Like any product, hybrid LTCI policies aren't perfect, and they're not for everybody. But when a hybrid fits a client's needs, how do you convince him or her to buy? Three successful producers share how they're countering objections when it comes to hybrid LTCI products and talk about what features they'd like to see in future versions of the policies.
For Part I of this month's producer roundtable, see: Hybrid LTCI prospects: How to find (and sell!) to them
Q. What objections do you hear about hybrid products, and can you share some ways you can overcome those objections?
Steven A. Plewes, CLU, ChFC, principal of Advisors Financial Group in Gaithersburg, Md.: The number one objection is the premium for life insurance with long-term care riders. Unlike a long-term care policy, where there may be a spousal discount involved for a husband and wife, the life insurance contracts are individual contracts, so the client is paying the full premium without discount. Additionally, there’s an added fee for the long-term care rider. Variable annuity products can sometimes have heavy fees, particularly if you add an enhanced death benefit or have an income guarantee and then add a long-term care rider. The premium and fees can start to add up. I know from personal experience — because I’ve had my mother-in-law in an extended long-term care nursing home and assisted living nursing home care as well as my own mother, who is currently on Medicaid and resides in a long-term care facility — that the costs for this type of care can be exorbitant. When you lay out the actual premium costs versus the potential benefits, you can relate that to the relatively low fees over the life of a contract, and most clients start to come around.
Matthew D. Brotherton, CLTC, president of 1752 Financial in Roanoke, Va.: The objection I hear most often is the expense compared to a traditional long-term care policy. When I show them different options, they see the higher cost with the hybrid product. But then I remind them that the hybrid product is solving two needs they have. At that time, they remember the power of the hybrid policy.
See also: They Said No. Now What?
John J. Demboski, CFP, of Demboski & Chapman Financial and Insurance Solutions Inc. in Akron, Ohio: Making sure the client really understands that he or she has two problems is key. If the prospective client can first see that he does indeed have two issues, and then, second, see that the hybrid product will be a better fit for solving the problem, he will usually move forward.
Q. Many agents who do well with hybrid products speak highly of how these products have positively impacted the long-term care insurance business. In your view, what other modifications might companies make to their products that would help the business?
Brotherton: One feature I would like to see with this product is an increasing long-term care benefit by CPI — the Consumer Price Index. One of the major negatives to most of these products is the level amount for long-term care.
Demboski: I’d like to see more hybrid solutions solve different kinds of issues. For example, a disability insurance, life insurance and wealth accumulation hybrid product would cover some of my younger clients’ problems.
I’d also like to see more carriers training on these products. Given their complexity, it’s very easy for a producer to stick with the older, more traditional products. The hybrid products haven’t picked up as much steam as they probably deserve because of their complexity and because of agents and advisors not being aware of these solutions.
Plewes: Perhaps life insurance companies can look at ways to provide some kind of joint benefit. Variable annuity contracts that offer long-term care riders typically will allow a joint contract to be written, even in the case of an individual IRA, so either spouse can take advantage of a long-term care rider benefit within the variable annuity product. Even though the life insurance may be on the life of the insured, the long-term care rider could provide access to the spouse in a sort of pooled or shared benefit, like many annuity long-term care riders offer. I think this would make it more palatable for both husband and wife, moving them toward a product where there’s a life insurance and a long-term care need.
Q. Any further thoughts?
Plewes: Overall in my experience, clients in their 40s, 50s, and early 60s have either had some kind of direct experience or experience with a family member with long-term care needs. I feel this marketplace is a growing opportunity for advisors, and I recommend they work with someone who is very knowledgeable. The products are complex and vary from state to state and contract to contract. Seller and buyer beware!
To read the first part of this producer roundtable, see: Hybrid LTCI prospects: How to find (and sell!) to them