Guided Path 8-5 Long Term Care & Disability

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Long-term care insurance is becoming an increasingly fundamental addition to the financial planning process. That’s why Zacc Call and Laura Hadley, along with insurance professional Barney Tanner, are diving into the intricacies of long-term care and disability insurance. They discuss the likelihood of needing long-term care, the various payment options including insurance, and the importance of planning for potential costs. The episode also explores the differences between standard and linked benefit insurance policies, the role of ADL requirements, and the nuances of disability insurance coverage. Discussion points include: The basics of planning for long-term care, the 6 main avenues of paying for long-term care: Private pay, family support, Medicare, Medicaid, veterans' benefits, and insurance, the role of insurance in long-term care from an insurance professional, the various policies you can choose from in disability insurance, and more.

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[00:00:00] Welcome to The Financial Call. We are financial advisors on a mission to guide you through the financial planning everyone should have. Whether you're doing it yourself or working with a financial advisor. These episodes will help you break down complicated financial topics into practical, actionable steps.

Our mission is to guide motivated people to become financially successful. Welcome back to The Financial Call. We are on season eight, all about insurance. We are on episode five. Talking all about long-term care and disability. Zacc and I are both here today and we have a special guest with us. This is Barney.

He's here with Allegis, their simplicity company. He's an advisor development consultant, but he helps us a lot on the insurance side of things. You specialize in long-term care, creating a plan for that as well as some disability, and now there's a lot. To this topic. We told Barney his biggest challenge of today is going to be simplifying the basics that you need to know about [00:01:00] this topic in just a short episode.

So we are really excited to have you here today talking all about this thing that. I think a lot of people hear about, they worry about, but they don't know a lot of the details about it. So hopefully we can dispel some of the myths and fears about it today. And I think we're just going to dive right in.

Yeah. If you're okay. I'm going to tell us where we are in the seasons so that everybody knows this is the eighth season, this is insurance. So we've been talking recently about healthcare insurance at the beginning, before 65. Healthcare after 65 years old. That's second episode. Third episode was term and permanent life insurance, the basics of it.

The fourth episode, when to get life insurance, when to drop it, and today we're doing long-term care and disability, which again, we know that's too much, but we also know that a lot of you just want to understand the basics and you want to get. The right education to be able to then dive deeper. So hopefully we give that to you today.

So today is long-term care and disability. [00:02:00] So Barney, last name Tanner Barney. Tanner. Barney's a great guy, helps us understand these topics we work with Allegis closely. Is there anything we missed that we should talk about before we dive in? No, I think that's it. It'll be fun to be here, so thanks. Yeah, this is great.

Okay. Can you give us. Like a basic explanation of what is long-term care or a long-term care plan. Yeah, so long-term care, when we're dealing with it, this is definitely more about chronic illness. So if you look at it in kind of the going through life, disability will come into play When we're working and when we retire, we no longer are working.

We have assets that are pain, but I. There are still expenses, and when it becomes a longer duration or long-term or a chronic illness, that's what we're going to be talking about is this. How do we pay for this type of long-term care that we encounter as we have this journey here? I. Is there a timeframe? It probably ranges a little bit, but what [00:03:00] would be your typical timeframe that you see when it becomes long-term rather than just a short term?

Long-term is basically more of a medical, when you know you're not going to get better, you break a hip. You're going to go through physical therapy, you're going to get better. You're going to be back being mobile, but like a heart issue or cancer, a lot of times become long-term or chronic, you're never going to have that cure.

That's when it becomes, dementia is really big right now. Those are long-term or chronic, so more of the outlook rather than you've hit this timeframe. Now it's considered long-term. And just real quick, we are seeing younger and younger when we are seeing like early onset of dementia, people in their fifties, that becomes a chronic issue.

A LS, they're never going to get better because of that diagnosis. And so how are they going to be taken care of now for the rest of their lives? Yeah. Interesting. And give us an idea of the need. How many people end up needing this long-term care end up in a facility where they're needing to pay for it? Do you have numbers on that?

Yeah. Here's some shocking statistics on this, and this is going to be for people age [00:04:00] 65 and older. Seven outta 10 people will encounter a long-term care issue. So 70% of people, if you think about it, if we're in a room of 10. We're over the age of 65. Seven of us need to stand up. We're going to encounter that sometime.

So it's a pretty big, now remember, this could be taken place in a home. It could be a facility, so it just doesn't mean I'm going to be going directly to a nursing facility. And that's what we're categorizing this as. This is just across the board at home or in a facility, adult daycares or things like that.

