The Great Depression was triggered by restrictive trade laws, tight money policies, tax increases and a government unable to cope with the events that transpired.  Regardless of the economic theories of the day and unprecedented government intervention our nation did not begin to pull itself out of economic dysfunction until we entered our next great challenge in 1941; World War II.  Today?s credit and financial market debacle appears to be a result of easy credit being provided to people who were not qualified to receive it, the ?creative? packaging of sub-standard mortgage risk, and regulators who either would not or could not oversee practices destine to create the results we now see.

I believe that many of our current problems began when financial institutions such as banks, insurance companies, stock brokerage firms and investment houses were allowed to imitate the services and products that they provided consumers.  Supported by quasi-governmental agencies Fannie & Freddie Mac, this house of mirrors diminished transparency leading to our current circumstances. Mix in the ?mother?s milk of politics? (Jess Unruh) and now we have politicians, many of whom are operating under severe conflicts of interest, trying to fix the mess that they have created over the past decades. This isn?t a political statement; as we have painfully learned there?s plenty of blame to go around.

Is this the beginning of Great Depression II?  Far be it from me to be able to answer that question.  Like many Americans I?m watching my net worth diminish daily and I actually have a home on the market that I doubt will sell anytime soon.  Intellectually I know that panic is not the answer but it is hard not to worry.  This leads me to my primary point; how do we get consumers to purchase long-term care insurance as their nest eggs shrink, their businesses suffer and they worry about their jobs or making payroll.

The first answers are the easiest. If people were planning to use their income, assets or equity in their homes as their long-term care planning tool it should be obvious, once and for all, that they can?t always count on those assets to be readily available.  Regardless of the final bailout cost for this mess, if consumers believe the government will be able to take care of their long-term care 20, 30 or 40 years from now they are already suffering from some form of cognitive impairment.  We know that the government won?t be able to tax its way out of this problem; if people aren?t creating income or wealth there will be little to tax.

Another worry that consumers may have is the financial viability and stability of the insurance companies selling long-term care insurance.  This is a reasonable concern.  My response to this anxiety is the fact that LTCi is heavily regulated, particularly in California.  It is also one of the most scrutinized when it comes to pricing practices and reserving requirements.  While insurance companies do run into trouble, from time to time, history points to a fairly stable and responsible industry.

The final objection might be hardest to respond to; in times like these where do consumers find the money to pay for long-term care insurance? Regardless of whether you are making a business or individual sale the answer is to start by showing plan designs and benefits that may not be quite as ?rich? as you may be accustomed to.  First, you want to avoid sticker shock.  As I?ve written in the past, when it comes to selling long-term care insurance, it is easier to sell up than down. Second, solving part of the client?s long-term care problem today is the best solution in the environment we are currently operating in.  You will always have an opportunity to show a ?richer? plan after the client feels comfortable with the initial program that you present.

As I finish writing today?s Blog the U.S. Senate, in a rare display of bi-partisanship, has voted to approve the financial ?bailout? plan and now it heads to the House of Representatives.  It is likely to pass and become law.  We will all have a ringside seat to see if this will achieve the goals set for it and calm credit markets. In the meantime our job continues; provide high quality insurance products to protect people?s assets and income. Long-term care insurance continues to be an important element of this protection.

We continue to stand ready to help you reach long-term care insurance sales success.

Our last 8-hour LTCi certification continuing education classes are now scheduled.REGISTER TODAY by linking to our website.

barry@paradigmins.com

In the May issue of California Broker, the cover story and related article are all about ?group? long-term care insurance.  I certainly can agree with the author that employer sponsored long-term care insurance has a tremendous potential.  As you know, we?ve been talking about it for several years now, and as many of you can attest, sales in this arena are increasing monthly.  Some of the advice provided in the article actually has some value, particularly as it relates to the types of employer groups to target and the employee education necessary to successfully implement a plan.

But as my April 3^rd blog posting (sorry, I took a bit of a break) points out, pigeonholing employer sponsored LTCi as a 15+ ?group? offering limits the agent?s thinking and marketplace.  And, as earlier postings reveal, group products, particularly in the small employer setting, are not necessarily the best for consumers and clearly aren?t in the agent?s benefit either.  The fact is that the May California Broker article continues the misconception that employer sponsored long-term care insurance is just a ?group? sale.

