MarketWatch: Pick a Reverse Mortgage Instead of Care Insurance

Reverse mortgage professionals know that partnerships with financial planners could hold the key to endorsement growth, and a national business publication found an advisor who recommends Home Equity Conversion Mortgages over long-term care insurance.

MarketWatch this week featured George Gagliardi, a financial planner from Lexington, Mass., who’s “growing increasingly fond” of the reverse mortgage option for clients who come to him asking about long-term care insurance.

“Individuals in their 50s and 60s often expect Gagliardi to recommend long-term care insurance,” MarketWatch reporter Morey Stettner writes. “They may assume it’s a prudent way to protect their assets if their health declines and they rack up steep bills for an assisted living facility or in-home aides.”

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But Gagliardi points to expensive premiums as a reason not to buy the products in retirement, and MarketWatch noted that such policies for federal government employees almost doubled in cost last summer when insurer John Hancock Life re-upped its contract with Washington.

“The wife of one long-time fed told me that premiums for her and her husband will increase from about $400 per month to more than $800, or roughly $10,000 annually,” Forbes contributor Howard Gleckman wrote at the time.

RMD has extensively covered the rising expenses associated with long-term care insurance, and last year U.S. News and World Report declared that “no one can afford” the products, which provide cash for expenses associated with aging, such as skilled nursing care or in-home assistance.

Instead, Gagliardi typically offers his clients two solutions: a hybrid long-term care policy that also includes a traditional cash life-insurance payout, or a reverse mortgage — despite frequently receiving initial skepticism based on the HECM’s still-checkered reputation.

“When he mentions reverse mortgages, Gagliardi braces for resistance,” Stettner writes. “He knows that some clients perceive them with a jaundiced eye.”

The planner himself offers a refrain that’s likely familiar to originators and lenders.

“Their reputation is terrible,” Gagliardi told MarketWatch. “Some people are shocked that I’m even proposing HECMs. They react with, ‘I’ll lose my house!’ But these products are better now.”

After explaining the benefits, potential downsides, and protections associated with the reverse mortgage program, Stettner leaves readers with an upbeat quote from Gagliardi about the upsides to HECMs over long-term care insurance.

“If you need long-term care, the money must come from somewhere. If it comes from an insurance policy, maybe you’ll never have to use it. With a HECM, it’ll leave you with more money to use that would otherwise go to pay the insurance company,” he told MarketWatch.

Read the full piece here.

Written by Alex Spanko

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  • “Reverse mortgage professionals know that partnerships with financial planners could hold the key to endorsement growth….” Really? Are we that desperate?

    How will this hope change, if any, if endorsements drop in fiscal 2018 as fits the downward slopping irregular shaped M annual endorsement pattern for the this and the last four fiscal years. With one more expected increase to the fed interest rate this fiscal year, how will HECM demand react or will lenders drop their margins?

    For now and the foreseeable future it is hard to imagine any significant RM growth outside of the HECM. Even then growth is more a topic around a few stiff drinks in conference rooms than teetotaler sober in war rooms trying to maximize revenues in high volume market.

    We are in stagnation and while partnerships with financial planners are helpful, they are not our way out of this pattern of stagnation at least for years to come, if ever.

  • A Reverse Mortgage is a great, flexible tool for anyone over age 62 with significant home equity. Using an RM to pay for private-pay custodial home care is also a good option. But instead of buying LTC insurance?! That’s terrible, if not actionable, advice. Oh, but he does recommend “hybrid” LTC insurance, which is a legitimate LTC insurance funding solution, so it’s not really so simple. It’s interesting that Mr. Gagliardi and the authors note “regular” LTC insurance is “too expensive”, but recommend a hybrid policy that forces a consumer to pay for life insurance and cash value guarantees which cost two to three times more premium for the same LTC benefits; yes, you get your money back if you never need care, but you also paid significantly more for that right. Mr. Gagliardi (like Mr. Gleckman) clearly does not understand traditional LTC insurance which makes him a very un-credible source.

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