Asset-Based LTC Policies: A Great Fit For Banks
By Trevor Thomas
Banks are inherently rich in potential clients for asset-based long term care insurance, experts agree.
For an LTCI producer, whether working directly for a bank or partnering with one, a referral from a banker is a strong selling point, they note. Thats because customers have a great deal of confidence in their bankers advice.
And bank-based reps, with their focus on investments, resource allocation and asset protection, are well suited to sell asset-based LTCI, says Greg Vacca, an insurance consultant to banks.
“Its a nice product for banks that want to provide long term care insurance,” says Vacca, who is based near Irvine, Calif. “It fits their sales force, and if the sales force can do a good job of explaining it, the customer can see its value.”
Now is a good time for banks to seek better customer penetration of asset-based LTCI, observes Ron Wolf, a principal of the Tillinghast unit of the consulting firm, Towers Perrin, Stamford, Conn. Thats because the large baby boomer cohort is approaching retirement and is increasingly aware of the need for estate planning.
“What is driving peoples decision now is first, price and second, qualitythe financial strength of the underlying insurance company,” Wolf says.
Unlike traditional LTCI, the asset-based version accumulates a cash value. It can be either a whole life insurance policy with an LTC rider, or an LTC policy that provides a tax-free death benefit if the covered individual never needs long term care.
The product can be paid for with annual premiums, but banks are most attracted to single-premium versions, says Vacca.
Single-premium policies are a lot like selling annuities, so bank reps are familiar with how to sell them, he points out. In fact, many banks sell the product to customers whose annuity is about to mature, because the proceeds then can be used to fund the premium, Vacca notes.
“A lot of clients have seen annual pay product, and for whatever reason dismissed that, because they dont want to pay insurance premiums the rest of their lives,” adds Bruce Moon, director of financial service products for Golden Rule Insurance Company, Minnetonka, Minn. “Theyve heard rates can go up, and that doesnt thrill them.”
Troy W. Bender, president of UMB Scout Insurance Services, says asset-based LTCI is good for clients who have large pools of money they want to pass along.
“The caveat with [conventional] long term care insurance is, the clients may need the cash they put into the insurance,” says Bender, whose agency is a division of UMB Bank, Kansas City, Mo. “Asset-based products let us take care of that concern as well as the wealth transfer issue.”
Some customers who have a life insurance policy they no longer need are willing to exchange that policy for one that provides a long term care component, Bender says.
Not all experts agree that asset-based LTCI sales are growing steadily, but anecdotal evidence suggests some success for the product.