Wow. And what's the typical length of need? Now this is the only type insurance Z that as guys, it's actually good. We're actually less expensive because we just don't live as long. Females because they live longer, we're more expensive in more ways than that. I don't think I'm going to touch that. That is so true.

Like the only, this is really the only time that we're getting the cheaper solution, right? Like car insurance, everything else. Health insurance and everything. This is the one insurance, [00:05:00] even life insurance, long-term care insurance where it's actually cheaper for a male than it is for a female. So. Is that because they don't expect us to live as long.

That's it. Yeah. Our life expectancy, and to your question, Laura, it's the average, if you kind of put both male and female together, we're about 3.2 years, but females are about 3.7 years in a facility or needing care where males are about 2.2, 2.4 years. So if we will, we bring down the average, just 'cause to your point, Zacc, we die.

Interesting. Give us a feel for the role that Medicare and Medicaid play in long-term care. I. If you ask people, it's really interesting people, you'll ask the question, does Medicare pay for long-term care? Some people will say yes, and some people will say no. I'm going to say, if you have to pick one, then it's a no because Medicare is only to get you better.

So if we talk original Medicare, I am not a Medicare expert, but original Medicare will pay a hundred days, and then after the a hundred days of that. Particular situation or issue that you're having, it [00:06:00] becomes private pay. So Medicare health insurance itself is designed to be more short term. They want to get you better.

'cause once you're better, then you move on and life continues on where long-term care it's going to be for the rest of your life, or if you will, until the day you die. Got it. And just a reminder for listeners, Medicare is the insurance that you get at 65. You've paid into it your whole life. Medicaid, on the other hand, is insurance that's provided usually through the state for lower income needs.

So on that point, it's a mean tested, we like to say, mean, tested where you have to have a certain amount of assets, certain amount of income before the state will step in. When I'm teaching classes on this, I like to tell people here in America. We take care of, of our elderly, 'cause this is what we're really talking about, or the elderly.

But there's bad experiences with Medicaid. There's good experiences with it as well, but it's there and it's there for a purpose. So it can step in and help pay for things, but not. Not long term. Medicaid [00:07:00] would be more for long-term. They'll step in more. If it's mean tested. You'll hear a lot of the quote spend down, right?

You have to spend all of your assets to get on Medicaid. It is a welfare program, so if you have quite a bit of assets, Medicaid's not going to be your first option. Where Medicare does pay. Right outta the gate if you go into a facility, but there's certain requirements for a health insurance or Medicare to pay for as well.

So it just kind of depends on where you're at in your overall long-term care plan. And Medicaid will look at prior assets or don't they do like a two year look back. So you can't just give away all your assets. That's right. From hope to qualify for it's, there's a look back and believe for Medicaid, it's a five-year.

Look back. Got it. So it's not the plan. Medicare and Medicaid are not the plan with long-term care? I would say they're part of the plan because if it's a short term or it can pay for a part of it, then we want to know, yeah, this is what Medicare's going to pay for. Yeah. But it is not the plan. No. Got it. So we think that everyone needs a plan for handling this risk.

This is a risk, and [00:08:00] 

. It's something that needs to be addressed. I. And the thing is, as planners, we run into a little bit of a dilemma and Barney's going to help us understand maybe how to think through this.

But our dilemma is that everyone needs a plan. So the wealthy people, oftentimes their plan is to just self-insure. 'cause they have enough money that they know they can handle that. Expense because they just saved enough money so they may not need to buy long-term care insurance. And that's really what our episode is about, is long-term care.

'cause we're in the insurance section here, the insurance season. So the folks that don't have money oftentimes don't have enough income. Or enough wealth to feel comfortable paying the premiums associated with long-term care insurance. Once again, take a step back. Everybody needs a plan, but help us know how long-term care insurance can fit into that plan when it's hard for the less [00:09:00] wealthy to pay for it and the more wealthy may not need it.

That's a great question, Zacc. Starting with a plan, everybody in my opinion, needs a long-term care plan. They're going to have some form of help and what we've come up with and show people, there's six ways people pay for long-term care issues, and those six basically are private or self-pay. Right? People have enough.

They've saved enough and good for them so they can privately pay for that, and that's great. The other way to do it is a family. Family can maybe step in. Maybe they have a child or children, or maybe it's down to caring for 'em at their home. But family pays for long-term care as well. The other options we just talked about were Medicare and Medicaid.

Those are options. One option that most people don't really know about is, especially this is only for veterans, so if we have veterans that serve during wartime. We'll talk about this, but it's going to be aid in attendance. That's important for people to understand that that's an option to pay for long-term care, especially for veterans.