There are a vast of wealth of employer groups with less than 15 employees; very successful companies with highly compensated owners and key personnel.  The same sorts of companies listed in the California Broker article; consulting firms, doctors? groups, law firms, engineer architects, financial firms and software professionals.  The author of this article ignores highly profitable employer groups, owned by Baby Boomer entrepreneurs, looking to protect their retirement savings and income and would relish the opportunity to let the government pay a good portion of the premium through the simple wonders of tax deductibility.

The key is three! An employer group with three or more participating employees can purchase high quality individual long-term care insurance products, from two of the best LTCi carriers in the industry (A+ rated) using modified criteria that eliminates 90% of the underwriting hassles inherent in individual long-term care insurance.  If the covered employees can answer ?NO? to a short list of simple underwriting questions the policies are issued; no attending physician statement, no phone interview; it makes long-term care insurance easier than ever.  What?s more, one company will offer simplified underwriting to spouses with ten covered lives.  This can be five employees and five spouses.

Do all of the employees need to be offered the same levels of coverage?  No, Mr. Big can qualify for a generous benefit package and provide low cost core benefits to two other folks in the firm.  And both of our multi-life carriers offer an employer sponsored discount that makes their competitive pricing even more attractive.

How much better are individual long-term care insurance products than group?  As I?ve written in the past, individual products are owned by each insured, therefore, if they leave their employer, portability is not an issue.  If the insured chooses to continue paying the premiums the policy is theirs.  Also, individual policies are likely to be more rate stable than group products.  And lest you think group LTCi premiums are less than individual, think again! In many cases, particularly after age 50, individual premiums are less than group.

And you, the agent, make out much better with multi-life long-term care insurance. Individual first year commissions are three to four times that of group and renewals and service fees are fully vested.  No other agent can come in the back door and take customers away from you. Both you and your clients win big with individual multi-life long-term care insurance.

There is a place for true group long-term care insurance but it is rarely the call for smaller employer groups, particularly those under 250 employees.  Look to multi-life long-term care insurance before you make the move to group.

Please reply to my Blog by clicking on ?comments? below or by writing me directly atbarry@paradigmins.com.

Changing demographics, adjustments in long-term care insurance pricing practices and more difficult underwriting beginning in 2004 turned many producers away from LTCi and they migrated to term life, annuities and Medicare Advantage products.  Let?s face it, why fight the fight when familiar or transactional sales are more easily at hand.  As sales plummeted, some insurance carriers began looking at worksite and or the small group market as the next great frontier of long-term care insurance sales.

The notion of working the worksite or group long-term care insurance market doesn?t appeal to all the people.  Financial planners and those specializing in individual life insurance and estate planning do not see themselves in the group business.  Medical insurance producers struggle with adding new lines of business to their existing group clients because of the price increases and the ever changing complexity of their core business.  In many regards, those of us who consider ourselves ?marketers? miss the forest for the trees.  The simple fact is that the small group or multi-life LTCi sale is not a group sale at all; it is merely the logical next step from the corporate carve-outs of days past.

In the first era of the corporate carve-out sale, most agents settled for writing a policy on Mr. or Ms. ?Big?.  If they had a partner and they each had a spouse so much the better.  For the most part, the premiums were tax deductible and the benefits always tax free. If the broker tried to get the owners to purchase something on a key employee or two, the response was usually negative.  The corporate carve-out sale, above all else, was all about the business owner.

Now that multi-life long-term care insurance is upon us, we can provide small business owners, with as few as three covered employees, simplified issue top quality long-term care insurance at discounted rates. The advantage is in the underwriting. No more waiting months for an attending physician?s statement and a problematic underwriting decision.  If the employer and other covered employees can answer ?NO? to a short list of questions, they will have their policies in a matter of weeks.  Commissions follow closely behind.

And owners can still lavish themselves with significant benefits while providing a few selected covered employees with a lower cost core program.  This is not group insurance so the employer can determine eligible classes for coverage.  The key is THREE! With this requirement met, the agent has a world of possibilities before them.  The financial planner/life insurance agent only interested in the owner and maybe one or two key employees can stop here. The group producer can go forward and offer discounted individual long-term care insurance policies to the rest of the employees, also on a simplified issue basis.  At 10 covered lives, one carrier will offer simplified issue on spouses as well.

