Insurance advisors are typically optimistic with their sales projections for the upcoming year, so those who have experienced a drop-off in long term care insurance sales may consider this only a temporary blip. To these advisors’ positive-thinking minds, baby boomers are only taking a breather before they regroup, open their diminished retirement statements and decide to protect what is left by buying comprehensive LTC insurance.
We all hope that is the case. It may also be prudent, however, to have a plan B, one that addresses a certain consumer distrust of financial services and insurance companies, an unwillingness to spend thousands of dollars on premiums and a paralysis due to the fiscal crisis our country is facing.
What potential ideas would appeal to this plan B consumer? Here are some thoughts.
LTC insurance: 60% off
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We are told the best approach for LTC planning is to look at the future cost of care and have a plan that pays for that care regardless of where it is provided or how long it lasts. For example, healthy clients in their early 60s should purchase a plan with unlimited benefits that includes a 5% compound inflation rider and enough monthly benefits to pay for the highest quality Alzheimer’s facility in the country.
The problem is that type of premium is very expensive–about $5,000 annually, in fact. Unless someone really is looking to buy those benefits, it would be difficult to convince that client and their spouse to spend that money. So the outcome may be no action at all. Let’s face it, people are not as prudent with their future as they should be. Notice how the lack of long-term savings contributed to the financial mess we’re in.
If, however, you modified this plan by changing the lifetime benefit period to 3 years, and the compound inflation option to a guaranteed purchase option, the premium becomes closer to $1,500 annually. That may be a price point that is more acceptable to someone looking at LTC insurance.
Granted, the guaranteed-purchase option doesn’t typically qualify as a Partnership policy, if a client is considering buying one, because it does not specifically cover inflation. And over the long term of the policy, someone would probably pay more in premiums than one buying a plan with built-in inflation. However, in the current economic environment, a short-term planning horizon is better than none at all.