But again, that's being tested like Medicaid, so [00:10:00] it's not for everybody, but it is an option depending on where you're at in your plan. And last but not least, we have the insurance. And so to answer your question, my opinion is how does someone want insurance to play into their overall plan? So lemme just take someone who is affluent has done well saving and they've set aside, let's just say $200,000.

This is going to take care of our long-term care issues. They've earmarked that money and they've, and set it. You're probably going to not invest us into maybe equities or securities 'cause we want to have it protected safe. It's kind of safe and secure. Does that make sense? Mm-Hmm. Well, what we can do if as part of the plan is we can say, well, hey, why don't we take just a small piece of that 200,000 that you've saved and we basically will buy a long-term care insurance.

Now we're going to get into the different types of it, but this has been really popular these days where we'll say, look, let's take a hundred thousand. And we're going to create now a pool of money that a hundred thousand is going to basically give me two or $300,000 to take care of [00:11:00] long-term care expenses. I still have my extra a hundred.

So in essence, I could have a total of $400,000 to take care of me if I need it. The question is if I need it. So that's going to be really cool to say we can use insurance as an enhancement, or we like to use in the insurance world a leverage our money. So for someone who's in fluent, they can actually use it to have a little bit more, maybe they can reallocate those resources.

So if you've turned a hundred into 300, I've now have 300 instead of two. And what's real popular with that type is it's not a use it or lose it. If I never use that insurance, I lose it. It will pass on to your beneficiaries and we'll get more into that. I know when we start talking about the different types, but when it comes to planning is, does someone want to be able to use insurance?

As part of their plan, and they just scrape off a piece of that, what they've saved and they basically give it to the insurance company. Hopefully that makes sense. Yeah, that makes a lot of sense. That's really interesting. I think if somebody's sitting down to evaluate their own situation, how much do they have [00:12:00] saved?

How much do they want family to be involved, and how much could they help with? And if they're a veteran, do they have this aid? So I think it would be helpful for listeners to know how much really is the cost of this long-term care. Obviously you have a range, right? For the different types. Facilities what you're getting.

But do you know typical costs of long-term care? You know, as part of the plan, Laura, we go through and, and we actually, that's our first thing that we have to start with, is what do we want to plan for? Because it depends. So for example, let's say you have a senior who wants to live in Palm Springs, California, right?

It's sunny or Florida. Well, the cost for care there in Florida is a lot different than if we go to like Minnesota where it's cold, right? So every part of the country. So depending on where we at, where do you want to retire? We could be here in Utah today, but I want to retire in Florida. So we need to plan for where we want to end up at.

So the first thing that we do when we start talking about these long-term care plans is really what do we want to plan for? What are the costs when we have tools to show, like here in Utah, the average cost of [00:13:00] care for a private facility is about $9,000 a month. Now that's your own room in an actual facility.

Okay? Where in. For example, California, that cost could be $12,000 to $13,000 a month. Which one do we want to plan for? Well, it depends on where we want to live, if that makes sense. The other thing we have to look at too, we have the statistics on how long the average stay is 3.2 years for both men and women combined.

If it's a female, I may be pushing a little closer to four, a male, maybe two and a half to three years, but I may have longevity in my family. My mom's 94. And so my dad passed away when he was 70. My mom's 94. So, Hmm. Am I going to live past 80? Maybe I want to plan maybe for three, four or five years. Seven years maybe.

So when we first start off with our plan, we really want to find out you as an individual. What do you think your family genetics are like? We're guessing, I mean, that's what we have to do with insurances. We're going to guess, but we have people that think, man, if I hit 75, I am like [00:14:00] doing good because that's my family.

We have heart disease, we have. Whatever the case may be, that's part of the plan that we want to talk about. Once we figure out that piece, the others makes it real simple to kind of fall in place to help. 'cause we've now know that, hey, I need a plan for at least five years. We know what the roughest costs are going to be.

Now. It really helps us when we do that retirement planning to say, this is what we're looking at in terms of what we want to set aside. Okay, let's maybe take a step back. Those six different types. Can we go back? Can you just say those again because those were really good. I want to, I want to make sure our folks have a chance to really think through the different options.

Yeah. So every American has six ways to pay for long-term care. I'm going to say private pay and self-funding is usually what people always say, or one of the highest ways people pay for that family. There's family, how do we pay for it? And it could be just not so much monetarily, but also if you will physically, but it's both.

That's actually one of my questions. 'cause in that second one of family, it seems like a lot of long-term [00:15:00] care situations is them paying, I'm saying air quote, paying with their own time. They bring the person into their own home or they move and they live with mom or dad and they're taking care of that person.

