One of the most heated debates within the LTCI specialist community is whether something is better than nothing.
Unfortunately, there are many examples of people who reduced some premium costs up front when they bought LTCI, and regretted it at claim time. Examples could range from benefits that don’t come close to paying the cost of care to benefit periods that are inadequate. A great example of the debate on this subject can be found at “Reader Feedback: ‘Budget’ LTCI Policies More Harm Than Good?”, where several producers debated the issues presented in the article “Designing an LTCI Policy for Every Client’s Budget.”
Something to keep in mind is that the initial policy sale must always be suitable for a client. Every state requires the personal worksheet financial suitability form to be completed, and if somebody would struggle to pay LTCI premiums for the life of the policy (including potential rate increases), then LTCI is probably not for them. In fact, an advisor may want to have a more stringent financial suitability than the state minimums — for example, limiting the premium to 5 percent of income, as opposed to 7 percent.
In the case of a client who doesn’t want to purchase LTCI or for whom a policy isn’t suitable, but who is still interested in other products or services, it may make sense to schedule a follow-up meeting about long term care planning for a future date.
And for those who do buy, after the policy is delivered, it would be an excellent idea to schedule an annual policy review.
Those of us who partner with an investment advisor typically participate in an annual review session. Here, the discussion focuses on the performance of various investment classes, the macroeconomic environment, and changes in personal financial/risk tolerance that would affect future investing decisions.
A similar conversation should occur with long term care planning. The points of review could include the following:
- Carrier. A review of the carrier’s current financial condition and its ability to fulfill future promises.
- Plan benefits. Look at the current plan benefits, adjusted for any inflation protection included.
- Cost of care. A look at the current cost of care in a particular geographic area or other areas where care may be provided. Also, a review of the long term care inflation rate.
- Changes to personal health. You may also want to discuss health conditions that would either affect a possible claim or future insurability in case coverage needs to be augmented.
- Gaps in plan. A realization that income or assets would need to be allocated for gaps in current coverage.
- Coverage availability. Review if coverage is available from such sources as a group plan, and if so, compare that plan to current coverage.
- Recommendations. Finally, recommend any changes to the current plan in place.
The annual review may seem like a lot of work. However, thanks to advances in carrier and agency automation, you can easily gather much of this data. This is especially helpful for advisors with a large block of long term care policyholders who can’t meet face to face but would like to discuss a performance report over the phone.
The annual review is a way to keep on top of plans and stay in touch with clients – and the added service will undoubtedly lead to new referral business.
Tom Riekse Jr. is managing principal at LTCI Partners, a brokerage general agency specializing in LTCI. He can be reached at [email protected].