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Back to Basics

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Imagine that you’re shopping for a new car and visit a dealer’s showroom to compare the models that you’re considering. You ask the salesman the usual questions about available options, performance and mileage, warranty coverage, etc. Although he’s affable enough, he won’t give you straight answers. Instead, he responds to your questions with vague marketing clich?s or tells you that he’ll have to ask his sales manager for more details. You quickly realize that he doesn’t know much about the cars and decide to take your business elsewhere.

Now put yourself in the position of a prospect who you’re presenting with an LTCI proposal. If you can’t provide solid, knowledgeable answers to this potential customer’s questions, he will start to doubt your expertise. Once that happens, he’s more likely to dismiss your proposal and will seek another advisor who can answer his queries.

Get smart

Of course, you’re not applying for a job as an LTCI underwriter, so you don’t need Ph.D.-level knowledge about the coverage and policies. But you do need to know what you’re selling so you can anticipate and answer questions that prospects (who will range from uninformed to surprisingly product-savvy) are likely to ask.

Nancy Morith, CLU, CASL, LTCP and owner of NP Morith Inc. in Princeton, N.J., has been selling LTCI since 1989. She points out that consumers can gauge a producer’s product expertise early in their conversations. “When you have a depth of understanding of a subject, you are able to convey that to your client or your prospect in a way that shows,” she says. “It doesn’t mean that you’re dropping names or advanced degrees or anything like that to try to wow them. They just hear it because you’re coming from a different place than a producer who just is quoting off of a fact sheet.”

Jesse Slome, CLU, ChFC, and executive director of the American Association for Long-Term Care Insurance in Westlake Village, Calif., recommends that advisors start developing their product expertise by learning about LTCI’s major features and characteristics.

For example, it’s important to understand how reimbursement policies differ from cash policies, Slome says, because there are pros and cons to each approach. A contract’s treatment of elimination periods is another important provision to understand, as are the available inflation-protection options.

Genuine expertise goes beyond understanding policies’ features, however. LTCI carriers have different underwriting guidelines that have a direct impact on the applicant’s insurability and premiums. Advisors who sell LTCI only incidentally (less than five contracts per year) need to rely on external sources for underwriting insights, says Slome. “It’s not just rates and features–it’s health insurability that really is the most important consideration. And because it changes all the time, if you’re a broker, your best source for that information is the FMO, whether that’s a general agency or the larger national general agencies. Those are the people who are submitting multiple apps every day. They are the ones that are directly working with the health underwriters, and so what you want to do is seek their advice beforehand.”

Partnership programs
There’s another element that your understanding of LTCI basics should include: the role of LTC partnership programs at the state level. These programs, officially known as Qualified State Long-Term Care Partnership programs, were authorized in the Deficit Reduction Act of 2005.

The legislation’s goal is to encourage more people to buy LTCI, and the new program expands partnership LTCI to more states (previously it was available only in California, Connecticut, Indiana and New York, but as of year-end 2008, 20 states had enacted the program). Consumers who buy the program’s special LTC policies are allowed to protect more of their assets and qualify for Medicaid when the LTCI benefits expire. Private companies selling long term care insurance policies must be approved by the state and the policies must meet minimum standards with features like inflation protection.

Partnership LTCI has the potential to increase the coverage’s appeal to a wider audience, but you’ll need to review your state’s licensing requirements before you can sell the policies, Morith cautions. The DRA requires that agents undergo an initial eight hours of LTCI training and four additional continuing education hours every 24 months in order to sell the policies.

The training regulations vary by state, so you’ll need to check with your local regulators. “Some of the states are saying this is only for those who are going to sell partnership policies,” says Morith. “And some of the states are saying this is for anyone who’s going to sell any long-term care insurance, partnership or not. The requirements and the educational requirements that will fulfill a particular state’s rules and regs may vary.”

Read the fine print

LTCI training programs will help you understand the concepts and mechanics of how the insurance works. That’s a good start, but you need to see how the insurance operates in individual policies, and the best source for that level of detail is the LTCI contract itself.

Admittedly, it’s difficult to stay awake when wading through any insurance policy, but the contract is the product that you’re selling so it’s very much worth the effort. Of course, you could argue that insureds don’t read contracts if they trust you. That might be true, but the last thing you want is for a sale to fall through because you can’t explain a contract feature or benefit to a prospect or applicant who drilled down into the details and wants answers to very specific questions.

“You have to read the contract,” says Morith. “Don’t rely solely on the marketing literature or the agent’s handbook. Read them, certainly, but actually read the contract language and understand it. If there’s something you don’t understand, you go back to the company and ask them. They have marketing help lines. They have people there who can help you.”

Staying focused

It would be easy to spend a lot of time analyzing LTCI contracts to evaluate the offerings and master the technical detail. But putting that much effort into that level of preparation could significantly reduce the time you have available to get in front of prospects. Slome suggests that one way to avoid analysis-paralysis is to narrow the number of policies you consider to four or five where you are satisfied with the features, rates, and the insurer’s underwriting guidelines and financial stability.

In terms of technical knowledge, Slome uses an analogy. “Most people try to become engineers and build the airplane but the airplane never gets off the ground,” he says. “They never put in the effort to say okay, now let’s really fly it. There’s no question you need a level of expertise, but maybe it would be more prudent to partner up with a specialist who can help guide you in those initial few sales until you get grounded. You don’t need to or want to make this overly complex.”


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