Simplification is primary. With ?NO? answers to the simplified health questions, the agent doesn?t have to sweat a decline which could create difficulties with their important client. Depending on the broker?s focus, the multi-life sale becomes either an extension of the benefit program that they have built and managed for their employer group and or much needed retirement income protection for their individual client. Either way, multi-life, simplified issue long-term care insurance is the shortest distance between two points, creating valuable asset and income security for your clients and multiple streams of vested renewal commissions for the agent.

Call us today to see how easy and profitable multi-life long-term care insurance really is.  You don?t need to be a LTCi expert to help yourself and your clients.

REGISTER TODAY FOR OUR APRIL 29, 2008 PRUDENTIAL LONG-TERM CARE INSURANCESUMMIT.  MEET PRUDENTIAL?S TOP GUNS AND LEARN THE LATEST LTCI SALES TECHNOLOGIES.

Click Here For All The Details

barry@paradigmins.com

Steve went out to see one of his existing clients.  He?s been talking to this gentleman about long-term care insurance for the several years and each time he has raised the topic the client says, ?I?m worth more than $5 million dollars, why do I need long-term care insurance?? Being the not so shy guy, Steve said the following; ?Do you have a $20 bill?? The client said yes, pulled his money clip out of his hip pocket, peeled-off a $20 and handed it over.  Steve then proceeded to tear the $20 bill in half and handed one of the pieces to his astonished onlooker.

Incredulously the client sputtered ?what are you doing?!  Steve then said ?was that painful? Now think how painful it will be when you have to write a check for $100,000 per year for your long-term care.?  Steve finally made this man feel the pain with a simple demonstration. His next line was classic.  He said to his client ?now let me show you how you can have a partner who will write the $100,000 check for less than ten cents on the dollar.?  The client said ?yes, get me a quote, and get it now?.

That was insight number one.  Revelation number two is that Steve is learning to say less and he?s enjoying it more.  He has come to overcome his need to explain every nook, nuance and nicety of the long-term care insurance products that he is talking to prospects about.  It isn?t easy for him, but he?s learned that less is more.  He?s selling the piece of money and more importantly the peace of mind that long-term care insurance provides consumers.

Most wealthy people got that way by leveraging their money.  It you can reach their pain and then show them, as Steve did, that they can get 100 cents for ten or less they?ll get it.  Don?t pre-suppose that they?re not interested because they can conceivably self-fund and keep after them.  They won?t consider buying until you knock them out of their comfort zone and they won?t do either unless you ask.

TIME IS RUNNING SHORT TO GUARANTEE YOUR SEAT AT OUR APRIL 29^TH

PRUDENTIAL LONG-TERM CARE INSURANCE SUMMIT

Two Hours Continuing Education

Sales Ideas & Technologies That Work

Breakfast & Validated Parking

Special Tuition For AHU Members
GO TO OUR WEBSITE FOR DETAILS & REGISTRATION

By the way, I forgot to ask Steve if he returned an in tact $20 bill to his client.  I’d wait until he takes the application!

barry@paradigmins.com

Let me reiterate what you should always advise your clients; that all long-term care insurance is guaranteed renewable. This means that as long as the insured pays their premiums in a timely manner the insurance company cannot cancel their contract for coverage.  It does, however, allow for insurance companies to increase premiums for groups of policyholders or series of policies if they believe that the rates they are charging are inadequate.  The fact that an insurance company has not raised premiums in the past is totally irrelevant and always has been.

Rate stabilization is a regulatory process that requires the long-term care insurance companies to subject their pricing on specific policies sold, to independent actuarial review.  In order for the California Department of Insurance to accept pricing on a specific policy the independent consulting actuary and the home office actuary must sign an actuarial memorandum that states that they believe that the premiums being charged are sufficient under moderately adverse conditions.

This sign-off is a serious matter. Actuaries, both consulting and home office, take this responsibility to heart because not to do so would be a terrible ethical lapse and could cost them their careers.  I?ve known home office actuaries to withdraw existing long-term care insurance products from the marketplace due to what they perceive as pricing issues over strong objections from other company management.  In many regards, the home office actuary rules the roost!