I've even heard that the order in which you go through long-term care, if you do not have a spouse. Is oftentimes the daughter, your own daughter. And then after that, oftentimes it moves to daughter-in-Law, not your son. And so depending on the makeup of your own kids, I mean, maybe you don't have any daughters, I.

I know of family situations in my own family where a daughter-in-Law was tasked with taking care of her father-in-law and resented the situation. Ended up really not having a great, and it impacted their own marriage too, because it's like, here I am, I have to put my entire life on hold for your dad.

You know? And it's just a really difficult situation that money can solve. That insurance could solve that type of resentment anyway, so some of the stuff we talk about in [00:16:00] finance and in planning is not all numbers. There's relationships there, and sometimes it may make sense to figure out your long-term care plan monetarily, whether that's self or through in insurance, or usually a combination of both in order to avoid the non-monetary effects of it being a weight within your marriage or something like that.

Those are really good points. I'm going to take it one step further. It's not only your children, right? Daughters. Thank goodness for the daughters, but it's also what about your grandchildren? I tell the story when I teach classes on this, if I can real quick. When my mother-in-law was living with us, she fell in the bathroom, she was taking a shower, she fell.

It's a distinct sound. It's like a car crash when you hear that. Well, I went running, I know your viewers can't see me, but I'm a big guy. The first words outta my mother-in-law's mouth. We're not. I'm okay. Everything's good. Barney doesn't come in, which it didn't offend me. Right? But we just had that discussion right there about who's taking care of what.

When [00:17:00] it comes to family, and this is what we try to teach people, is what do we want our kids and our grandkids? Because my wife needed to go in and help her mom, which is fine. There it goes. Back to your point, Zacc, the daughters, but then my daughter had to step in and help my mom. So not only do we want our children, what about grandchildren to take care of us?

So those are some of the things as we start talking about this planning process is what do we want our kids and grandkids to do or not do? Absolutely perfect. I know you can't give quotes necessarily 'cause it's very, very unique to an individual and underwriting and how that works. But here in Utah, we're here in Utah, you probably, I would assume, do quite a bit of case design for advisors in Utah.

By the way, Barney partners with financial advisors and insurance agents. To help them design a long-term care plan. And oftentimes that may include an insurance component in it. So when an insurance component is added into a plan, how much are people covering generally? That's a really good question.

Here in Utah, maybe here in Utah, we're [00:18:00] going to get into talk about the product specific, but let's just say somebody has a desire, and this is what really helps out, why it makes it super easy. If someone knows that they need, say, $10,000 a month. That's $120,000 and let's say it's for three years, right? I'm doing simple math here, so that's $360,000.

Hopefully my math comes out, right? But then we can say, well look, I can take a hundred thousand dollars. Of your assets and turn it into 300? Well, I may need a little bit more to get to the 360 mark. I want to make sure we put on an inflation rider too. But really what makes it super easy is once I know what we're going to plan for, it could be 50,000, we could take 50,000 and turn it into a hundred or 150,000.

And I think what people are trying to get to is more of the traditional type of insurance where they say, Hey, I need a policy that gives me X and it costs me a thousand dollars a month, $12,000 a year. Those are going to be a little bit harder because we're going to go through underwriting their age, how healthy they are.

But I think most people that we're [00:19:00] seeing right now, we're looking anywhere from about 150 to $300,000. That's the ballpark of people, of total expenses available for them for a period of their life. That's what they're going to plan for. That's anywhere from, that's good to know. Yeah. About 150 to 300 is.

Kind of the range and they're thinking about it, it sounds like they're thinking about it that way more so than they're thinking, I want to buy a policy that covers $4,000 of my long-term care expenses. Or maybe they are thinking, I guess I'm trying to think through like the folks that as, as they do the mental thought process, are they thinking monthly expenses more or total assets over a period of time?

I would say they're probably going back to the monthly expenses. 'cause that's what's really out there. That's what they've heard. You know, their parents had a policy policy that's real and that's what's real. And so we try to say, we take that monthly and we try to extrapolate a total, but it will always come down to monthly.

So it's on the advisor and agent to then help figure out the total assets required and total insurance need required. But the individuals are generally. Probably thinking still monthly. They're still going down to monthly, and when we start off the plan, it's all based on monthly, [00:20:00] what are you going to need?

Okay, so then let's talk about the two main types that we are familiar with and then you throw in any others out there that we may not be familiar with, but we pretty much lump them into two main categories, being standard policies, what you talked about earlier, where you use it or lose it, you're paying a premium and that premium basically disappears.

And in the event that you are eligible for long-term care, then at that point. You can claim benefits and that's it. That's all there is to that standard policy. And then there are either linked benefits or hybrid policies or different ways of structuring it through life insurance, like the chassis of a life insurance policy where you talked about you can set it up so it's not use it.

