By Lindsey Kirk. GamePlan Financial
Tuesday, March 4, 2008

It’s no secret that people are living longer and the cost of medical care continues to rise. Long term care insurance (LTCi) is perhaps the most dynamic living insurance product to be developed. But despite the media coverage that this topic receives, many agents and clients still don’t truly understand the issue or how they can benefit from LTCi products.

As advisors and agents, we are on the front lines of this discussion every day. It is our responsibility to educate our clients about long term care and the benefits that LTCi products can provide.

Most agents, however, feel that long term care is a tough sell. When asked why, most agents say that clients simply don’t want to pay the premiums. The reality is that no one ever wants to pay insurance premiums.

So why are other types of insurance products easier to sell?

Familiarity and education. People know that they need life insurance. They know that they need auto insurance. And they know that they need home owner’s insurance. Just as agents were once challenged to educate consumers about the benefits of life, auto and home owner’s insurance, it is the responsibility of today’s insurance professionals to educate their clients about long term care insurance.

As an advisor, if you are struggling with your LTC conversations, ask yourself if you believe in the benefits of long term care insurance. Are you fluent in the topic and familiar with the products? Have you or someone you know experienced an event where long term care was needed? If you don’t believe in long term care policies, you will not be nearly as capable of selling it to your clients.

Learn everything you can about the topic and the products. LTCi makes sense for a growing number of consumers, and the number of clients who are viable candidates for LTCi will only increase. Many advisors and agents are excellent candidates themselves, and it only makes sense to purchase one of these policies if you’re presenting or recommending one for your clients.

Start with learning the fundamentals about why LTCi makes sense for your clients. Some of the industry’s most widely used statistics about LTC and the benefits of LTCi policies include the following.

• Consumers have a 50% chance of requiring long term care.


• Men on average spend a little more than 2 years of their life in long term care.


• Women on average spend a little more than 3 years of their life in long term care.


• The average cost of long term care is currently about $70,000 per person.


• In 30 years, the estimated average cost of long term care will be about $200,000 per person.

Compared to other types of insurance plans, LTCi premiums can look quite hefty. But look at what your clients will receive. A client can get a policy that will pay out more than $500,000 for just one-fifth of that in premiums. For those clients who say that they can afford to self-insure, the issue is not cost of purchase as much as risk mitigation, control and peace of mind so that their family or estate will not be adversely affected from possible LTC expenses.

Another discussion point that may come up when talking with your clients about LTC is a fear that they will never use the policy. Let’s hope that they don’t use their policy. Home owner’s policies aren’t based on the fact that a fire will ravage all of a client’s belongings, but rather the need to protect the client should their home be ravaged by fire. Clients should not feel like they have to use a LTCi plan or its wasted money. They should feel a sense of security and peace of mind in knowing that they are protected.

As an alternative, there are policies that offer return of premium or a death benefit. With those plans, if a client is lucky enough to not use their policy they can be assured that their beneficiaries will still be able to receive their premiums in the form of a death benefit.

One of the more concerning issues is when a client procrastinates in making a decision about LTC because they feel that they are too young or too healthy to start a LTCi policy. This perception may be driven by factors that include saving on premiums not paid. In reality, the older your client is the more they will pay for the same LTCi benefits. Waiting another ten years also could allow for an illness or ailment to set in that can place your client in a more expensive risk class or, worse, deem them uninsurable.

If your clients are working adults who can afford LTCi premiums, they can realize more favorable rates over the long-term by locking in their health status benefit now. Keep in mind that if your clients wait, three things will happen: the cost of care will increase, product pricing will increase, and your clients’ age-based premiums will increase.

Be prepared that some people will want to rely on the government to provide their LTC. Many clients are surprised to learn that in order to qualify for Medicaid, they have to spend down their assets. Ask your clients if they want to receive care from a government run program. Medicaid also does not cover in-home care and does not allow you to choose how and when you would like to receive your care. When most clients learn about the nuances of Medicaid compared to LTC programs, they tend to re-examine their choices. This can help your clients learn the differences between these two approaches to long term care.

It is not our role to convince people to purchase LTCi. It is, however, our responsibility as advisors and agents to prepare our clients for what lies ahead. Despite media recent media attention, many people are still largely uninformed about the product and how they can benefit from it.

Approach LTCi with the same care and diligence that you use with other products. Have the LTCi conversation with your clients and let them know what their choices are, even if they choose to do nothing. At best, we are providing enough accurate information so that our clients can make the best, most informed decision for their unique situation. And at the end of the day, if we’ve done that, we’ve done our job.

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