Now despite the best efforts of the Department of Insurance, independent consulting and home office actuaries, there is always a possibility that there will be unforeseen claims or other issues that might cause the need for a request for rate increase on a specific block of business.  In this event, the Department of Insurance would require another independent consulting actuary to work with the insurance company on a new rate filing.  The nature and size of the rate increase would dictate the California Department of Insurance?s action both from a rate increase perspective as well as penalties, if any, imposed on the insurance company.  I can tell you that in my discussions with home office actuaries that the current regulations have created an environment where the companies play their assumptions very conservatively.  Also, many of the overly aggressive pricing practices of earlier years are a thing of the past.  Rate increases don?t make anyone happy and this includes the insurance companies.

Allow me to put long-term care insurance rate increases into the context of other forms of insurance.  Both auto and homeowners insurance can be non-renewed each policy anniversary at the discretion of the company.  We also know that the premiums on these forms of coverage increase on a regular basis.  Medical insurance premiums also have a tendency to increase annually.  Term life insurance policies generally have level premiums but at some point, in most cases prior to death, the policy terms out or the renewal premiums become prohibitive.  Non-can disability insurance benefits go away after a time as well.

Finally, let me just mention that the in-force premium increases that we have seen from insurance companies still in the market have been very moderate.  Additionally, when we compare the premiums on an in-force policy that has experienced even multiple increases to a new policy we find that the latter, issued at the insured?s attained age, is significantly more expensive than staying the course despite the increase.  In the end, most policyholders stick with their existing policy.

So while I do understand consumer angst over this issue the fact remains that long-term care insurance premium pricing is heavily regulated and when taken in the context of other coverages that most people purchase it may be subject to a greater level of regulatory oversight than most insurance products.

Coming Soon!  Details on our exciting April 29, 2008 continuing education and sales training meeting featuring Prudential Long-Term Care; watch our website or contact your BJFIM/Paradigm Marketing Representative for all of the details.

barry@paradigmins.com

Let me start by acknowledging the obvious.  That is, that the insuring clause (definition of disability) in an own occupation disability policy is inherently different than that found in a qualified long-term care insurance policy.  The former triggers benefits when the insured cannot perform the duties of his/her occupation and the latter when they can no longer care for themselves due to an inability to perform activities of daily living or they suffer a severe cognitive impairment.  One could say that the definition of disability in a long-term care insurance policy is closer to that of total disability.  Regardless, it is clearly function driven as opposed to occupation based.

One of the points that I made in the article was that as a person?s life changes and they move towards retirement the nature of their professional and business lives may change, and in fact, the disability policy that they purchased because they were a trial attorney or a brain surgeon may have become obsolete.  The risk that was being indemnified for 20 years ago, having a steady hand or being able to attend a court trial, may no longer be pertinent. These professionals may already be consultants or have moved onto other aspects of their livelihoods where proving that they can?t perform a certain specialty or aspect of their business could be difficult.

The larger point that I tried to make in the article, however, was the basic fact that as time passes without a claim, disability insurance policies actually have a diminishing dollar value and an increasing cost per unit of coverage.  For example (and I quote from the article) ?when your 37-year-old client purchases a ($5,000 per month) policy that pays benefits to age 65, they are getting (or starting off with) a protection package worth $1.7 million (not adjusting for COLA in the event of claim).  But it is only worth about $600,000 when they reach age 55 and $300,000 when they reach age 60.?

There are several points that should be considered here:

1. Unlike long-term care insurance the cost of living (COLA) adjustment in a disability income policy does not begin until the insured goes on claim.  Therefore the policy actually loses value unless they suffer the insuring event sooner rather than later.
2. If our 37-year old pays $3,000 per year for his disability insurance his/her initial cost is .00176/thousand ($3,000 divided by $1.7 million).  If they don?t go on claim until age 60 the cost per thousand will be .01/thousand ($3,000 divided by $300,000). Therefore, the annual cost per thousand of benefit at age 60 is nearly 18 times more than at the initial issuance of the policy.  I understand that this example does not consider that the COLA rider engages in year two of the insured going on claim. However, even if this insured were to go on claim at age 60 a 5% COLA would have minimal impact on the actual benefit payout since the insurance company is only on the hook for five years.

Long-term care insurance purchased with a 5% compound inflation protection has an increasing value from year two of policy issuance and thus a decreasing cost per thousand of benefit as time passes. A 55-year old client who purchases a $365,000 pool of money policy ($200 per day times 5 years) for about $3,000 per year today would have a benefit pool at age 83 (likely age of claim) of $1.6 million.  This cost-to-benefit equation is almost 180 degrees opposite that of disability income protection.  What is also starkly different is that as the client reaches their 80?s the likelihood of making a claim and using their policy is nearly 50%; far greater than the probability of being disabled prior to age 65.