Or lose it and that way it can have some death components to it as well. It seems like the industry has definitely moved in that direction and I can see why. I mean people like the idea of not losing the money if they happen to pass away and never need it. Is that right? That was a really good explanation.

I don't know if you want me to go deeper. No. Dang, dang. That was, that was pretty good. I want you to go into Linked Benefits. Maybe you [00:21:00] can explain an example. 'cause the standard one, I think most of us can conceptualize that you pay the insurance and hopefully you don't need it. Or if you do, you get some.

But the linked benefits is. They're just different. Can you maybe give us like what is the most standard. Life insurance, hybrid policy or linked benefit policy. And what do they mean by linked benefits? Like help us understand those things. Perfect. So lemme just start with the standard, just so if people hear out in the industry where they may read or hear it, it's called a traditional long-term care policy.

The only thing that that standard or traditional policy does is pay for long-term care. And again, when we're talking about it now. Every policy. There's a lot out there. But the general rule is it's going to pay for home care. It's going to pay for assisted living care, skilled nursing care, adult daycare, durable medical expenses.

So these policies are out there. That's what they're going to designed to pay for. That's their standard or traditional long-term care policies. So you did a great job explaining the standard. I [00:22:00] won't go into much on that one except people get frustrated with. One point on that. One is one premiums have to be paid every year.

Month, quarter, whatever it is. And then the other thing that is, is the prices aren't guaranteed. So think about it. So one of the analysis, and I think was actually for your office, one of your advisors had me do the price increased 237.5%. Okay, this is on standard or a traditional policy that they had, and that's a huge frustration for people that are on fixed incomes or they're trying to stay within a budget, if you will, in retirement.

How can a premium go up 237.5% in one year? One of the big issues that we have is the prices are not guaranteed. I'm not going to go into how it all works. I mean, now we're getting really into the weeds, but that's a huge frustration. So let me jump then to the linked benefits. You may hear somebody say linked hybrid savings based or asset-based type of products.

So all of those are the exact same thing that we're [00:23:00] talking about here. So a linked benefit, usually it's attached to either a life insurance contract or an annuity. Those are your two most prominent type of linked benefits. So what do I mean by that? People will say, well, if you buy that hybrid or that link benefits, then it's not going to really give you all the benefit of a traditional.

And that's not true. It still will pay for home care, assisted living, skilled nursing facility, adult daycare, durable medical. I mean, they're robust. That's what they're designed to do. There are some tax benefits. We're not going to get into 'em on this episode, but again, there can be some tax and that's what you have your CPAs for as well.

But the idea behind this one now is. Let's just take a life insurance contract. I'm going to go back to that scenario that I talked about. We had $200,000 we set aside. We're going to take a hundred thousand dollars of it and we want to put it into some insurance to buy up, gimme more expense. We can take that a hundred thousand dollars and buy a life insurance contract, either a single life or a joint life, depending on if you're [00:24:00] married.

Or if both people qualify for it, that's always 'cause there's underwriting involved. But then we can go ahead and we can turn that into say, two or $300,000. I'm just using those as round numbers 'cause people can understand that. But let's say we take that a hundred and we turn it into $200,000 for both husband and wife, both people can utilize it.

Now we're going to drill back down. It's going to give you a monthly benefit. 'cause that's what. This is really all about is a monthly benefit. But let's say they go through their whole time, it's growing 'cause they put an inflation writer on there and they never utilized it. They both passed away and never once utilized this.

There's a beneficiary that it goes to whoever they named a charity, their children, the trust. People really like that is because even if they used a piece of it and then they died, let's say they had a three year benefit and they used it for a year and then passed away, and there's some still death benefit left over that goes to their kids.

So very, very populars. Zacc, to your point is because they are at least going to leave something behind [00:25:00] or they're going to use it all up. And even if they use it all up, sometimes there's a residual death benefit that will pay a little bit. And that death benefit is probably less than the cumulative amount for the long-term care, right?

Yeah. So these policies, if you were to take that same a hundred thousand and buy just a, like if you will, a normal life insurance contract, you're going to buy a lot more death benefit. We're designing these around long-term care, so our death benefit is smaller, but our long-term care benefit is big. And that's the whole design about that.

But going back to what these products, again, life insurance, there's a whole range of it. And this is where when you're talking to your advisor, you want to plan, maybe I'm focusing more on, I want the biggest long-term care benefit possible. I don't care so much about cash accumulation or like death benefit.

