Q. I’m having trouble closing a number of prospects because they complain the premium is too expensive. Do you have any suggestions how to overcome that objection?

A. The premium amount has always been a problem area, even before the rounds of rate increases by many carriers. Working separately, two industry leaders have developed a similar approach to meet that objection head-on – Scott Boyd, LTC director of TNBC, and Barry Fisher, vice president of Republic Marketing Group.

“When agents present an LTCI policy by saying, ?I’m recommending a policy for $200 per day of benefits … and the premium for the two of you is $6,200,’ many prospects counter with objections,” Boyd says. “What occurs is a sort of disconnect, where they are hearing that for more than $6,000 a year, they are getting $200. The problem is the prospect is having difficulty processing the true value of the policy benefits.”

“The solution is to present the true value of the policy in conjunction with the premium,” Fisher explains. “The focus of your LTC presentation should be the amount of money the insurance company will deliver at the time of claim and what the client needs to pay for that protection.” Fisher has developed a software program called “The Less Than Lifetime Solution” for agent use, to better illustrate the concept for prospects.

Here are the key talking points:

  • Cost of care in the client’s geographic area. Use the semi-private rate and then annualize it to a round number.
  • The policy value (pool of money) at initial time of purchase.
  • The policy value in the future, based on the inflation option chosen. Boyd and Fisher prefer using 5 percent compounded inflation protection.
  • Client’s current age.
  • Age 83 to 85 is the probable age for the first claim.
  • The policy premium in relationship to the benefit at the likely time of claim. Assume the client is 58 years old when purchasing the policy (the average age of purchasers). Therefore, 58-year-old prospects need to project what their costs will be 25 years from now, when they are likely to need care.
  • Typical claim of four to five years (according to the 2004 Milliman Actuarial Consultants study of actual claims paid by the major insurance companies). That translates into needing $1 million to $1.3 million dollars set aside to secure a retirement lifestyle. Plus, an identical amount needs to be set aside for a spouse.

Here’s an example to illustrate the concept: A 58-year-old purchases $200-a-day daily benefit, four years benefit length, 5 percent compound inflation benefit. The annual premium is $3,100.

If benefits begin at the anticipated age of 83, the future pool of money will be $1,014,742 (calculated by the initial annual benefit multiplied by policy inflation factor every year, up to and including the years of the claim payment period).

Now your explanation to the prospect (for an individual) can illustrate the true value of the policy. “Bill, this policy is designed to provide $1,014,000 of benefits when you are most likely to use it, and the premium for this pool of money is only $3,100.”