LTCI can be a hard sell at times. These strategies will help you convince your client the product is a good buy.
Long-term care insurance (LTCI) has been around long enough with sufficient public awareness to ensure that the “sign-me-up” cases are a thing of the past. Public knowledge is plentiful on this product. That means you’re likely to encounter objections to buying the coverage–some valid, others unfounded. Overcoming those objections and misconceptions will mean the difference between getting the coverage in place or not. Here’s how experienced LTCI advisors respond to some of the most common objections you’re likely to encounter.
“It costs too much”
Cheryl J. Sherrard, CFP(R) with Rinehart Wealth Management in Charlotte, N.C., puts the LTCI annual premiums in the context of what a year’s care would cost in a skilled-care facility. This helps clients compare the annual LTCI premium of $2,000 or $3,000 with skilled nursing expenses of approximately $70,000 for a year in Sherrard’s area.
“It takes 23 years of paying premiums of $3,000 to equal one year’s care costs,” she points out. “It is also helpful to remind them that in the case of a married couple, not only would you have the skilled-care cost for the sick spouse, but you would continue to have all the normal living expenses for the well spouse. That can easily deplete a portfolio in a very short timeframe.”
Kevin J. Meehan, CFP(R), ChFC(R), CLU, CASL(R) with Summit Wealth Advisors, L.L.C. in Itasca, Ill., reminds retired clients that much, if not all, of their income will continue if they need long-term care. Those sources can include pensions, Social Security, portfolio income and so on. Consequently, prospective buyers often don’t need to insure the full LTCI cost, and Meehan focuses instead on covering the potential expenses that exceed their cash flows.
Framing the need that way–meeting the gap, not the full potential cost–gives clients a sense of relief that they don’t have to cover the entire LTC expense. “Couples respond differently if one is disabled as far as where they spend the money,” he says. “Typically the healthy one isn’t going to Europe anymore. And so a lot of their variable expenses change because somebody is ill. Some of what is being spent now may be freed up to go toward this care. So what we want to do is say, what’s the gap and then let’s buy that much coverage. Sure, ideally, all the risk is transferred, but realistically most people don’t have the premium tolerance to do that.”
The cost issue isn’t just about money, though–it’s also about having clients recognize their values, set financial priorities and decide how they would change their lives if they need LTC. Ted Gregory, CFP(R) with Gregory Advisors, Inc. in Huntington Beach, Calif., has his clients identify their values and near-, medium- and long-term goals as part of the financial planning process. He uses that information to develop a detailed financial model with two scenarios for the clients.
The first scenario assumes no LTCI but with the present-value of a convalescence at an agreed-upon age. The second scenario assumes the client has LTCI with the benefit applied to the cost of the same convalescence as modeled in the first scenario. Gregory then shows the clients how the different scenarios will affect their ability to achieve their goals. The result: Clients frequently either agree to purchase LTCI or substantially modify their stated values and goals, he says.