LTC Adds Muscle To Executive Benefits

Long term care insurance producers are finding a strong and growing market in executive long term care plans for small and medium-sized businesses.

Smaller firms are responding well to the message that LTC as an executive benefit protects key people’s personal financial assets, provides permanent and portable coverage, and offers significant tax benefits to both the company and the executive.

The market for LTC executive carveouts has grown to the point where many employee benefits producers bring it up on almost every call, says Mike Eagan, managing director, Worth Partners, Sudbury, Mass. If they don’t, they may miss out on an opportunity, he adds.

Eagan strongly urges agents and brokers to keep returning to the LTC topic during follow-up sales calls with business clients.

“I had a situation where a company to which I presented the idea a couple of years ago was not interested,” Eagan recalls. “Then, two years later, I found they had decided to do it but went with someone else.”

Making the LTC executive carveout sale is “more like farming than anything,” he notes. “You plant the seed, water it and harvest it. It’s not a quick sale, but if you don’t tend to it, it’s going to go someplace else.”

Eagan has another tip for LTC agents: Get the executives’ spouses involved.

Especially if you’re dealing with mostly male executives, the spouse can be a key ally, he adds. Women usually are more finely attuned to the problem of long term care than men, because they are more likely to have been involved with the care of elderly relatives, he notes.

But there’s another practical reason to reach out to spouses. “If you set it up with a small, closely held company and you can include the spouses, you get eight people where you might have had four,” Eagan points out.

He sees his prime market as the C corporation. “That’s where the tax savings are most attractive, and that helps the sale along.”

In Eagan’s experience, the successful sale is typically a company with one or two decision-makers who think LTC as an executive benefit is a good idea.

The age of the executives also has a strong bearing on making the sale.

“Often, this happens after they reach age 50 and are looking to the end zone,” he observes. “The fact they can use the corporate checkbook as opposed to their personal checkbook helps things along, too.”

Eagan finds that, generally, high-tech companies are not a strong candidate for LTC. One reason: They tend to have a relatively younger senior staff.

For another, they are apt to be financed by a number of outside investors, who often look unkindly upon rich benefit plans.

“They’re just trying to grow and eventually go public or whatever. If they’re in it for five years and out, they’re not so concerned about benefits,” Eagan says.

Much better candidates for a successful sale are established businesses run by executives in their 40s and 50s. Often, they are starting to understand LTC is a risk, and they can get tax advantages from buying insurance to cover it, says Gail Steingold, founder and principal of Burling Insurance Group–Long Term Care, Chicago, an independent broker.

The tax advantages then often close the sale, she says.

“That always brightens up a business owner, when you tell him how you can pay for this,” Steingold says.