Sometimes people will say, no, I want a big death benefit and I'm going to use that death benefit. 'cause you can pay for long-term care. So now we're going to be getting into the design and we tailor this around each client. Hopefully that makes [00:26:00] sense. Yeah. And the insurance companies allow us to help the client.

Weight that based on different policy design to say, okay, they want more of a death benefit, they want more of a long-term care benefit and we can do it that way. Okay. So real quick before we move on, because we do need to jump into disability, but this has been wonderful on long-term care. I'm just going to throw out another term you're going to hear, which is a DL activities of daily living.

So most of these policies require that you. Not be able to do a certain number of activities of daily living if you are able to do all but one, for example. And these are things like being able to go to use the restroom and getting up outta bed and things like that. Dress yourself. And so let's say that you are needing help.

But you actually are sufficient. You can do quite a few of those things. The long-term care policy may not actually go into effect or kick in. So Barney alluded to this earlier on in our conversation already today. This is why I love the design. He's already talked about where you have $200,000, you're designing it [00:27:00] for long-term care, and if you can take a hundred of it and leverage it.

To become 300 when you actually are eligible for insurance-based long-term care. Then the other a hundred thousand remains flexible and could be used if you don't qualify yet. So maybe you go for a year or two where you're able to do five outta six of the activities a daily living. So therefore your long-term care insurance doesn't.

Kick in yet you could use just the cash that you set aside in the really conservative investment, but then maybe during that year or two, you're not able to do another one of the activities of daily living. And then maybe your long-term care insurance kicks in. And so there's the flexibility, and this is why it's nice to have a plan instead of a policy.

That's the difference here. Barney talked to us about this before we got on, and the reality is you need a plan, not necessarily a policy. A policy can be part of the plan, but the plan is more important than any individual policy. Well said. That was beautiful. Awesome. Okay, let's move on to disability. So this one I don't think will [00:28:00] take.

Quite as much time because I think it's a little bit more straightforward. However, this is one where I believe, this is just my personal opinion. I think people focus so much on life insurance during their working years, and they oftentimes completely forget about disability and the risks of the events are actually flipped.

Like if you look at the stats, it's my understanding the risk of one of us needing in this room disability. At some point is actually a lot higher than one of us actually needing to make a claim on a large death benefit during our working years. And I think it's a mistake for us to forget about disability.

So let's go through a few things here, Barney, before we get into like the difference between own occupation and any occupation. 'cause I would like to cover that. What can you tell us about like, how often do people need disability payments and disability claims and things like that? So here's some statistics for you.

These may shock you, but [00:29:00] 25% of employed individuals, so these are people employed some type of employment ages 20 and above. Gotta remember, disability is only going to go to anywhere from 65 to 70 before we go into retirement, okay? So that's the age range that we're talking about, but that means one out of four people will be hit with some type of disability.

For at least one year, between 20 and let's call it 65. Five. Okay. Yeah. One out of four people. That's 25% of the people I'm telling. I'm telling you. Not one out four people are dying between 20, goodness. 65. Goodness. Right? That is not even during the pandemic. Was it that high, by the way? Right. In terms of death, so yeah, disability, to your point, Zacc is huge.

I don't know why. I don't know if it's just kind of back of our mind. We just don't want to talk about it or think about it. But I oftentimes talk with an estate planner that we work with carefully and we talk about, okay, what are the issues if you die? And people think that's estate planning. [00:30:00] And then my other question is, what are the issues if you don't die?

Like what are the issues where you get close to it or something changes in your life and you don't die? And that's long-term care and disability. That's really what we're talking about today, is what happens if you don't die. It is. Lemme just throw out some stats real quick. So there's two types of disability that we categorize.

Short term, usually less than six months, and then long term. These are the top five short-term claims. And this is going back over a 10 year period of time. So we're segmenting the market, but one of them is pregnancy. Short-term, people get pregnant, they have families, but that can be a short-term disability.

For a variety of different reasons, but they leave their employment to take care of their child. There may be complications, but pregnancy is the number one. Short term, is that counting the normal pregnancy and normal childbirth, or is that saying like, oh, something happened either to the mother or the child that caused them to need to extend, or what are we talking about?

Just pregnancy in general. Okay. Because it will bleed over short-term [00:31:00] pregnancies usually is six months, or you know, not the pregnancy six months, but the stay or the care, you know, complications. I mean, that can go into long term, but this is just short term, kind of normal, just kind of the everyday, it could be a complications or in ICU for a month.

That's still within that short term period. So pregnancies, mus, I can never say this. Musculoskeletal, skeletal disorders, that's like the back, the neck, the leg. Injuries from fractures, spine strains. Muscles, okay. Or anything to do with the ligaments. That's the injuries. Digestive disorders. So that's our internal organs.

