There is no taking a vacation from history. Our current economic malaise and uncertainty is only made more difficult because many Americans thought that we lived in an ever expanding universe of prosperity driven by excessively low interest rates, cheap consumer goods and low cost energy. We’ve learned differently over the last twelve months and may have a few more hard lessons heading our way.
In light of this economic uncertainty individual consumers and small business owners are rightly concerned about keeping their jobs, maintaining their businesses and lowering their overhead. It hasn’t gotten any easier to start the long-term care planning “conversation”. However, your client’s problem hasn’t gone away. If they think it has, they are taking a vacation from reality. In fact, the investments and home equity they may have been relying on to pay for their long-term care have evaporated and may or may not be back when they need it. There are now more long-term care planning solutions available then ever before; our goal is to provide you with the products and tools that can make the process easy for you and your clients.
The long-term care insurance “game” has been changing and will continue to do so in more radical ways. The day of most consumers being able to afford lifetime benefits is a distant memory in the rear view mirror. The re-pricing (that means UP!) of compound inflation benefits is now upon us. Utilization of assisted living benefits will soon begin taking their toll on claims experience forcing a rethinking of that benefit and cost. Finally the Pension Protection Act of 2006 and the proliferation of accelerated benefits for chronic illness will create new sales opportunities of life insurance and annuity products; combos so to speak. The faint of heart will avoid the changes or stop talking to their prospects and clients about long-term care planning. The rest of us will take the challenge, learn some new tricks and go forth and sell. Which category will you fall into?
There are three simple steps to making the transition but even before that there’s a “pre-step” so to speak. That is that long-term care planning can no longer be product centric. In fact, it must be life stage focused. You see, people of all ages must contend with the notion of planning for an unforeseen chronic illness. Long-term care planning can no longer be viewed as something that happens to older people. Folks of all ages suffer from serious accidents and illnesses that require care that isn’t covered by medical insurance. Yes, I know that the proliferation of long-term care happens towards the end of life but how lousy would you feel if you sold a life insurance policy to a 35-year old father without an accelerated benefit rider for chronic illness who, after a serious auto or skiing accident, can no longer care for himself?
It is all about life stage. The appropriate sale to a 25 to 45 year old would probably be a UL or term life product with an accelerated benefit for chronic illness. The middle age individual (late 40’s to early 60’s) would still want some amount of traditional long-term care insurance. It ultimately provides the most clucks for your chronic illness bucks. The older client, mid 60’s to late 70’s, may wish to consider repositioning some of their underperforming investible assets, that they’ve set aside for the long-term care emergency, into an asset based solution such as a single premium life + ABR for chronic illness or a Pension Protection Act annuity + qualified long-term care benefit rider. Smart insurance professionals will learn how to coordinate and “stack” these various coverages to best serve the consumer.
It’s been said that every great presentation can be distilled into a three step process. Here’s my suggested approach to getting clients started on the long-term care planning path:
- Identify the risk. Everyone’s got one, young, middle aged and older. Illustrate a reasonable long-term care scenario for the age of the client that you are talking to. A client doesn’t know that they have a problem until you describe it to them. You can use our “Pool of Money” software or any tool that allows you to model the potential event. Just give them a planning target to shoot at. Something is better than nothing.
- If the client recognizes that they have a problem, suggest an age appropriate solution. Keep in mind that what you are suggesting today will only be part of that solution. Needs and products change. Just like people purchase life insurance more than once in their lives coverage for chronic illness will no longer be a one shot approach.
- Review and keep reviewing your client’s need to leverage the risk of chronic illness. It’s all about life stage and the client’s inclination towards indemnifying for the risk. Some will want some and other will want none.
There’s one more thing. You will need to lead with questions not answers. If your client is concerned about this risk, regardless of their life stage, it will be appropriate for you to ask for some basic information about their finances; income, net worth and the amount and sorts of investible assets is essential particularly when you are working with clients in the later stages of life. If you insist on throwing product choices at the client without doing your homework they are unlikely to buy. Long-term care planning, with insurance, will continue to be a rifle shot not a shotgun sale.
Resilience is the key to surviving and thriving. If I had my druthers I’d like to be back in 2001 selling traditional LTCi with lifetime benefits, 5% compound inflation and 10-pay premiums. The sad fact, however, is that we as an industry, have only cracked the code of long-term care planning for less than 10% of the folks who need it. This isn’t an impressive scorecard. If we care, we need to do better for our clients and ultimately ourselves. So into the breech I go; care to join me?
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