Long Term Care and Disability Insurance

November is Long Term Care Awareness Month

Presented by Tim Dreher The month of November is Long Term Care Awareness month and as we move into the holiday season, now may be an opportune time to begin that LTC conversation that you’ve been putting off with your clients! This is a time of the year when many families gather together to celebrate the season so what better time to encourage your clients and their families (especially your client’s children) to have “the talk”. Industry studies have shown that only about 10% of consumers have had a conversation with their parents or in-laws regarding long term care. Tell them not to wait until it’s too late just because it is a somewhat uncomfortable conversation to have. Most parents don’t like the idea of needing help from their children when they have spent their entire adult lives raising and taking care of their kids. That possible role reversal can be very difficult for a parent to accept. Although the conversation may be difficult, it could also be one of the most important conversations spouses could have with each other, children could have with their parents, and you as their advisor could have with them. That’s where you, as the agent and advisor, come in. Remind them that they need to talk about not only how and where they would like to receive care, but also, and just as important, who is going to provide that care, and most importantly, how will it be paid for. By doing so, they are preserving the legacy they have worked so hard to protect. Having a plan in place should a long term care event occur goes a long way to alleviate much of the worry that can come with an uncertain future. There is a great amount of misinformation and misunderstanding regarding available long term care services and it’s your job to be there for them as a source of correct information and advice. The time to discuss, prepare and plan with your clients is now, not waiting until a long term care event arises and a family is forced to make many decisions that could be very costly. Take this holiday season to have the “talk” with your clients so they in turn can have an informed discussion with their family. Both you and your client will be glad the conversation happened.
Long Term Care and Disability Insurance

Insuring a Spouse For Free with LTCi, (well almost)

Presented by Tim Dreher Nearly every day while working with insurance producers, I get a request to run an LTCi illustration for an individual quote for a person whom is either married or has a domestic partner. In these situations, I always ask why we are not quoting the other spouse/partner. The answers that I normally hear are either the spouse/partner is uninsurable or that the other spouse/partner is just not interested in purchasing LTCi. I have noticed that the majority of these situations is a wife wanting LTC protection and a husband that either does not see the need or doesn’t want it because “I’ll never need it, I’ll drop dead first”. Let’s face it, most caregivers in a long term care situation are women whom have seen it happen to a friend or maybe have even been a caregiver themselves and understand the value and need for LTC insurance. Many of the LTC carriers we work with at Financial Brokerage offer a substantial discount for couples or domestic partners when both apply for coverage. In those cases where the spouse/partner is insurable, I will suggest adding the spouse/partner to the quote at the minimum benefits available in order to take advantage of the spousal/partner discount. It has been my experience that adding the spouse/partner at the minimum benefits results in a premium that is less for both spouses/partners than the cost for a policy where only one is applying. For example, let’s look at a couple, female and male, both age 55, looking at a plan with a $5,000 per month benefit for her, 5 year benefit duration, and a 90 day elimination period with 3% compound inflation protection where the female wants coverage but the husband does not. I ran the illustrations with 3 of our most competitive carriers. By adding the husband at minimum benefits ($1,500 per month for 2 years, with a 90 day elimination period and no inflation) the resulting savings were between 13% up to a whopping 37% savings over the price of quoting the female only. That is giving the benefit quoted above for the female spouse and the male (at minimum protection) for under the premium of what it would have been for her plan only. The savings for a 3 year benefit (everything else the same) resulted in premium savings of between 21% on the low end to 30% savings on the high end. LTC insurance carriers like couples and their premiums reflect it. So the next time you’re in a situation similar to the one above, show your clients a great idea on how you can save them money on their LTCi premium while at the same time giving a reluctant spouse some coverage too.
Long Term Care and Disability Insurance