So that was number four. And mental health. Mental health is our fifth. So those five categorize, our top claim makes up almost 70% of all short-term claims. So that's huge. And you can see where any one of those fall. I. The reason I wanted to share that with you, let me go in to show you what the long-term, so this is six months or longer.

Musculoskeletal, we just talked about that one. Those are the two top ones. Cancers is a [00:32:00] long-term disability. We're talking about the injuries, fractures, and whatnot. Time to heal mental health now is number four, and then circulatory the heart. So those are our five, and again, that's 72% of all long-term care claims.

So to your point, Zacc, think about how many people have mental issues. They just can't work. This is where we're going to get into the OCH or Antioch, but it's a real thing. If we can't work, how do we replace our income? Okay. So I think one of the easiest ways for people to understand own occupation versus any occupation is to think about somebody like a very precise surgeon who's operating, whose specialty is like.

And I've told this many times, my wife had a brain tumor, and the doctor that goes in and cuts behind the ear, it has to be incredibly precise as they move around the facial nerves, the hearing nerves, and get those tumors out like very, very carefully when there's two doctors at the same time, one from the ear and one from the brain [00:33:00] out that they carefully work together, right?

So an own occupation. Disability policy would pay out if that person cannot do their own occupation. If he breaks his hand or a finger, he can't do that job. He can be a Walmart greeter though. And that's different. That's any occupation. So you want, in my opinion, I want own occupation because. I don't want my insurance to deny me because I could go out and get a job anywhere and work as a Walmart greeter.

I want not to put anything, I'm not trying to downplay that, but I'm just trying to say like, you don't need your hand in particular for that. And so there's a big difference between own occupation and any occupation. And for me, I'm trying to think, I've thought through my own profession right now in the last I tore my ACL.

Skiing and I've had three surgeries on it because it just didn't work. The repair didn't work. The second scope didn't work. And luckily the third [00:34:00] surgery's pretty good. I haven't been skiing since, I don't dare, but I'm living a great life right now with my right knee. But there were many, many months that if I still did the job I did in college, which was I did a lot of tenant finish.

Steel stud framing in college. So I would've needed to carry heavy, heavy beams and heavy things and get up on ladders and down on ladders. Like I would not have been able to do that job for a year or two had I torn my ACL during that time. Now, as a wealth advisor, I can sit at my desk and hobble around the office and talk to people, and that's okay, right?

And work on a computer. But you gotta really think about the activities that you would need to do in your job and think about the difference between an. Own occupation policy and in any occupation policy? In general, I prefer own occupation and just across the board. Barney, am I missing anything on that that you would add?

You said it really well, so we like to do own occupation as well. And this can come from an individual policy or it can come from a group policy as well. [00:35:00] So you want to make sure you understand. To your point, Zacc, the definition of what type of disability? I mean, obviously something's better than nothing.

But yeah, you want to make sure it's ock, just to your point right there. But of course there's going to be a pretty significant price difference for the cost of an own occupation versus any There sure can be. And it depends. Also, it's going to even further what occupation you're in. Going to your point, Zacc, that specialist, the doctor who's a specialist, he's going to pay a little bit more than someone like you and I who are sitting behind a desk.

I mean, yeah, I mean, we can make the same amount of money. But our specialties, if I'm not saying nothing against us, right. I think we're pretty specialized in what we do. He thinks you're special. Let's just be honest about this situation here. I mean, we can do this job with very few limbs and very, you know, I mean exactly.

But at the same time, they're going to pay so each. Occupation will have even within its own field, a dentist versus some specialized dental reconstructive. [00:36:00] Anyway, so that's kind of what we're dealing with when we're talking about disability. Now, here's real quick if I can, when we talk about that, there's a lot of employers that offer group benefits and we encourage people to take those.

Those are great. Oh, interesting. That was one of our questions because what about the risk of leaving work and losing the coverage? Now that is big because a lot of group employers, it's not what we call portable. So you're hoping your next job has it, and maybe they do have it, but you're going from, let's say, a benefit of say, $7,500 a month down to.

4,000, 5,000, 3000. So they're not all equal. So that's why, again, talking with your advisor, it's really good to say, well, this is my disability that I get through work, which is great. And then you can add on top. So just because you have group, you can also have individual as well, or you can just have a straight individual because your group doesn't offer you anything.

Again, here's some general rules that we talk about is it's about 2% of your [00:37:00] income. Now it will depend, but think about it. If you're making a hundred thousand dollars, would you rather make $98,000 to then if you become disabled, get $60,000? Or would you rather make a hundred thousand dollars? And if you get disabled, you get zero.

