Most financial services professionals are familiar with the statistics by now: An estimated 60% of individuals over age 65 will require some type of long term care during their lifetime, the Centers for Medicare and Medicaid Services reports. The average cost of just one year in a nursing home is currently about $75,000, according to the American Council of Life Insurers.
LTC is a potentially costly situation that many Americans are likely to face–and the message coming out of Washington is that individuals will be held financially responsible for the expense. The Deficit Reduction Act severely limited Medicaid planning as a practical option for many, and Medicare covers very little in the way of LTC services. Yet few people are planning for this possibility: Only 8 million Americans are covered by LTC insurance, according to the American Association for LTC Insurance.
What the LTC insurance industry needs is the attention of the millions without coverage, but winning that attention in today’s over-communicated society is not easy. However, a large number of Americans employ financial advisors, who can help start the conversation.
For clients who do not have a plan to pay for LTC, the costs can have a devastating effect on their financial well-being, wiping out assets that have taken a lifetime to accumulate. Advisors who talk to their clients about LTC insurance are, therefore, providing an important way to protect their retirement savings and to prepare for future healthcare needs.
Still, many advisors hesitate to dive into LTC insurance, even when they realize the benefits it could offer their clients. Often, it is a matter of their having limited experience with the products. The financial services world is becoming more complex all the time. Consider all the areas in which an advisor is expected to be knowledgeable: investments, tax planning, insurance, employee benefits, saving for college and retirement, legal issues, estate planning, and so on. Adding LTC insurance into the mix can be daunting.
The good news for advisors is that experts are available to help them offer LTC insurance to their clients. Working with an agent who specializes in LTC insurance allows advisors to provide the information their clients need to make informed decisions about this important coverage.
Unfortunately, many advisors are reluctant to use the expertise of an LTC specialist. Perhaps they fear their client will have a bad experience with the agent and that it will reflect poorly on them; or maybe they worry their client and the agent will hit it off too well, somehow undermining the primary advisor-client relationship. This apprehension, while understandable, is usually unfounded and should not stand in the way of advisors carrying out their fiduciary responsibility to protect clients’ assets.
The key is to find someone with whom advisors can build rapport and with whom they feel comfortable referring their clients. With the right approach, advisors can use the discussion and purchase of LTC insurance to further strengthen their relationships with their clients.
All advisors, even those with a life and health insurance license, can benefit from calling in an LTC insurance specialist. Benefits for the advisor include:
o Using an expert allows advisors to offer LTC insurance to their clients without becoming immersed in their clients’ medical history.
o An LTC insurance specialist will have a strong understanding of product offerings and current trends, news and regulations.
o The underwriting process can be rigorous. Advisors may prefer to leave it to an expert who is more experienced with the standards and guidelines set forth by the various carriers.
Some clients may not have even considered that they may need LTC someday and what their particular wishes would be should that time come. Advisors can pass the emotional component of the LTC insurance sale to specialists who have experience talking with clients about such sensitive matters.
Agents benefit from the collaboration, too. Financial advisors and insurance agents alike are under constant pressure to find creative ways to connect with people. For LTC insurance specialists, the key benefit to working with financial advisors to offer coverage is that both they and the advisor are interested in reaching out to the same types of potential clients: Forward thinkers and planners with assets that need protecting.
For insurance companies, the advantage of having financial advisors and LTC insurance specialists working together has obvious benefits for increasing sales. As more financial advisors talk to their clients about LTC insurance, opportunities for gaining new policyholders arise. Companies that help financial advisors to offer this type of insurance by facilitating relationships with LTC insurance specialists should see their sales grow.
Advisors and agents working together to increase LTC sales is a winning opportunity for all parties. Clients get LTC coverage designed for them by an expert. Advisors get credit for initiating LTC insurance conversations and facilitating relationships with the specialists. Agents successfully close sales, earning commissions and referrals. And insurance companies open up another sales avenue.
With just 8 million Americans covered by insurance for their potential long term care needs, there is a big market for LTC insurance. Working together, advisors and agents can help each other grow this number and help many more Americans prepare for the future.
Cameron Waite is executive vice president of strategic operations for Penn Treaty American Corp., Allentown, Pa. He can be reached by email at