When a LTC Rate Increase Occurs, How You React…

Presented by Leonard Berthelsen Rate increases in any product line are never popular, nor are they a pleasant conversation with your client. Long term care insurance is especially difficult due to the fact that your client may be considerably older now than when they originally purchased their policy. That distance between purchase time and now present an ever challenging set of issues for both you and your client. Should I be proactive and address this right away with my client or do I wait for the news to leak out and maybe the client has calmed down before they actually get the rate increase notice? The prudent way would seem to me to address it with the client as soon as you can. It certainly is better hearing it from you than your client getting blind-sided by a news story or hearing about it through the grapevine. So what is that conversation going to be like? Well, short of your client going ballistic on you, level heads need to prevail. Most carriers offering long term care insurance or carriers that offered it in the past have gone through rate increases at least once. You may have become seasoned in how to handle it but many agents still struggle today on the best approach when rates go up. It is important to first remember this, you did not make these rates go up, your client did not make them go up and circumstances beyond both of you are controlling this. Market events certainly have been issues for the past 7-8 years. The interest rate that the carrier expected to earn on the invested premiums has not met policy design, utilization in some areas of the product have been higher than anticipated, and the simple fact that people are living longer and developing care issues that LTC was designed to cover is happening more frequently than what the product was priced for. Now that access to home care is so prevalent in our society, policyholders are accessing benefits earlier and receiving those benefits over a longer period of time, thus making the average claim higher. Yes, some of the older plans had designed persistency rates well below what was actually experienced that resulted in necessary rate increases. I do have to say though, if the plan was designed and built within the last 10-15 years, the persistency issue has been relatively the same, very high and quite probably not a reason anymore for the rate increase. So why the lesson in LTC history? How will you explain why the increase occurred and how will you make it understandable? I have gone through several rate increase actions with multiple carriers and my basic explanation remains the same. Reiterate the value of the plan, why they bought it and its value to them in current dollars. This gets your client back in the frame of mind of the product’s importance and the value proposition that convinced them to purchase it in the first place. I’ll create a quick premium comparison for each client demonstrating what the same plan at their current age would cost today and compare it to what they already have in place. This many times will defuse the notion of dropping it and shopping for something else. Rarely will the increased premiums on the existing plan be more than what currently is being sold. Many times the benefits will be stronger in their plan than what they can buy today. Once I have an understanding of the pure premium issue, I can move on to affordability. If this rate increase is going to put the premium out of reach or just more than what they are willing to spend for LTC, then I need to have the discussion about adjusting their current plan. In most cases the carrier will proactively give several “landing points” for the client to consider which generally means they are going to reduce benefits to keep the premium at a level that is acceptable. Not all benefit reductions are negative or bad. Maybe the client purchased it with inflation protection and it has grown to an acceptable daily/monthly level and they are okay with freezing it at that level. An easy solution to the problem. Some carriers will allow the reduction in the percentage of inflation protection as a means of reducing premiums. My conversation may need to go into possibly looking at reducing the duration of the benefit or other riders as a means of reducing premium. The main advice here is really very basic. Be proactive with your client when you know that a rate increase is coming. Start the conversation as soon as you know the facts. Understand the “landing points” that the carrier is offering and make sure that you restate the reason why they purchased the plan in the first place. The importance of long term care coverage for that policy owner is more important today than ever before, and the price is never going to be more affordable than it is right now. We all are getting older, living longer and in many cases dying slower with health related issues. Let’s just make sure that our clients are making the right decisions regarding the rate increase and for the right reason.
Long Term Care and Disability Insurance

A Debate Between Traditional Long Term Care Insurance and…

Presented by Leonard Berthelsen There seems to be quite a debate being waged between traditional LTC products and the hybrids of life and annuity products.  The positive of this is the attention long term care is receiving. I read comments like “I’ll lose it if I don’t use it”.  Yes, there is statistical chance that a client would pass away and not use the product’s benefits with the traditional LTC products.  However, I don’t believe there actually is a large statistical chance especially with long life expectancy and the utilization of home and community care services in a traditional LTC product.  Also, these plans now allow the untrained friends and family care providers to be paid for these services from the policy by many of the carriers.  When all is considered, access to long term care services will probably increase. Yes, asset based LTC products offer a” lock in” when purchased and there would be no future rate increases with that product.  For some consumers, this is desirable.  For many other potential clients, the single premium deposit or purchase is just not in the retirement plan.  Moving a large block of money to have dedicated to LTC coverage certainly is not for everyone.  In certain situations, does the client understand that the first money to get used in a hybrid annuity long term care claim is their own deposit? Traditional LTC products and carriers have a much better understanding of claims, costs, and morbidity than they did five years ago and certainly better than 25 years ago.  Only time will tell if the carriers have it right.  When financial planners and advisors design plans for their clients using traditional LTC products, there are certainly options in those plans that reduce the risk of future rate adjustments. I have even seen comments that there is a concern that when benefits are drawn from a LTC plan, those benefits would be taxed.  Since 1996 when tax qualified LTC plans became part of the LTC insurance landscape, these benefits have been paid tax free.  In the 1995 legislation that gave us tax-free LTC benefits, it also made all plans sold prior to 1996 grandfathered and treated as if they were tax qualified.  This issue has become somewhat of a lightning rod for justifying one design plan over the other. I’m not an advocate for one over the other, they both have their place.  Advisors should recognize that clients have different needs, just as we have different products for those needs.  One is not at the expense of the other.  Both designs can co-exist and both plans can flourish.
Life Insurance

You can have your cake and eat it too…

Presented by Gary Peterson A Linked Benefit (LB) policy allows you several options.  An LB policy offers long term care (LTC) coverage, liquidity and a death benefit.  If your client has a change in plans and decides not to keep the policy, a return of premium benefit may allow them to get back their initial premium.  If they die prematurely, the family receives an income tax free benefit.  Finally, your client has LTC benefits available if needed. LB policies attract people who:
  • Are retired or approaching retirement.
  • Are more affluent with higher net worth.
  • Want to protect against potential LTC expenses and leave a legacy to their loved ones.
Market interest for a product that links LTC benefits is growing by double digits.  This double digit growth may be because the LB policy is attracting new and younger markets.  LIMRA found that buyers in their 60’s continue to be the biggest portion of in-force policies; however, younger markets are finding them attractive as well.  Call your Financial Brokerage marketer at 800-397-9999 to find out more about Linked Benefit plans that are available to your clients and get your slice of cake.