One other quick point I?d like to emphasize before I wrap-up this posting:

Benefits from qualified long-term care insurance are always tax-free and the premiums are tax deductible (all or in part) for business owners.

This isn?t the case with disability income insurance.

AGAIN, I?m not suggesting that the disability income protection that you?ve been selling all these years has been the wrong thing or that you should now go out and replace all of the DI policies that you?ve sold with long-term care insurance.

WHAT I AM TRYING TO GET YOU TO DO is think about the value proposition of long-term care insurance in light of other policies that you?ve sold over the years so that you can better explain it to consumers.  Your job of protecting income doesn?t stop when your client retires. The risk changes, the nature of disability changes and therefore, so does the sort of insurance protection ought to be purchasing.

If you?d like a copy of my original article, please email me at barry@paradigmins.com.

The AHIP/Life Plans study reinforces a theme that we have been hammering on for the last several years here at BJFIM/Paradigm; that non-buyers are looking for clear answers to questions they still have about long-term care and long-term care insurance.  The fact that they underestimate actual and future costs coupled with confusion of how and under what conditions policies pay benefits perpetuates the notion that long-term care insurance costs to much.  Consumers who understand the risk they face purchase and keep their policies in record numbers.  This means that we need to redouble our efforts to communicate the actual facts in new, better and simpler ways.

Factors that would make non-buyers more interested in purchasing long-term care insurance include government programs that would extend payment for care beyond the policy limits. We call these Partnership Plans and they are available right now in California. The concern that premiums may go up in the future also troubles non-buyers.  While non-cancellable products do not currently exist, the rate stabilization regimen in place in most states, and particularly in California, provides consumers with the assurance that companies are pricing their products responsibly and that the regulators are looking over their shoulder.  Finally, above the line tax deductibility and the ability to use qualified plan funds for premium payment without tax or penalty would go a long way towards moving non-buyers to ?YES? . Talk to your Federal and State legislators about this issue.  If they truly want a free market private enterprise solution to our looming long-term care crisis, encouraging people to take personal responsibility for their own needs through tax incentives would, in the long run, be the most cost-effective to get consumers to do so.

Educating the public about their need for long-term care insurance is the key.  LTCi premiums are not a ?throw-away? so people must understand what you are asking them to pay for. BJFIM/Paradigm can help you with your efforts in this regard.  Susan has created a series of direct marketing letters for existing prospects and clients who have already said ?no? or ?maybe? to long-term care insurance as well as a number of letters to those who may be new to the topic.  If you are interested in using them, email Susan today atsusanb@paradigmins.com.

Finally, your client?s education starts with your own! We have scheduled our Q1 LTC-2004 and California Partnership 8-hour certification classes. Both Sandi Miley and I are updating our respective courses to bring you the latest in long-term care ideas, thoughts and technologies. Click on the ?classes & webinar? link at the top of this page to get the details. Space is limited so register today.

barry@paradigmins.com

What is it that Baby Boomers don?t understand about the following true and declarative statements?

1. Medicare does not cover the vast majority of long-term care services; and
2. Medicaid (Medi-Cal) is available only to individuals with low assets and income.

All one needs to do is log onto the following page on the U.S. Department of Health & Human Services website (Long-Term Care) and they can read the following:

Medicare doesn?t pay for long-term care. Medicare pays only for medically necessary skilled nursing facility or home health care (skilled care at home). However, you must meet certain conditions for Medicare to pay for these types of care. Most long-term care is to assist people with support services such as activities of daily living like dressing, bathing, and using the bathroom. Medicare doesn?t pay for this type of care called “custodial care”. Custodial care (non-skilled care) is care that helps you with activities of daily living. It may also include care that most people do for themselves, for example, diabetes monitoring.

And

Medicaid is a State and Federal Government program that pays for certain health services and nursing home care for older people with low incomes and limited assets. In most states, Medicaid also pays for some long-term care services at home and in the community. Who is eligible and what services are covered vary from state to state. Most often, eligibility is based on your income and personal resources.

