If your plans for 2011 call for adding long-term care insurance to your list of products, you need a solid foundation upon which to base your sales. Here’s a concise overview of the basics of LTCI.
It’s natural to focus on custodial-care nursing home stays because of their cost. According to the American Association for Long-Term Care Insurance’s 2010 Sourcebook, a private room cost an average $220 per day ($80,300 annually) in 2009. Local costs vary, but obviously a nursing home stay can be financially devastating.
Nursing homes are only one delivery method for long-term care, however. In his continuing education training program for WebCE.com, “Long-Term Care Fundamentals,” Paul Winn, CLU, ChFC, notes that LTC involves a range of health care services. Custodial care provides individuals with assistance in the activities of daily living: bathing, dressing, eating, etc.
Depending on the person’s needs, other health care services can range from intermediate to intensive care. LTC can be provided in a person’s home, community-based facilities and alternate care facilities, as well as nursing homes.
Winn cites several statistics to highlight the likelihood that clients will require LTC at some point in their lives. At age 40, he reports that the risk of needing LTC in a nursing home at some point in the person’s lifetime is 36 percent. That percentage increases to 49 percent by age 65 and 56 percent by age 85. Those probabilities are much higher than the risk of being in an auto accident (0.4 percent) or having fire damage a home (0.08 percent).
Most LTCI policies allow buyers to customize their coverage significantly. So which benefits should you recommend clients consider and which should they ignore? Mike Westling, CLTC, an LTCI specialist with Newman Long Term Care in Richfield, Minn., says that inflation protection is “number one” to include.
He notes that the industry norm previously was a 5 percent inflation-increase compounded annually, but that’s been changing. Some companies are moving to 3 percent annual compounding and others are shifting to the Consumer Price Index for their increases.
A second feature Westling recommends for a couple is shared care, which allows insureds to share the coverage pool. “If one person needs to dip into the other person’s pool, they can do that,” he says. “If the one insured doesn’t need it or dies before being able to use it, the pool transfers over to the other spouse.
The good news is they get the whole pool but they don’t have to pay the premium for the insured who is now deceased.” Westling also recommends a zero-day elimination period and 100 percent payout for homecare. Most baby boomers want to receive care at home, he says, and this feature provides them the ability to be able to pay for it on day one.