The statistics are sobering and indisputable: individuals age 65 or older have a 40 percent chance of entering a nursing home sometime during their lives. The average annual cost of a nursing home stay is $50,000, and even higher in some metropolitan areas.
Specialized care can cost as much as $200,000 annually. Are your customers prepared? Here are eight ways you can urge people to protect their assets and their families with a long term care insurance policy.
1. Personal financial planning
Discussing the need for long term care insurance is a natural adjunct to developing a comprehensive financial plan. “I get the most satisfaction and fulfillment in dealing with individuals,” says Paul F. Love, CLTC, CLU, ChFC of Foster Soltoff & Love, Ltd. in Bethesda, Md. Love has been helping his customers develop financial plans since 1972.
“I don’t look at one individual area for my clients; we look at everything: life and disability insurance, estate planning, legal documents like wills and trusts, investments, etc.,” he says. “When my customers are in a pre-retirement situation, we discuss whether they’re prepared, and determine whether they can retire comfortably. Talking about LTCI is a natural part of that discussion and our review process.”
2. Contingency planning
“We view the possibility of long term care as a need area and a risk area,” says Jennifer White, CSA, CLTC, LTC case consultant for Commonwealth Financial Network in Waltham, Mass.
White has been with the company for six years, consulting its advisors about long term care products and case design, and providing guidance on issues such as home care, assisted living, nursing homes and taxes.
“We emphasize putting plans in place for our customers rather than selling products; our job is to minimize risk for our clients’ portfolios. Ideally, they need to understand the options and make decisions when they’re young and healthy enough to make those decisions,” White says. “The reason people don’t plan for long term care is that usually they believe someone else will pay for it. The advisor needs to raise that issue with the client and ask, ‘Who do you think will pay for the care if you need it? It’s either going to be you, or your insurance policy.’”
Love asks his customers if they have planned for the significant possibility of needing long term care and if they have a plan in place to pay those additional expenses. “I remind them that even if you’re incapacitated, your mortgage doesn’t go away,” Love says.
3. Executive benefits
Long term care insurance is increasingly an important benefit that organizations can offer to attract and retain key employees. Love puts LTCI policies in place for corporate executives and their spouses, often as part of a comprehensive retirement plan.
“One of the nice things about utilizing a long term care insurance policy for executive compensation is that the company can be discriminatory and only pay for the policy for its owners and key employees if it wishes to,” Love says. “The expense is usually tax-deductible for the organization, and the premiums are not included in the income of the employee. Neither are any benefits that might be received if claims are made against the policy in the future.”
4. Group benefits
On the flip side, companies are increasingly offering LTCI as a voluntary benefit for all of its employees, with discounted premiums for the entire group.
“When we’re offering the benefit company-wide, we generally present the LTCI policy as part of a retirement planning seminar,” Love says. “We have a substantial 401K practice, and when we’re talking about retirement saving, it’s a perfect time to discuss long term care insurance. One of the real benefits for, say, a 30-year-old employee is that we can make the same discounts available for his or her parents, family members or even grandparents who want to purchase a policy.”
5. Personal experience
There’s nothing like immediate knowledge of a problem to illuminate the need for a solution.
“We find that many people are going through their own experiences of having to put their mother or father in a nursing home,” says White. “If they’ve been dealing with Medicaid, they’re learning about its limitations firsthand and realize that there are no guarantees that the outcome will even be comparable if they need care in the future. At the same time, most people believe that they can no longer rely on Social Security or the government if they develop a need for long term care.”
“Both of my parents had experiences with long term care,” says Love. “I try my best to help my clients visualize what it’s going to be like. For instance, there were many times when I had to lift my mother out of a wheelchair and into a regular chair when she was in assisted living. That very act was filled with all kinds of peril; if I lifted her incorrectly she could have gotten injured. Most people can’t imagine themselves in a nursing facility, or even needing assisted living or home health care. Part of my job is helping people understand and visualize it. I’ll tell them about my experiences and ask, ‘Do you really want your kids traveling three times a month to check up on you, or do you want to be independent and have professional care?’”
6. Comparison shopping
As customers become increasingly aware of the need for LTCI, the ways they shop for and purchase the product are changing as well.
“People in the 50- to 60-year-old age group have taken the time to become pretty savvy consumers,” says Love. “Organizations like AARP have developed checklists about what should be in a good LTCI policy. Customers are increasingly asking good questions, and in many cases, we’re asked to compare multiple policies from multiple companies to make sure they’re comfortable with the final decision.
“Often it’s not as much of a cost-driven decision as you might think. People might buy a term life insurance policy because it’s the cheapest, but they shop differently for LTCI because it’s not a small investment to make. If they’ve taken the time to really educate themselves, and if I’ve taken the time to give them what they need to make a good decision, they’re generally going to buy because they’re engaged in the process.”
7. Watch the news
Love was reading the newspaper when he came across some interesting statistics from the Bureau of Labor (www.bls.gov) that showed more men and women are continuing to work past traditional retirement age.
In 2005, 40 percent of 65-year-old men were still working, compared to 34 percent a decade ago. Twenty-eight percent of 65-year-old women were still working in 2005, compared to 22 percent 10 years ago. In fact, the number of women 80 years of age and older in the workforce doubled between 1995 and 2005.
“People are clearly working longer, and I don’t think that decision is necessarily voluntary,” Love says. “There may be other financial factors at work, but one of the top motivators for people staying in the work force is definitely the need for health care coverage.”
“Consumers are better educated about the area of need,” White says, “but they often don’t take inflation into account when they’re planning. They aren’t always buying products that satisfy their future needs and sometimes their LTCI policy isn’t sizable enough to fit with their other retirement goals.”
Advisors can help clients develop realistic plans for the future by calculating inflation percentages and discussing the aspects of future care that are most important. By utilizing the variety of optional riders available that cover benefits such as automatic cost-of-living increases and the availability of home health care, an advisor can customize the LTCI policy to best fit his customer’s needs.
8. More players, better exposure
As the market continues to grow, there is increased competition for the long term care insurance sector.
“Consumers are getting much more education about LTCI, and part of this is due to a larger distribution of the product,” Love says. “Many people have been offered a policy through their employers or associations they belong to.”
White agrees. “I’m in my 30s, and both AAA and my bank marketed LTCI products to me. However, advisors can use this increased exposure to their advantage. Other institutions may ‘advertise’ the product, but your job is to get the sale.”
Mass mailings from large companies offering LTCI policies are generally no match for an individual advisor who can offer personalized service and comprehensive planning. “The biggest motivator in my ability to sell this and communicate the benefits of the policies doesn’t have anything to do with premiums and benefits,” says Love. “My customers want the best product with the best provisions and personalized options, but they’re not going to be ready to buy until they feel fully educated. I get a lot of personal satisfaction from helping them become informed buyers.”
“The good news is that we’re in a much-better-educated market,” says White, “and I truly believe that now is the best time to get into the LTCI industry.”