As 78 million baby boomers prepare for retirement, media attention on long term care insurance has dramatically increased. For many advisors, this presents an ideal opportunity to grow their LTC insurance business and discuss with their clients the importance of this coverage in their comprehensive financial plan.
According to the 2007 MetLife Market Survey of Adult Day Services and Home Care Costs, the average national annual cost for a home health aide is $24,700. The Centers for Medicare and Medicaid Services expect the cost of care to increase three-fold in the next 20 years. LTC insurance can help to prepare for these often unplanned and costly services.
Financial advisors generally understand the protection afforded by LTC insurance. Yet many have felt in the past that LTC insurance was too complicated. They did not want to risk addressing it with their clients for fear of not being able to provide the most appropriate advice. However, certain carriers in the industry have alleviated these concerns by getting back to the basics and simplifying their product offerings.
With that hurdle out of the way, advisors can position themselves as a more valuable resource by presenting LTC insurance as an integral component of securing a successful retirement plan.
Here are 5 tips to keep in mind when approaching LTC insurance with your clients.
1. Expand your target market and reach out to younger boomers. A common belief about LTC insurance is that it is a product primarily for older adults. According to research from the National Alliance for Caregiving and the AARP, however, nearly 40% of adults who need long term care are between the ages of 18 and 64.
Reaching out to a broader age group can help build awareness about LTC insurance and offers clients a cost savings. If clients are in their 40s or 50s, there is a greater chance that they will be in good health and hence insurable. Premiums are also lower the earlier they purchase.
2. Describe the need, don’t sell the features. Your clients may believe that their health insurance, disability, Medicare or Medicaid will cover the cost of care. This is not the case.
Health insurance pays primarily for acute care, and disability insurance is for income replacement.
Medicaid is based on strict income and asset guidelines, and an individual may need to spend down their own assets before becoming eligible. Medicare will generally not pay for personal or custodial care. Medicare is for people age 65 or older and disabled persons. It pays for the first 20 days of care in an approved nursing facility, prescribed by a doctor after a hospital stay. After day 20, the individual pays a daily co-pay up until day 99. After 100 days, Medicare will pay nothing.
Others feel that they can pay privately for future LTC services. This can have significant consequences if they are not educated about the costs of care–forcing retirees to use their savings. In fact, according to the 2004 MetLife Long Term Care IQ Test, 45% of Americans between 40 and 70 underestimated the cost of receiving care in a private room in a nursing home.
In addition, as the cost of care continues to go up, an individual may be forced to spend down personal financial assets, placing retirement savings at risk.
Discuss the cost of care in your client’s area of the country or where they plan to retire. Based on the MetLife Market Survey of Adult Day Services & Home Care Costs, the national costs for 2007 are as follows:
o The national average yearly rate for adult day centers is $15,860?.
o The national average yearly rate for home health aide is $24,700??.
o The national average yearly rate for homemaker/companions is $37,440???
3. Get your clients started with an affordable level of coverage. It’s better than no coverage. While younger boomers generally pay lower premiums for LTC insurance, they are also facing competing financial demands. They may be paying for their children’s college education, saving for retirement, caring for parents or all of the above. Look for LTC insurance products that can evolve as your clients’ needs change. By offering flexible LTC insurance solutions, your clients can purchase an affordable level of coverage now and have the opportunity to keep adding to it over time to build up a comfortable level of protection.
4. LTC is a family matter–involve them. Because part of your role as an advisor is protecting your clients’ loved ones, encourage your clients to consider the implications that their care may have on their families. Offering LTC insurance to both spouses can provide clients with significant premium discounts as well as peace of mind.
For your clients who want to leave an inheritance to future generations, LTC insurance is an important step in protecting those assets. Further, LTC insurance can alleviate potential stress on their families should they or a covered loved one need care. Family members who become caregivers face a serious strain on themselves, their health and their resources. Caregiving may also be unbalanced among family members. LTC insurance can offer caregiving solutions to fill in the gaps that family members cannot provide.
5. Take advantage of selling LTC insurance at the worksite. How many of your existing clients are business owners or executives? As employers recognize the importance of benefits such as LTC insurance in attracting and retaining top talent, there are potential opportunities in the employer market for advisors.
Multi-life programs are sold as an individual product in a group setting but provide employees with additional premium discounts and reduced underwriting. Employers may also choose to pay for some or all of the employees’ premiums, or they may pay the premiums only for key employees. There are tax advantages to the employer for paying all or part of the premium. Employers can also choose to offer LTC insurance as a voluntary benefit, offering it to employees who will pay the full amount out of their own pocket but still receive the multi-life premium discounts.
In addition to following these tips, look for carriers that are stable and financially sound. Review ratings by the major agencies, and choose a strong carrier. Also look at the carrier’s history of providing LTC insurance and their commitment to the business. Your clients may not need their LTC insurance benefits for 20 years or more, so it is essential that they have confidence that their carrier will be there for them in the future.
Long term care insurance must be an essential part of consumers’ retirement plans. Advisors who simplify the process, communicate the need and understand their clients’ financial priorities will be well positioned to further protect their clients, and take advantage of the expanding market for LTC insurance.
Scott Beck is MetLife Inc.’s national director for MetLife Long Term Care Insurance. His e-mail address is is