Care in a crisis

Q. Given the economic crisis, many baby boomers believe they will be unable to pay for long term care insurance if they ever needed it and are using their savings to pay off day-to-day expenses. When it comes to long term care, many say ‘I just can’t afford it right now.’ With the likelihood that most boomers will need long term care at some point in their lives, what can I do to convince my clients that paying for long term care insurance, especially right now, is just as important as paying off day-to-day expenses?

A. Perceived affordability of long-term care insurance (LTCI) has always been an issue, even during good economic times. With the economy now in a recession, people are going to scrutinize every expense — including LTCI — to see if it is essential.

There is also understandable mistrust of the financial services world and insurers right now. Many boomers have always had suspicions of the sales approaches and promises that the previous generation took to heart. People aren’t eager to put their money in places that aren’t federally insured.

Therefore, the wrong approach in this environment is to come in with a carrier product brochure and illustration on the first meeting and say something like this: “Hey, there is a chance you’ll go to a nursing home someday and this insurance will help pay for that. Oh, the premium is $3,000 per year and if you don’t use it you’ll get nothing back.”

Also, if someone doesn’t have current income because they have been laid off, they probably won’t be an LTCI buyer for obvious reasons. There does need to be some knowledge of the prospect’s financial condition before discussions can start. If proposed premiums are going to be greater than 5 percent of annual income, the recommended plan being quoted is too expensive.

Instead, a better idea might be to look at two other approaches in discussing LTCI; as a family protection plan and as an adjunct to a new savings plan.