In this episode of Coffee with Chris, Affinity Senior Care CEO and Owner Chris Z, delves into the topic of Long-Term Care Insurance. In discussion with Doug Browne from Doug Browne Agency, the podcast examines some of the most frequently asked questions pertaining to long-term care insurance, including when to get started on the policy, how to identify the need for it, and the options available in the market.
Doug Browne is a licensed, multi-line insurance agent at Farm Bureau Insurance, Commerce. Doug brings a high level of expertise to his clients and works diligently with them to find a plan that meets all of their concerns. Doug’s specialty lies in life, home, auto, farm, and commercial insurance. He also specializes in providing long-term care plans through some of the top-rated insurance companies in Michigan.
Read the edited transcript below:
Chris: Hello! Welcome to another episode of Coffee with Chris. I’m here with Doug Browne from Farm Bureau Insurance. Welcome!
Doug: Thank you Chris. Good to be here.
Chris: Today is a special topic – we are going to talk about Insurance. Insurance is important for anything that you do, especially so when you are talking to a specialist and you are dealing with senior care, home care services – there’s a lot of important decisions to make, and that’s what we are going to talk about today.
But first I want to get to know Doug Browne. He works in our Senior Care Compass Group as our insurance specialist. Doug, tell us how you got into insurance.
Doug: Sure. I was actually in the mortgage world for many years, had a great mortgage company, but it was a smaller company. It wasn’t built to survive the recession. So ‘round about 2008,09,10 I realized that it was going to make sense to make a move. And I had been asking people for their Social Security Number for most of my professional career. So, I felt the call to provide a tangential service, maybe not just a strict financial planning, but to assist people with some aspect of their financial picture, this is where I’ve been my entire professional career. And it made sense to do so in the insurance realm where we are basically out there as trusted advisors, helping our clients to figure out the best way for them to take care of some aspect of their financial picture.
Getting back to the social security number, it’s just a question of being able to work with people’s trust, to earn the trust, and to keep the trust on a daily basis, and that’s why I use that phrase, but that’s been really the hallmark of what I’ve been doing for most of my professional career.
Chris: What do you find are the most common questions that people are calling you for? What kind of questions and services are you now providing typically in your office?
Doug: We opened our doors initially in 2010, primarily as a property and casualty company. And since that time, due in large parts to the greying of America, myself included (laughs), we’ve begun to work in the senior realm more. And my affiliation with Mutual of Omaha has really created some great opportunities there, from the standpoint of the long-term care program now we have available.
Chris: Yeah, and long-term insurance care is a big thing here, in our office, and in the senior care industry, and we find that none of them know where to start, or if they do have the policy, I find that they don’t know when and how to get qualified for it, or even, I hear some people say that it’s expensive and what do I do next if I need coverage for the care. So, let’s dive into one of the common questions we get all the time, which is, how do you get started, and how do you know when you need it?
Doug: There is a sweet spot here, and that is age 50 to 69. Within that realm your pricing is going to be most affordable, and your considerations are going to be much greater, you’re going to have more options. What we need to be aware of is first a historical understanding and then the reality of what long-term care is and what it isn’t. From an historical standpoint you need to remember that as a fledgeling industry, the long-term care insurance industry made too many promises and they didn’t make enough actuarial projections and frankly they did not underwrite people enough. A lot of the big names that aren’t out there any longer were basically underwriting males and females at the same risk level. And they were underwriting everyone either standard or preferred.
The reason I like Mutual of Omaha so much is that they avoided all of those rate increases that the rest of the industry has suffered through. And why? Because they have had from the very beginning four different levels of underwriting – Preferred, Standard, Class 1, Class 2, and they divided those into male and female, because gender has a huge impact, Chris. A male is going to be looking at an average long-term stay of 18 to 24 months, and female is going to be three years to three and a half years. So almost twice as much.
Chris: Do you mean the longevity of having the policy in general?
Doug: The longevity of using the care.
Chris: That’s interesting! So, they have this policy for 10 to 20 years and they use that for the last few months, or couple of years of their life.
Doug: Just about. What we want to avoid is having this policy for 15 or 20 years and cancelling it before they need it, because the rates went up so high.
Chris: That’s common, I hear that all the time. And that is such a shame because you’ve been paying a premium on this for such a long time, then you get to the point of your life when you need care and then all of a sudden you can’t afford it anymore. It’s a big decision to make.
Doug: It’s so true! I think that’s why I like the company I represent – Mutual of Omaha, because of the fact that we haven’t seen a rate increase in 13 years. And the earlier ones that occurred were when we were structuring us a little differently. The newer structure that I am talking about, and we’ve been doing this now for almost 20 years, involves providing you with a pool of money, not a guarantee of, “Hey, we are going to pay everything that you need for over the course of 18 months or 36 months or anything like that.” What we say is that you can choose a 100-200-300 thousand as your designated pool of money that you wish to draw from. Is that going to solve all your problems? Not necessarily, but what we find is that most of the people who can entertain long-term care in the first place are people who have some savings, who have some ability to pay some of those costs on their own. If you are in a tough situation and you are going to depend on long-term care to pay everything, unfortunately you probably have to be in a situation to afford it.
Chris: So, are there other options available for someone, if long-term care insurance doesn’t work, is there any type of pool of money that someone else can draw from?
Doug: Well, there’s long-term care, and as you know there’s Medicaid. Those are the two real options that you have. There is another option now and I like this because it is much more cost effective as well. And that is using universal index life policies, where you are basically going to be able to double dip or even triple dip on the money.
Chris: You are saying that if you have life insurance policy you can use it towards long-term care?
