Editor’s Note: The following is an excerpt from “How things are shaping up in the LTCI market: A Life Insurance Selling Producer Roundtable,” which appears in the November issue of Life Insurance Selling.
Even though public awareness of the need for LTCI appears to be increasing, producers still need to help prospects feel the importance of being adequately protected. Can you share an approach that you’ve used that has been particularly effective in helping your prospect understand the need for LTCI?
Mark S. Jones, LUTCF, president of Remington Insurance Group, Houston: We ask three very simple questions and follow with appropriate responses:
1. “How’s your current health, and are your parents still alive?” Healthy people in their 50s and 60s often live into their 80s and 90s, and genetics can play a key role.
2. “Have you had any personal experience with the costs associated with long-term care?” Their true knowledge base is exposed fairly quickly.
3. “Are you aware if you eventually need any type of long-term care, there are only three funding choices for you to consider?” First, some sort of government-funded plan, such as Medicaid, or your family members. How reliable is that option? Second, a personally owned LTC-type insurance policy — which places the owner/insured in control. Third, self-insure — the use of your personal assets. If self-insurance is the preferred choice, the follow-up question then becomes, “Which assets will you liquidate first?”
Also, annuities that qualify under the 2006 Pension Protection Act are excellent alternative tools for helping fund LTC expenses. If insurability is an issue for traditional LTCI or even hybrids, a PPA-compliant annuity can be funded and made accessible, income tax free, for qualified LTC expenses. Older deferred annuities with sizeable gains should also be evaluated for a possible 1035 exchange. Even though these are modestly underwritten — and a person can be declined — it is not to the extent of a traditional LTCI policy.
Althea S. (“Charlie”) Reed, Ph.D., CLTC, financial representative for Asheville Financial, Asheville, N.C., part of the Northwestern Mutual network, and owner/president of Long-Term Care Insurance Connection: I work with colleagues in the area of retirement planning. Through the software we use, we are able to show what a long-term care need will do to someone retiring at age 60 or older and not needing care until age 80 or older. Even a relatively short-term care need of three years for one person, for example, can force a reduction of income by more than 50% for a couple with $2.5 million to $3 million they can devote to retirement income.
My clients tend to be aware of decreasing benefits and increasing premiums that have plagued much of the LTC market. They want to know how they can be sure the same will not happen to the plans they have purchased. I truly feel the “unrest” in the LTC insurance industry has been more detrimental to increased LTCI sales than any other factor.
Matthew D. Brotherton, CLTC, president of 1752 Financial Solutions, Richmond, Va.: More and more clients and prospects of mine fall into the Sandwich Generation. According to the Pew Research Center in 2010, just over 1 in 8 Americans aged 40 to 60 is both raising a child and caring for a parent. At some point these prospects and clients realize that they need to take care of themselves. It might be an article they read, a story on the news, a conversation with their financial planner or coworkers, or the fact that the benefit is being offered at work that prompts them to take action. These Sandwich Generation folks also don’t want to put their kids in the situation they are in with their parents.
Most of my long-term care business comes from working with employers. With the help of the human resource team, we develop an educational strategy to teach the employees about long-term care insurance. Over a three- to four-month period of education, many employees start to think twice about purchasing the product. They like the easy underwriting that can be available, the discounted premiums and the simplicity of purchasing a plan through payroll deductions. Depending on the insurance carrier used, the discounts can also extend to family members. That helps open up an additional source of clients as well.
This is a great time to be involved in the long-term care insurance marketplace. People who thought they could self-insure now think about LTCI. Financial advisors, attorneys and CPAs realize their clients’ assets are not as high as they used to be and now would benefit from protection with an LTC insurance policy. Also, brokers and those who did not work in the LTC insurance market are looking for ways to generate extra revenue.
If you realize your clients need long-term care insurance but don’t want to do it alone, don’t hesitate to bring in a specialist. Or bring in a junior agent to work your book of business and split business with the new agent. Either way, talk about the product — or hybrid — with your clients, note your file and help protect your clients against the unexpected.
Charles K. Hirsch, CLU, is a contributing editor to Life Insurance Selling. He conducts the Producer Roundtable features for each issue.