So why are Americans confused about this?  Even the government isn?t confused!  In fact, they are telling people on their website that they need to handle their long-term care planning needs pretty much on their own.  Even if the government did pay for our long-term care, which they don?t, are these the folks we want caring for us when we can least care for ourselves?  Think DMV!

Terry Savage, a financial reporter for the Chicago Sun-Times and a nationally recognized advocate for long-term care planning says it?s all about DENIAL. In an October 2004 article she states:

I’ll say it again. The next great financial crisis facing our retirement assets is not another bear market. It’s the cost of long-term care. A new study released this week by Met Life shows that the cost of care in a nursing home now averages $70,000 a year!

Savage cites a MetLife Mature Market Institute study done a few years ago that shows that only 2% of those Americans surveyed scored B or better on a long-term care and long-term care insurance I.Q. test.  So let me test your I.Q.; whose job is it to educate Americans regarding this topic and to shake them out of their complacency and denial?

A.      The government

B.      Insurance agents

C.      Financial advisors

D.      All of the above

Next question; who wins if Americans take responsibility for their long-term care planning?

A.      Americans

B.      Insurance agents

C.      Financial advisors

D.      Future generations of Americans

E.       All of the above

Final question; what?s the common denominator between the two questions above?

A.      Insurance agents

B.      Financial advisors

C.      All of the above

Like many of you, I?ve been in the insurance business a fair amount of time; 31 years.  In all these years I?ve never met anyone who wants to buy insurance unless they have been touched by an angel or it is already too late for them to qualify.  Additionally, when it comes to all forms of voluntary insurance coverages, the vast majority that purchased had the need explained to them in ways that they understand it and probably more than once.

If you are not talking to your clients over the age of 45 about long-term care planning and how long-term care insurance is the most cost-effective way to take care of the problem you need to be. Even if after you broach the topic you turn it over to a specialist who handles the details you need to keep long-term care planning front and center. If you have spoken to your clients about this and they?ve put you off or don?t want to deal with it, keep trying.  It?s our job and someone needs to do it.

In coming weeks I will be sharing and reviewing some of the latest intercompany long-term care experience data from the Society of Actuaries released yesterday. Its dry stuff but important to know.  Stay tuned.

barry@paradigmins.com

If Opdyke wanted to be helpful, he may have started by saying that yes, policies from the late 1980?s and through the mid-1990?s were, in large part, underpriced for two primary reasons. Some companies were irresponsible in their pricing practices.  As with many accident and health policies certain insurance carriers will try to capture market share with low pricing and easy underwriting knowing full well that premiums will need to be increased in the foreseeable future.  Agents who sold these policies thinking that premiums wouldn?t be increased should have known better.  Consumers who purchase long-term care insurance based on price alone should be more prudent; this product is a financial risk management tool not a gallon of gasoline; one generally gets what they pay for.  The real damaged insureds are those that bought a policy based on deceptive promises and or the high pressure tactics employed by a few insurance companies and their distribution that specialized in selling long-term care insurance with dubious pricing and underwriting practices.

In many cases, however, there are legitimate reasons why some policies are experiencing rate increases:

1. People love their long-term care insurance policy which means more have kept them in-force for longer than is typical of most insurance plans.  Low lapse rates (voluntary and involuntary) have created upward pressure on in-force premiums.
2. Many of the policies in question were designed in an interest rate environment that is far different than it is today. Our current extended low interest rate atmosphere means that insurance companies are not earning the anticipated returns on the large reserves that long-term care insurance requires.  A 25 basis point difference in this pricing component over a period of time can have dramatic impact on rate stability.
3. Benefit utilization has been higher than expected.  People want care at home and thus they tend to claim earlier.  Expect assisted living claims to place additional upward pressure on in-force and new business pricing.

So Mr. Opdyke is only partially correct in his adjective usage.  Some, not all policies were ?wildly underpriced? and the fact is that few policyholders are facing ?routine? rate increases. Beside that, after all of these years I?m not sure where anyone got the idea that long-term care insurance premiums wouldn?t or shouldn?t go up.  With the exception of whole life insurance (and now universal life with secondary guarantees) I would like someone to identify an insurance product where premiums don?t increase or benefits are not changed, reduced or disappear.  The fact is that even when in-force LTCi premiums are increased, insureds generally keep their policy which is a testament to their perception of value of what they have purchased..

