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Life Health > Life Insurance

Profile The LTC Insurance Buyer

By John M. Connelly

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If youre selling long-term care insurance protection, youll find this statistic, courtesy of the U.S. Census Bureau, relevant to your prospecting: Every second, an American turns 65.

If you are in the senior market, you already know that most mature-aged adults do not currently have private insurance to address the LTC funding problem. However, I believe that will change as large numbers of adults move into the “silver” and then the “golden” years.

More aggressive marketing on TV and in print is already raising awareness about the issue among aging baby boomers and their parents. As the so-called sandwich boomers try to juggle careers, children, and care for aging parents, they are getting a front row view of the critical importance of LTC insurance.

The sheer number of older Americans–there are more than 40 million aged 50 and 64, and 35 million aged 65 and up–suggests there is potential for expanding sales of private LTC insurance. However, identifying the right prospects is critical. This requires LTC buyer profiling.

Before looking at the buyer profile, lets review the two major types of private insurance that can address the problem. One is stand-alone LTC insurance; it owns the lions share of the market right now. The other is linked benefits policies–those that combine life insurance with LTC benefits in one policy. The latter are attractive to the segment of the market that can afford to buy stand-alone policies but do not do so.

Regardless of the policy type purchased, LTC buyers do share certain characteristics when compared to non-buyers. Their profile follows:

The LTC buyers are more likely to be married, more highly educated, and wealthier. They typically have incomes greater than $50,000 (linked benefits owners, $100,000) and assets, excluding the primary residence and qualified plans, greater than $100,000 (linked benefits owners, $300,000).

Having an average age of 67, LTC insurance buyers have planned well over the years, and they recognize that government wont pay their LTC expenses unless they deplete their assets. They dont want those hard-earned assets diminished by LTC expenses. They see value in shifting the risk to an insurance company.

Furthermore, these individuals are healthy and active, and they dont see themselves as elderly. (Therefore, it is critical for advisors to present LTC insurance as a “financial planning” tool. This combats the perception that the coverage is “old peoples” insurance.)

Men are likely to approach the issue of LTC funding from the logical standpoint of asset protection. Women, on the other hand, make a more emotionally driven decision, because odds are that they have cared for a parent or other relative, expect to care for and outlive their husbands, and recognize that the majority of nursing home residents are women.

Finally, consumers with assets less than $75,000 (excluding home and automobile) and an annual retirement income of less than $25,000 are not good candidates for private insurance; they would likely qualify for Medicaid benefits.

What is most likely to set linked benefits policyholders apart from stand-alone buyers is their perception of the risk. While both types of insurance appeal to those who want to be prepared, linked benefit buyers are not convinced they will need LTC. They cannot justify paying for a policy they might never use, but they can justify purchasing a policy that provides income tax-free LTC benefits under IRC Sec. 104(a)(3), an income tax-free death benefit under IRC Sec. 101(a)(1), or both.

In short, they see that linked benefits policies increase the paying power of funds for LTC and provide a seamless solution for wealth transfer.

The current demographic shifts, combined with the tax-favored status of these policies, offer advisors many opportunities to expand sales.

For instance, it is never too early to raise the topic of LTC planning with your middle-aged clients, because it is primarily middle-aged women who are caring for their parents.

While conducting an annual review with age 50+ clients, therefore, ask this one simple question: “If you or your spouse were to need LTC tomorrow, how would you pay for it?” This will surely create a dialogue that ultimately translates into sales.

John Connelly is a vice president and business leader–linked benefits products for First Penn-Pacific Life Insurance Co., a Schaumburg, Ill., subsidiary of The Lincoln National Life Insurance Company and a member of Lincoln Financial Group. His e-mail address is [email protected].

Reproduced from National Underwriter Life & Health/Financial Services Edition, October 28, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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