That's the reality of what disability insurance is about. It's you're not going to get a hundred percent of your income because then everybody's going to be disabled. You get about 60%. And you know, I found it to be relatively cost efficient for me. Okay, so quick example. In our previous episodes I talked about how my life insurance was not portable from my previous employer.

Well, it was, but it went from $70 a month to $1,100 a month for the same coverage on life insurance. The disability I had through my previous employer. Was portable at the same cost. I was shocked by it, so I think I paid, it was like $47 a quarter. It was really not that bad for about $3,500 of monthly [00:38:00] disability coverage, and so I kept that.

I have been paying those quarterly payments up until actually about a quarter ago, I finally decided to let it go because I'm part of the Financial Planning Association and they have a partnership. With something called, I think the company's Ryan's Insurance or something like that, and they gave me for not that much more, $12,000 a month of disability insurance.

So I was able to get that through that association for a cheaper per. Dollar of monthly anyway, so you get the idea. And does the disability cover you as long as you qualify being disabled with your own occupation? Are there certain limits that only pay out certain time? No. There's limitations if you kind of get into it.

But it really comes down to it if your doctor says you cannot perform your job duties. And here's the cool thing about a lot of the individual ones. You could be doing your job duties as a doctor. And you still have it, and now you move and you now become a teacher. You give up your practice or you're just now a general practitioner.

You're not doing the surgeries [00:39:00] anymore, but it will kind of move with you. But let's say you completely change fields. You go from being a doctor to a law enforcement. Well, that's your new occupation. So if you can't become a law enforcement, you get hurt in the line of duty, you're now disabled. Obviously the doctor has to verify this.

It's just not, oh, I'm disabled, it's medically. But once the doctor says, now you can't perform, there's a payout. And if they pay out, they pay out. And we pay claims all the time. But you will hear horror stories. I mean, just like social security. Most people think, well, if I get disabled, I'm going to wait on Social Security Disability.

Good luck. It's not a quick process. And it's for sure in Antioch and that's in Antioch. I mean, if you look at the statistics on how long it takes to get that particular one, you're going to lose your house, your cars, I mean, mortgages. Don't wait to say, oh, if you're disabled, we'll wait for a year before you can get money back in.

Right? People want their money. So I'm going to go back to what we talked about. It's the plan. What are you going to do about that, and how are you going to cover this income if you get disabled? One more thing about disability [00:40:00] too. It's funny, companies will pay an exorbitant amount in work comp insurance. We have to, it's the law.

We have to buy this, and I think it's like less than 1% of injuries on disability are due to on the job claims. I'm going to use you skiing, you're out playing. But my work disability coverage would cover me. When I broke my knee, I broke my knee on a trampoline. My group disability plan would cover me, but I was at home plan.

So that's a big difference as well too. Besides that work comp insurance versus disability insurance. That makes sense. Okay, so let's do a summary here, and we talk about this a lot with insurance. Sometimes insurance is something that you can kind of check the box and then revisit multiple years down the road.

I do think that it's worth dedicating the time here. To really think about your long-term care plan, your long-term care plan [00:41:00] is probably a little bit more involved than check the box. Got it done. Move on for a while. Your long-term care plan needs to be more coordinated between I. Who are the people helping me?

What are the assets I'm going to dedicate to this, and what insurance will I use to supplement it? It's the one area of this season that I think it would be doing it at a service to say, check the box, look at it. But you do need to check the box of having a plan and then revisit that. On probably a three to five year window for those who are retired or in that stage of life.

For those of us who are younger and working, to me, the disability side is, yeah, check the box, get it in place, get the right policy in place, and then you probably need to revisit that every five years and check in and make sure that you have enough coverage. For me, I look at it about every two or three or four years, but that's because I'm a little bit more focused on this stuff, being in the industry.

And I like to know what's out there for me. And personally, [00:42:00] I think people are underinsured on disability by a long shot and usually they're either at or slightly underinsured on life insurance. And then from a long-term care planning standpoint, I think people have an accidental plan. They have assets and hope it works.

That's they have an I can pray. Yes. And so anyway, that gives you an idea. These are a lot of pretty complex planning topics, but this episode we really wanted to give you at least the basics of long-term care and disability. You can tell Barney had to really hold back on a lot of, like more of the complex side of the tax effects and how you structure it and the actual design of it.

That's for us to talk one-on-one with you. If you want, give us a call if you want to talk about that stuff. And next episode we'll be talking about property and casualty insurance. That's right. Thank you, Barney. Thank you. This podcast is intended for informational purpose only and is not a substitute for personal advice from Capita.

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