Finally, if a policyholder owns a long-term care insurance plan from a company that has legitimate reasons for raising in-force rates, a case could be made that the insureds received a ?time value of money dividend?.  First, they have enjoyed lower than market premiums for a number of years. Second, when adjusted for inflation, the premium increases they are experiencing are generally quite moderate. Therefore, they have had a pricing advantage. Again, I?m not trying to soft-peddle or downplay the negative impact of in-force premium increases, particularly for people on fixed incomes. However, there are more facets to this issue than Mr. Opdyke has presented in his brief, broad-brush treatment.

One more point of contention; Mr. Opdyke alludes to ?more affordable bare bones policies?.  I would like to know which one?s he is referring to.  As most of us know, premiums on new policies have been consistently going up over the past five years as insurance companies have been adjusting to the new realities and the more stringent regulatory environment of rate stabilization.  Additionally, as with medical insurance, the states mandate certain benefits making ?bare bones? policies non-existent. With this in mind, the notion that someone who purchased a policy ten years ago could find one that is less expensive today, particularly taking into account that they would have to adjust the benefit package for inflation is a fantasy.

That being said, as I recommended in my Blog posting of October 26^th, I do think it is a good idea to review an insured?s long-term care insurance program periodically.  I?m not suggesting replacement, but I am urging that we provide our long-term care insurance clients with the same policy review regimen that we generally suggest for other lines of business.

Thanks again for asking me to comment on this article.  I hope this will help you respond to your client?s and prospect?s questions.

This will be my last post prior to Thanksgiving.  I hope that you and your families have a great day and a safe and relaxing holiday.

barry@paradimgins.com

If an American today retires at age 65, they have an eighteen year life expectation.  This means that fifty percent are likely to live beyond age 83.  In order to generate $1,000 of retirement income for 216 months (12 x 18 = 216) our 65-year old would need to have about $133,000 earning 6% after taxes.  In month 217 there would be no remaining principal so hopefully our retiree is lucky enough to be in the first half of 77 million Baby Boomers that run out of money the exact day they move onto the nether world. When Gen X & Y adults make it to retirement their life expectation is likely to be even longer.

Other surveys indicate that most Boomers don?t expect their lifestyle or spending to diminish when they retire.  So let?s say that our client decides that they can live on $5,000 per month when they reach age 65.  Carrying the previous example forward our retiree would need to have $665,000 chugging away at 6% after taxes just to keep them going until age 83. This plan again, would exhaust both principal and interest.

Ooops I forgot to mention one other nagging bit of information.  $5,000 tomorrow won?t be what it is worth today.  At a 3% rate iof nflation $5,000 will only be worth about $3,000 in 18 years (age 83).  So even if our 65 year old, who expects to maintain their lifestyle after retirement, earns 6% after taxes (twice the rate of inflation) and plans to run out the clock exactly on his/her 83^rd birthday they are still likely to live a number of years past their money.

So is this what Dennis Hopper is talking about in those commercials where he exhorts us to live life on our own terms?  This plan doesn?t leave a lot of room for error or living past your 83^rd birthday for that matter.

Need I ask the obvious question?  What happens to this financial plan in the case of an emergency?  Say the plumbing needs to be fixed or the family dog needs open heart surgery. Where will the money come from?  And since 30% of our future retirees mistakenly think they already have long-term care insurance (AARP) and the other 70% think they?ll never need long-term care (my statistic) then why bother protecting your nest egg?   After all, why worry about a $14,000 per month (5% inflation adjusted to age 83) long-term care event that won?t happen to me, particularly when I plan to die the day before all of my retirement money runs out?

If an insurance or financial planner thinks that their work is done when they place their client on a hypothetical trip towards retirement nirvana they are wrong!  They haven?t even done half the job.  Presuming that they can properly guide their clients through the ups and downs of investment savings and planning the wealth that they?ve helped them create is at mortal risk because if either spouse has a long-term care event (very likely) their monthly retirement income will be devoured.  Next goes investments that are throwing off income and finally the home, where everyone wishes to receive care, is at risk.  Then they (and their dog) can move in with their Gen X or Y children!  God forbid they should live past age 83!  For half of us that?s when the real fun begins!

Long-term care insurance is the NOW insurance product for the ME GENERATION!  Add an (L)to your client?s 401(k) plan and a LTC to their IRA to make sure that the engine of wealth they are building today is protected against the nearly inevitable long-term care event of tomorrow.

barry@paradigmins.com