From the April 2009 issue of Boomer Market Advisor • Subscribe!

Avoid long term disaster

Due to a recent decline in disposable income (to put it mildly), clients might feel long term care insurance is a "luxury" they can no longer afford. We're not sure where to begin in addressing such a destructive and damaging viewpoint, so we turned to Boomer Market Advisor contibutor Tom Riekse, Jr. for help. Riekse, managing principal of of Lake Forest, Ill.-based LTCI Partners, runs through the items long term care advisors should focus on in the current down market. A quick read will serve your clients well, and save them - and their loved ones - from financial heartache down the road. He can be reached at Tom.Rieksejr@ltcipartners.

Take time to re-learn the market.

Many states have instituted new NAIC required producer training in order to sell long term care insurance (LTCI). It typically involves eight hours of initial training and four additional hours every two years. Even though there are convenient, inexpensive online courses it might be a great time to go to a classroom. Several insurers are sponsoring such courses and many times the cost is subsidized as well. And typically, the instructors they use are excellent.

Communicate the need to clients.

There is an abundance of content available to communicate the needs for LTC planning to boomer clients, including videos, e-newsletters and Webinars. Where in the past much of the marketing was geared to only seniors, the newer material addresses the boomer marketplace and its particular needs.

Gather all the necessary information to make a planning recommendation.

Many advisors will have a good grasp on the current (albeit diminished) financial situation of their clients, but might be unaware of their current health status. A key component of LTC planning is doing it before health problems narrow the options available. Send out a confidential health screen or use a third party to ask the questions. Knowing this will help bring a better solution.

Consider planning for a shorter time horizon than in the past.

In the past, long term planning might have involved buying a large benefit insurance policy that would take care of all possible future LTC needs, with features such as unlimited benefit policy and a 5 percent compound inflation rider. Persons who bought those policies, even those that have seen rate increases, should consider themselves fortunate as the current plans with similar benefits are extremely expensive. Instead, consider planning for a shorter time horizon, such as six to ten years with the understanding that each year the plan will be reviewed based on the strength of the carrier selected, the current cost of care in the area, and the client's current planning budget. When the economy picks up and the clients feel more comfortable, they can consider buying additional benefits. Of course, the risk is their health will change and additional benefits can't be purchased. However, the initial plan will still be in place, which is much better than no plan at all.

Diversify among carriers.

Is your client concerned that a policy they might not use for 30 or 40 years is dependent upon the future health of a carrier? Perhaps they might be interested in looking at policies from two carriers. For example, they could purchase a "base" reimbursement contract with a three-year benefit period that includes inflation protection which could qualify for many of the newer state partnership programs. They could then consider a "cash" benefit plan layered on top. The cash program would allow benefits when they became eligible regardless of who was providing the care. The cash plan could be purchased in benefit account levels such as $100K, $250K or $500K. These plans could include automatic inflation--just note that not including inflation would be much less expensive.

Consider asset-based solutions.

These are for those clients not interested in putting out new premium dollars at this time. Provisions of the Pension Protection Act clarify the tax treatment of such plans will take effect in 2010. An asset-based product, such as a single premium life/LTC plan or annuity/LTC plan, can use either an existing life or annuity contract via a 1035 exchange. Also, since many clients have been buying CDs or increasing cash amounts, there could be money available to purchase these safe products, which combine self-insuring with riders that can double or triple the account value for LTC needs.

Realize the motivation for purchase.

Many people mistakenly believe LTCI is purchased because of the want to protect assets or maintain independence. In reality, no one can prepare for an LTC episode and the impact it has on one's family. The primary reason people should plan is because they love their family and want to be proactive about the well-being of their future.

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