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Explaining LTCI rate increases

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Q. I know that as part of the client appointment, I need to explain about the possibility of long-term care insurance (LTCi) rate increases — why they have occurred in the past and the future probability. How do you handle that conversation so that the prospect understands the reasons and still feels comfortable buying a policy?

A. First, see last’s month’s columnThere, I focused on the reasons for the rate increases, with information provided by actuary Jim Glickman. This column gives the version of the information I use when explaining this topic to clients.

See also: LTC Almanc, part 1 and LTC Almanac, part 2.

The topic of rate increase must be mentioned, particularly because LTCi applications include a list of rate increases that have occurred for that company. So, I’d rather have the conversation during the initial presentation instead of having it when focusing on completing the application and solidifying the sale.

The result: I have never lost a sale because of the rate increase issue. And, by dealing with it during the client presentation, it becomes a non-issue and does not interfere with closing the sale.

My client presentation is structured so that I broach the topic of rate increase after I have had an in-depth conversation about the various benefits that determine the policy premium amount and before I switch topics to explain selecting a carrier and the application process. 

I start by explaining the words “guaranteed renewable.”

“These policies are guaranteed renewable, which means that as long as you continue to pay the premium, the insurance company must renew the policy. However, that does not meant that there can’t be rate increases. You should expect some rate increases over the life of the policy.

“But, Mr. and Mrs. Client, this is not like your car insurance or health insurance, where you see a lot of rate increases. This product is different. But do expect some rate increase over the life of the policy.”

If I’m asked about how frequently rate increases will occur, I base my answer on the age of the clients. If the clients are in their early 70s or late 60s, I say there may possibly be two or three increases. If the clients are younger, I don’t provide an exact number. I just say I don’t know.

If the clients have no more questions, I then move to the next topic in my presentation, which is explaining other benefits that are included in the policy, such as waiver of premium and care coordination.

If the clients do ask more questions about the reasons for the rate increase, I explain that the rate increase must be approved by the state department of insurance. I will also provide the information discussed in last month’s column, starting with the comparison to Medicare.

What I plan to do now is to send the client who does have additional questions a copy of last month’s column. 


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