Use Disability Income Insurance As A Springboard To LTC Planning

Disability income and long term care insurance both help protect clients if they become sick or hurt. Discussing the DI product with a client can be a springboard to discussing LTC. For workers who are planning for their senior years, thats an important link to make.

DI insurance is necessary when protecting earnings, and therefore is of paramount importance to both current and future financial plans of a client. LTC insurance is critical in helping to protect the clients assets from diminishing due to the expense and burden of receiving care; this exposure is not covered by any other means of protection.

You, the advisor, already know that. However, clients often do not. The reality is that many clients have an aura of invincibility and denial about them that makes it challenging for financial professionals to discuss these exposures with them.

But there is good news in the DI/LTC story, too. And that is, the market is wide open and you can get in. The place to start is with educationat the workplace.

Disability and life insurance were the leading products sold at the worksite during 2002, according to the 2003 Eastbridge Consulting Group U.S. Worksite Study. In a tough economy, it seems, hard working people develop a stronger appreciation for their income and they are more inclined to protect their ability to earn.

Its no coincidence that benefit administrators have been emphasizing voluntary coverage in recent years. It boosts their offerings and helps employees better protect their financial future.

That said, pre-retirement senior market clients who already have recognized and addressed DI insurance needs are excellent prospects for LTC insurance. These individuals already understand and have prepared for the financial consequences of being unable to work because of sickness or injury. Further, they probably realize that coverage is less expensive when bought at a younger age.

Employees who are new to senior market status are good prospects, too. These workers may find that LTC insurance is becoming an important consideration for themselves and not just their parents. Those in the middle market may be especially interested if they have parents or know of family friends who are experiencing care issues.

But some workers may not have had those experiences or may not realize the meaning for themselves. What to do then? The trusted financial professional can be instrumental in changing the mindset. The advisor can encourage employees to think of their own personal needs and retirement goals, and of how theyve prepared for these needs so far. The advisor can also point out the potential impact a lengthy illness may have on financial plans and the lives of loved ones.

A good place to start shifting this focus is during a realistic discussion of retirement savings and roadblocks that may impede reaching goals.

Point out that two potential hurdles facing seniors today are health status and retirement savings levels. Many people plan their retirement based on maintaining their current standard of living. But outliving ones retirement assets is a definite risk they also need to discuss.

My feeling is, the insurance industry hasnt even scratched the surface of potential candidates for this coverage. Consider: According to a May 23, 2003 Hot News article from National Underwriter, a 2003 American Society on the Aging survey found that only 17% of U.S. residents have insurance to cover LTC costs, and only 37% of participants have saved anything to cover LTC costs.

Since life expectancy has increased significantly in America during the past 200 years, it is prudent for individuals to plan early for LTC care needs.

Here are some ideas for positioning LTC coverage.

Explain how the insurance pays a benefit, regardless of age, when a policy owner needs assistance with activities of daily living, such as bathing or dressing.

Build upon an established knowledge base. Begin reviewing the clients current financial plan, and then show how LTC coverage should be part of a complete plan.

Focus on needs specific to women, particularly their chances of being family caregivers while working and the potential of outliving spouses. Emphasize that LTC coverage will help them meet family obligations and maintain more balance in their lives.

Give people tools to understand, too. That is, give them tools that show how their current personal protection plans will help them achieve long-term retirement success.

Insist on a reality check. It is difficult to ignore the volumes of published information on the increasing costs of health benefits and care across the United States. Statistical data and cost information available on Web sites are starting points to bring clients face to face with reality.

The market is full of candidates for LTC insurance. Financial professionals should learn to recognize these candidates, and then focus on raising their awareness levels about LTC needs and solutions. When it comes to placing coverage, be sure to propose options from strong carriers who have a track record for standing behind their policy owners for the long term.

R. Tim Sinks, CLU, is a MassMutual general agent. His agency does business as Capital Financial Group, LLC, Nashville, Tenn. His e-mail is rtsinks@finsvcs.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, November 14, 2003. Copyright 2003 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.