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Registered Reps Starting To Get Serious About LTC Insurance

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Two fears haunting baby boomers now edging into their retirement years are (1) spending their twilight years in a nursing home, among strangers, and (2) spending inordinate amounts of money to avoid that outcome.

These concerns, say registered reps interviewed by National Underwriter, are helping to fuel demand for a product that many reps and advisors neglect to discuss with clients: long term care insurance.

“Seniors want to live their final years in a dignified way, which usually means in their homes,” says Peter LanFranca, president of LTCPlans.Biz, Independence, Mo. “Long term care insurance lets them do that at a fraction of the cost they would otherwise incur by spending down savings.”

Increasingly, reps say, boomers are planning not only for their own long term care needs but also those of their parents. Hence, many of them are purchasing policies on their parents. And women are taking the lead: John Noble, director of product and market development at UnumProvident, Chattanooga, Tenn., observes that women account for 60% of LTC policy purchases, compared to 40% of men.

Fueling demand for LTC insurance is the growing recognition, both among advisors and clients, that LTC is integral to a comprehensive financial plan. Other funding sources, such as Medicaid and life insurance policies that carry a long term care rider, will generally cover LTC expenses only in part.

“It’s an eye-opening experience for people to realize they’re not covered and what they have to go through to get LTC,” says Noble. “Some clients say they’ll put their assets in trust in the Bahamas, impoverishing themselves on paper [to get Medicaid]. What they don’t realize is that the government will determine who will provide care and how. They lose the ability to choose.”

Medicaid generally does not cover the most attractive care options, such as assisted living and home-based care, adds Marilee Driscoll, founder and national spokesperson for National Long Term Care Planning Week. To secure these services, individuals have to pay out of pocket–a potentially devastating drain on the financial resources for all but the wealthiest individuals.

Indeed, personal savings represent a substantial share of long term care costs. The Congressional Budget Office estimates out-of-pocket costs totaled nearly a third of an estimated $135 billion spend on LTC services in 2004 (excluding the value of donated care).

Given an aging population, that figure is certain to rise. According to the AARP, the number of people age 65 or greater who will need long term care is due to increase to 12 million by 2020, up from 7 million in 2001.

The ultra-affluent won’t be the only ones using LTC insurance to fund this care. Reps say mid-market clients account for an increasing share of their clientele. But sources note that the high cost of LTC insurance–monthly premiums of $600 or more are typical–only makes sense for clients who have a sizeable nest egg to protect. One commonly cited figure: $250,000-plus.

Contributing to the burgeoning demand for LTC insurance is innovation in product design. Many solutions now offer, for example, riders that increase benefits in tandem with inflation; pay cash benefits; fund in-home modifications (e.g., the installation of a wheel chair ramp or medical equipment); and return premium payments to a surviving spouse upon the death of the insured.

“What wealthy folks wouldn’t do in the past was buy traditional LTC insurance,” says LanFranca. “When they’re exposed to the new products that do the special things we talk about–living in the privacy of their home with the services they want, then securing for their estate the premiums they paid–they’re amazed they hadn’t heard this before.”

LTC advisors emphasize, however, that LTC insurance is not an easy sale. Compared with life insurance, for example, LTC insurance doesn’t offer tax-deferred, cash value accumulation. And, whereas life insurance beneficiaries are guaranteed to receive a death benefit so long as the policy is in force, no benefit guarantee is available for LTC insurance. If the insured doesn’t need long term care prior to death, no benefit is paid.

Sources therefore stress the importance of highlighting, in advisor-client discussions, the risks of doing without the insurance, and of marketing LTC insurance as integral to retirement and estate planning. To that, reps need to do a thorough fact-finding when meeting with prospects.

Among the questions to ask clients: Who in the family has had long term care needs? Who is likely to require such care in the near future? What other sources of funding can be tapped to pay for long term care needs? Can current goals and objectives be met through self-funding? What do frail and elderly parents think about a son or daughter inquiring into LTC insurance on their behalf?

This last question, observes Charlie Reed, president of Long Term Care Insurance Connection, Asheville, N.C., can spark strong reactions. “Sometimes, parents show incredible gratitude,” she says. “But others get angry because they feel they can take care of themselves. LTC is an emotional sale, probably more so than any other product.”

In part because of such sensitivities, reps need to have a firm grounding in the range of issues that LTC insurance engenders. While a life and health insurance license may be sufficient to market LTC insurance under state law, observers insist that advanced training in the product is essential.

Advisors looking to add LTC insurance to their portfolio can choose from a variety of training programs serving this market niche. Among the available educational designations: CLTC, sponsored by the Corporation for Long-Term Care Certification; CASL, from The American College; LTCP, offered by the American Association for Long-Term Care Insurance; and CSA, sponsored by Society of Certified Senior Advisors.

When considering a training program, observers say, reps need to inquire into the breadth and depth of coursework respecting LTC insurance features and factors–tax laws, methods of treatment, non-LTC assets–that impact long term care requirements. The best programs, they add, also impart marketing and sales techniques, and detail the resources required of advisors.

Among other things, they need patience. Reps say the processing of LTC applications can take 45 days or longer. That’s often because LTC underwriters have numerous attending physician statements to procure.

“Whereas life insurance applications weigh mortality risks, LTC apps consider factors affecting morbidity,” says Kevin Vozar, vice-president-operations for Covenant Reliant Producers, Nashville, Tenn. “A life underwriter might not be concerned about an applicant with Rheumatoid arthritis. But this condition could be grounds for rejecting an LTC application.”

LTC underwriters, he adds, also closely scrutinize cognitive impairments and drugs that applicants may be taking to alleviate a mental condition. That knowledge should serve as fair warning to “pill-popping boomers” who, Vozar observes, are more dependent than their parents on antidepressants.

Because few LTC manufacturers offer rated policies, upwards of 30% of LTC applications are declined, according to Driscoll. And those who win acceptance may have to pay higher premiums later on. For this reason, LTC advisors frequently counsel clients to purchase limited-pay policies.

Reps looking to build a profitable practice in long term care insurance also need to consider the marketing and technical support they’ll receive from LTC manufacturers and their broker-dealers, experts say.

“Most [LTC manufacturers] provide a significant amount of support in terms of marketing literature,” says Reed. “They’re offering more training, too, than they did in past years. But I’d love to have more interaction with other people who are selling LTC insurance.”

This article originally appeared in the September 2005 issue of Registered e-Report, an online publication of National Underwriter Life & Health. You can subscribe to this monthly e-newsletter for free by going to


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