Doug: Absolutely! The IUL as they are known in this industry – Index Universal Life Policy gives you, as one of their options, the ability to access some of your death benefit, some of your face amount of your policy towards your care as you need it. You might think that you are giving up some of your life insurance and I might respond – well no, it’s not that you are giving up your life insurance, that you have money that’s available to you and if you don’t use the money, it will pass to your heirs as life insurance. If you use the money for your long-term care, it’s utilized at a time and manner that you need.
Chris: So, the phrase is “if you don’t use it, you lose it.”
Doug: Right. And in this case with the IULs, that’s not the case.
Chris: You can use it for any type of situations that you have going on, it is your money to use for care or whatever situation that you need at that point of time.
Doug: Or pass it on. And the rules as far as using it from the long-term care standpoint are pretty flexible as well. All you need to do is get a doctor’s certification that you can’t satisfy two of the activities of daily living. You know, like transferring, continence, feeding, things like that, where the doctors know that you cannot satisfy two of those items, you then have the ability to access this money, and here’s the beauty of this – the Index Universal Life policy –is that we are not going to ask you for receipts, we are not going to ask you for anything, we are going to ask you for the doctor’s statement saying you could not satisfy two of those aspects of daily living.
Chris: The insurance company calls us too. They want us to verify that we have a care plan of the ADLs, they are going to want to see that you actually truly need this care, and in Michigan, they don’t need a doctor’s script to have caregiver services, and what I understand is that here in Michigan you don’t have to be licensed to be a non-medical caregiver company.
Moving forward into the conversation, you were saying that after you are pre-qualified the policy kicks in?
Doug: Right. The distribution of the fund kicks in. And right now, you can draw, I believe it is up to 10,600 per month before the IRS steps in to take the tax part of that. So, let’s say that you don’t need 10,600, let’s say you only want 6000, we are going to send you that 6000, we are not going to ask you for receipts, invoices, reasons, justification, nothing.
So, let’s talk about the reality here. The reality is that you are 70 plus years old, and your spouse is taking care of you as best they can, but you are not functioning on all cylinders. You decided that you need 6000 dollars. Traditionally you will have to go and collect up invoices and go through that headache, the insurance companies, and everything else. Now you already have the doctor’s or the caregiver’s certification that you are eligible because you can’t function or do 2 of those 6 ADLs. So, we are asking your spouse, your caregiver, to do nothing but request 6000 dollars if that’s the amount, ten thousand dollars if that’s the amount. None of this – Send us receipts, document, justify, none of that. Just send us the amount.
Chris: I work with all the providers, you know like New York Life, CNA, John Hancock, and it’s difficult because if you don’t show any care notes, that this is the necessity of care, then that person is stuck with privately paying. But working with Mutual of Omaha sounds like, hey listen, we know that you need the care, let’s provide it.
Doug: You qualify for it. It sounds like a simple point but think about the spouse who is sitting at home in beautiful 75-degree weather, wrestling with invoices all afternoon so that they can get hold of this money. Who needs that?
Chris: And at the last years of your life, this is stressful. That’s another thing, family members are not involved, they are not around, they might not be able to take care of you, that situation is something that we deal with and that’s why I wanted to discuss this very specific topic today. You might have a policy and not sure when to start it, and sometimes people start it right when they feel like it’s their last years, or they maybe at hospice. And you can’t start your policy if you do have two ADLs, which is, let’s talk about that – the ADLs – If you are limited on mobility, if you can’t feed or dress or bathe yourself, cannot remember to take your medications, and toileting – part of the hygiene and personal care. And so, if you qualify for two of the six, you cannot go ahead and use your policy. That is so heartbreaking, when I talk to family members, and they have been paying for 20 years and they stop paying on that. And that’s wasted money. They could have actually put that money into an investment and put that somewhere else.
Doug: That’s exactly what Index Universal Life policy is. Remember, we are looking at two different policies here, one is Mutual of Omaha, and the other is with another group I work with – Minnesota Life. This is the Index Universal Life. They are one of the oldest providers in this space – they are one of the top three providers in this space as well, for their ease of use, their transparency, they don’t jigger their numbers to make things artificial, the numbers are accurate, the presentations are accurate, but the reason I talk about this is that, you can set them up as well if you get into this early enough. You can set them up as well to generate income for you on an annuity type of basis, in addition to the other aspects we spoke about – the long-term care aspect, and the leave it behind for your heirs as life insurance aspect.
So, I like to look at the Index Universal Life as a fantastic place to put your money for myriad of uses.
Chris: And that’s tax free too? If you take a portion of money, is that just for care or for anything else?
Doug: Anything else. You can set that up in such a way where a majority of the money is going to be tax free. I mean, some of the money that comes out as gains will be taxed at your then applicable tax level.
Chris: So, there’s a lot of options available. If someone wanted to contact you Doug, what’s the best way to reach you?
Doug: Something like this is best done face to face or over the telephone (248-486-1831). You are welcome to reach out and send me an email (dbrowne@fbinsmi.com), but I am not going to entertain an email conversation back and forth just because this is a more sensitive topic than what’s my auto rate.
Chris: But it is something you can handle. They not only do the long-term care insurance, but they can assist you with an auto quote as well.
Doug: Auto, homeowners, we do a lot of business with lakefront homeowners as well. Farm Bureau has the best of class lake estate program which is a homeowners insurance policy specifically for lakefront people.
Chris: Thank you for coming to our show. We appreciate you so much.Doug: I appreciate you for having me here Chris.
If you are looking for additional support to meet the changing needs of your family member, please reach out to us at: www.affinityseniorcare.com or call Affinity at 248-363-8430.