Today’s pre- and post-retirees are a savvy bunch. They’ve lived through the upheaval of the ‘60s, the height of the Cold War, multiple economic recessions, ups, downs and all-arounds. Most of them raised children, put them through college and now have the greatest reward of all: grandchildren.
It should come as no surprise, then, that this group that has “seen it all,” demands value and is hesitant to pay a large annual premium for an insurance “unitasker.”
If you are a “foodie,” you know the expression. But for the uninitiated, “unitasker” is a term made famous by a well-known food commentator. It describes a kitchen utensil or machine that can only do one thing. In the cooking world, a “multi-tasker” is preferable since it can do many tasks and represents a better value for the money spent. It might be obscure, but it is a great analogy in the long-term care insurance world.
Traditional health-based long-term care insurance (LTCI) has been around for decades. For many clients it can be a great fit. For what it does, it does very well. The reason it is such a hard sell, though, is that it only does one thing. LTCI only provides long-term care benefits. The same benefits that your clients believe they will never need.
It does not matter what the statistics say. It is human nature to believe “it won’t happen to me.” Most people (even those who have had family in a long-term care situation) believe it will never happen to them. That’s just one of the challenges of trying to sell LTCI today.
So we are left in the unenviable position of asking clients for a sizable annual premium, in perpetuity, to pay for a product that only protects against a risk they believe will never happen. Therefore, it’s a difficult case to make to a client that he or she should spend a considerable amount of his or her retirement money funding this “unitasker.”
Or maybe not…
A long-term care “multi-tasker”
There are long-term care (LTC) products available that can do more and provide your clients with benefits beyond long-term care while avoiding annual premiums.
Asset-based LTC is a concept that has been around for quite a while and, as traditional LTCI sales decline, these alternative solutions continue to expand. You may have also heard them described as “combo” or “hybrid” products but, in short, asset-based LTC consists of life insurance and annuity products that can provide LTC benefits.
By taking time-tested concepts and adding an LTC component, asset-based LTC offers clients a number of attractive features. First, because of the permanent life insurance or annuity foundation, these products accumulate cash value that can be surrendered should the product no longer fit the client’s needs. Second, life insurance-based products provide a death benefit to heirs should care never be needed, and annuity solutions provide their accumulated cash value. Finally, there are LTC benefits should most forms of care become a need. Many will recognize this value proposition as similar to the old life insurance “live, surrender, die” presentation method. The idea being benefits are there whether you live, surrender the policy or die.
Several options to choose from
Life insurance and annuity asset-based LTC products differ in their structure and benefits. Life-based products provide immediate leverage in the form of a death benefit that can be accessed for qualifying LTC expenses. At death, any unused benefits pass to heirs income-tax free, and LTC benefits are also typically income-tax free. Annuity-based products have benefitted greatly from the effect of the Pension Protection Act legislation. If certain criteria are met, withdrawals from the annuity are income-tax free for qualifying LTC expenses. Annuity-based products provide accumulation for future LTC expenses rather than a death benefit, with unused cash value passing to heirs at death.