LTCI: A Changing Market

Change is difficult to accept, whether you are being forced to take an unfamiliar street due to road construction or forced to alter how you conduct your business. However, it is undeniable that change is going to impact our lives and our business, whether we like it or not. The attitude of “Because that’s the way we’ve always done it here” just can’t rule our business lives.

Are you ready to change?

The new product offering

A new generation of products, such as linked-benefit design hybrids and differently packaged LTC insurance policies, is available today — and they may be more appealing to certain clients. In particular, these alternative product solutions are potential opportunities for clients who have rejected suggestions for LTC planning in the past. As advisors, we need to recognize that the desired results may be reached in various ways.

Linked-benefit policies are an excellent option for the “self-insurer” clients — those that believe they have been successful enough not to need insurance solutions. While you might argue that future costs of care could impact their financial plans dramatically enough to warrant transferring that risk, not all are willing to accept the facts.

Alternatively, packaged policies are also emerging that do not require high net worth client funding styles. In fact, some of these policies may also be attractive due to their lower price structure. LTC is often seen as expensive and confusing by both clients and advisors. New designs are available that take away both of those concerns.

For both of these clients, it’s important to recognize that risk management planning doesn’t always equate to one solution. The idea that a client should purchase one policy that will meet all their future needs, today and tomorrow, may not be appealing to everyone. Needs change over time, and advisors must recognize that having flexibility within their recommended solutions may be best for some clients.

A challenge and an opportunity

Most linked-benefit and alternatively designed LTC policies do not provide the same level of “solution-based” protection that the more traditional LTC policies deliver. This new generation of policies is not always designed to provide full coverage that will protect against the entire risk. Some of these policies only provide money to help cover the cost of care, not to fully pay for it.

Herein lies both the challenge and the opportunity for creative planning. The opportunity, of course, is that you can get more protection in place for more people. The challenge is this: the advisor must be prepared to monitor the client’s risk management portfolio on a periodic basis and be willing to recognize when additional coverage may be required. Most comprehensive financial planners practice this approach with investments already. There is no reason that risk management tools cannot be seen with the same level of attention. In fact, we quite often see individuals changing their portfolio of life insurance policies several times during their lives. So, why can’t the same be done for LTC?

However, the method of recommending one policy now, another policy later, has other inherent challenges. Such a strategy will likely be more expensive over the long-term, especially because, as age increases, so do premiums. There is also the risk of diminished insurability over time. You may have clients that desire more coverage down the road, but are no longer able to pass underwriting to obtain what they may need, at any price.