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Life Health > Long-Term Care Planning

Not your father’s LTCI

By Barbara J. Stahlecker

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Probably no insurance product has gone through more changes and variations than long-term care insurance (LTCI).

Where once clients would routinely buy lifetime coverage with a 5 percent compound cost of living adjustment (COLA) rider and limited-pay policies were all the rage, today the landscape has changed.

Most policies sold have a benefit period of three to five years and the 5 percent compound COLA rider is all but extinct. Limited-pay policies are history. Rates have gone up, many carriers have exited the market, and those that remain have tightened up on underwriting so hard many agents just gave up trying to write LTCI.

But all is not doom and gloom, if you have the right tools in your briefcase.

Even though traditional LTCI is getting tougher to sell, there are products entering the marketplace that can provide coverage for your client. These policies can cost much less than traditional LTCI and can be issued without all the underwriting hoops.

See also: EBRI: Real LTC spending

In fact, with so many products available you shouldn’t have to walk away from any meeting without an application.

Let’s take a look.

Weighing the options

Traditional LTCI

This is still the cornerstone of the industry. However with carriers leaving, increasing rates, strict underwriting standards, long underwriting times and special continuing education requirements, many agents shy away from it.

Because of these trends, the average age of the insureds is getting lower, and the policies are smaller. Also, with the trend towards gender-based pricing, many people who could have been clients just five to 10 years ago are finding themselves priced out of being able to afford a policy.

Hybrid LTC

These products are a combination life insurance and long-term care (LTC) benefits or annuities and LTC benefits. They’re perfect for the client who says, “What if I pay into this policy for all those years and never use it?” Unless your client has figured out a way to live forever, someone, somewhere is guaranteed to get a benefit of some sort.

See also: The little annuity product with big buying potential

The downside is that the client usually has to have a significant chunk of cash to put into one of these, which takes it out of reach of the “average” client.

Short-term care

A short term care (STC) policy offers coverage for one year or less.

See also: Have you asked your Medicare plan clients about STC?

With just a handful of carriers currently in the STC market, they can be tough to locate. Naturally, STC is more affordable than traditional LTCI, and the underwriting is much easier than for traditional LTCI. There are usually just 10 or 11 health questions on the STC application.

Some STC carriers do a phone interview; others do not. Some do a cognitive interview; some do not. Some carriers will care if the client has been previously declined; others do not.

When you consider that the largest LTCI carrier says that 49 percent of its claims are for less than one year, this coverage becomes very relevant.

Guaranteed issue home health care 

Yes, Virginia: There is such a thing.

With just a couple of qualifying questions (Can you handle all of your activities of daily living (ADLs)? Are you currently in a nursing home?), these policies can be a God-send for those who can’t qualify for any other coverage.

Their benefits are limited in scope, but you are still giving your clients something they didn’t have before you walked in the door.

High-risk long-term care 

Personally, I only know of one carrier in the market that is actively pursuing high-risk clients. It’s not in every state, and it’s not “A” rated by A.M. Best, but it has an excellent track record, and many products to choose from. For the client who has complications from diabetes, early Parkinson’s or early multiple sclerosis, it’s an option the client otherwise wouldn’t have.

Your clients rely on you to shop the marketplace and look out for their best interests. So whether your client is young or old, rich or poor, healthy or not, there is a product for them. Some of these products will become mainstream in just a few years. You’d be smart to get ahead of the curve now.

Pick up the phone and call all of your clients who were previously declined and say “I need to come and see you right away. There’s something new I think you should know about.” You’ll soon become your own best lead generator.

See also: The noblest profession

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