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October 07, 2007 at 04:00 PM
Expansion of the LTC Partnership program to more states creates new opportunities and challenges for long term care insurance producers.
The challenge is similar to working with high net worth clients in that, on both cases, numbers become a critical component of the planning.
If protecting assets through a Partnership LTC policy and still qualifying for Medicaid is one rationale for insuring, then benefit selection decisions are critical. In contrast, in high net worth planning, the critical objective is demonstrating value of insurance versus investments.
For markets in between the two extremes, the lack of LTC insurance penetration suggests that customers need 2 sets of information: 1) A better understanding of the financial impact of LTC on their lives; and 2) a better understanding of the value of owning LTC insurance.
This need can be stymied by conflicting recommendations from various advisors. In fact, the different views tend to encourage consumers to do nothing.
Consider: Traditional LTC insurance specialists make an emotional appeal, but this is countered by other advisors who suggest investments are a better way to cover care-related financial risk. Another advisor will argue that combo life/LTC or annuity/LTC products are better than wasting money on traditional stand-alone LTC policies which may never be used, while the LTC insurance specialist will argue the opposite.
In the end, the consumer’s ultimate decision may be emotion-based. However, the facts suggest that accurate financial projections are invaluable. For that reason, trusted advisors should guide clients through an unbiased comparison of choices.
In short, the cure to no action on LTC insurance is reliable and objective financial analysis.
Two situations will demonstrate the importance of numbers for Partnership planning and high net worth planning.
The Partnership situation is similar to that faced by people in traditional middle markets. In most cases, a compromise is required between desired coverage and affordable premium. In these situations, the question is “what is the optimum mix of benefits, future co-pay and premium, appropriate for a given client’s finances?”
By comparison, the high net worth client can afford maximum coverage but this client still wants optimum value–which can be found only by analysis of the future impact of the benefit choices made today. Indeed, benefit design decisions are likely more important than most advisors and clients realize.
Partnership prospects have limited resources. Without LTC insurance, they will likely qualify for Medicaid soon after a care event begins. Here, affordable premium and future co-pay are of paramount importance. Co-pay includes future cost of deductible days and difference between care costs and claims paid.
