the legislature, or are considering programs like this for all workers. Planning with Individual or Group LTC Insurance is likely to be a cost-effective alternative to any public program.
At Newfront we approach legacy planning as an integral component of individual wellbeing that includes our emotional, social, physical, community, career, and financial components. Reach out if you are looking to better understand the various insurance tools that can support you as you proactively plan for the future.
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