Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Life Insurance > Term Insurance

The downside of LTC self-insurance

Your article was successfully shared with the contacts you provided.

Q. I work with a wealthy clientele and when I mention LTCI insurance to them, many of them reply that they have plenty of money and can afford to self-insure the risk. Can you suggest some ways to counter that objection?

A. This is a common objection that all of us hear periodically. Maybe the person does have a lot of money, but it may still make sense for them to buy the insurance. An expert in addressing objections is Deb Newman, president of Newman Long Term Care, a brokerage agency in Minnesota and one of the ten people named to the Senior Market Advisor LTCI Power List. Deb recommends using stories to counter objections, so that story telling answers the objection and prevents a confrontational conversation. This helps create a comfortable environment in which the client can better understand your point of view.

Here are two stories Deb uses when she hears the objection that “I can self-insure.” She starts the conversation by saying, “That reminds me of a story…”

Story 1 ?? 1/2 “An LTC agent told me about a friend of hers. This friend had $30 million in assets, and approached my colleague and said, ‘I want to buy long term care insurance.’ Because they were such good friends, my colleague said, ‘Why? You could buy the nursing home. Why do you feel like you need to insure this risk?’ The response was, ‘Let me tell you what happens when you have a lot of money. You have a lot of heirs watching what you do with your money. If I begin to need care or when I can no longer make decisions for myself, I want to make sure I have the highest quality care available, without my heirs worrying about how they’re spending their inheritance on my care.’ We’re talking about 50- and 60-year-old kids who are planning their retirements around the inheritance they’re going to get. I think that in a selfish way that may affect the care that their parents receive. If that happens to be a concern of your clients, this story will help draw it out.”

Story 2 ?? 1/2 “This was told to me by a P&C agent. A very good client inherited great wealth. He’s a stockbroker who loves investing and assessing risk. He told the agent, ‘Once a year for 38 years I have found out what my home is worth. I have my home assessed and call a different agent to find out how much it would cost for me to buy homeowners insurance. I’ve never bought the homeowners insurance, but took the premium amount that they quoted me and placed it in an investment account. Now, 38 years later, I have a million dollars in that investment account and my home is worth $750,000. Therefore, I didn’t need the homeowners insurance.’

?? 1/2 So when this same friend said, ‘I want to buy long term care insurance,’ the agent thought he was playing some kind of game. He asked, ‘Why? You’ve got plenty of money.’ This man had $20 to $40 million in assets. The friend admitted that the reason he didn’t buy homeowners insurance is because he knew what the financial risk of losing his home was and he knew the statistical risk of that happening was two or three percent. He literally knew what it would cost to replace his home so he chose not to insure that risk. He went on to say, ‘There’s a 50 percent chance I’m going to need care, and I have no idea how much it’s going to cost me. Why on earth would I insure that risk myself? That’s the very type of risk that you transfer to an insurance company. That’s why I want to own LTC insurance.’?? 1/2

Tell this story to your rich clients who have been telling you that they don’t need LTCI. This will help LTCI make more sense to them.

Next month I will provide several more stories from Deb to counter the objection, “We’ve got plenty of money.”

*For further information or to contact this author, please use the forum below.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.