Long term care insurance: How to cash in on cash

By Julie Gelbwaks Gewirtz

Gelbwaks Executive Marketing Corp.

It's now the end of the first quarter 2009 and the year is just flying by! Are you meeting your personal goals? Have you achieved what you thought you would in these past few months? I know that based on the economy, what I hear from agents around the country, and overall results of the industry -- it's not easy out there. Many of you are looking for ways to increase your long term care insurance (LTCI) sales now more than ever.

Well, here are a few ideas using the cash benefit available in many policies today.

For those who are unfamiliar with the subject, let me first say that the cash benefit features in long term care insurance plans have come a long way. There are many different versions of how it can be written into the language of the policy. We have the complete, 100 percent cash that entirely replaces any reimbursement benefit. That money is paid monthly, in full, to the claimant and can be used however they see fit. No bills. No licensed caregivers required. Anyone can take care of you. It offers complete flexibility -- but at the highest premium.

We also, though, now have many other varieties of cash so that clients can afford the premium and still have some of that flexibility. These so-called "hybrid cash" plans in the marketplace offer either partial cash each month (e.g. 50 percent cash/50 percent reimbursement), extra cash over and above the 100 percent reimbursement payment, or a smaller percentage of cash in lieu of the 100 percent reimbursement benefit to be determined by the policyholder each month during claim. All of these options, in my opinion, are good choices that will eventually pay off in the end. Most notably, we do not know what the future brings. When we have "robot care" in 30 to 50 years and our reimbursement plans will not pay, we will all be very happy that there is at least a portion of cash in many policies that can be used to pay for that need.

Remember, cash is king, so let's now discuss sales ideas.

Go back to existing clients with reimbursement policies and offer them a cash enhancement. So many of our clients bought long term care insurance before cash benefit policies were available. So many of our clients bought policies without good inflation riders. So many bought home health care only. And so many others bought policies with too low of a daily benefit amount. They may have gotten in at a young age and have grandfathered policies (prior to HIPAA) that you absolutely do not want to touch. Premiums are good, but there's not nearly enough benefit. If this sounds like your book of business, then your clients are perfect for an idea like this one. Sell an extra $1,500 to $3,000 per month cash on top of what they have -- it will pay in addition to the benefit they will receive from their reimbursement model plan. More importantly, it will give them that needed boost that will either get them to the actual cost of care they are receiving or pay for things that were excluded in the reimbursement policy language of the existing plan.

Revisit prospects who turned down your offer and resell them on the "new" idea of cash benefit LTCI. It is very likely that many, if not most, of your prospects were shown a presentation for a reimbursement model plan. Although cash plans have been in the marketplace for quite a few years, they have never been more talked about than they are today. As I mentioned earlier, they are also widely available and more affordable due to the different hybrid versions that are emerging across our industry. If your prospect said no the first time, there had to be a reason. So many times, the reason is that the policy was too complicated, too expensive or it just didn't have enough of a foreseeable benefit to the consumer. Some form of cash can really and truly answer all of those objections. That prospect most commonly had just not been approached with cash. They have no idea it even exists, and when they hear about it, they tend to be intrigued.

When you have a couple and one is declined, sell 100 percent cash to the insurable partner. It's a dreadful situation. You finally have a good lead. You have spent hours of your time working with these clients. You educate, run proposals, complete applications and send it all to the carrier only to find that one of the two is declined due to health reasons of which you were unaware. You try to place the approved case and they don't want anything unless you can insure them both. What's your response? It should be that you can, in a way, insure them both with a new and innovative approach. Until the point is reached where he/she needs care themselves, the healthy partner will most likely be capable of taking care of the uninsurable partner (whether he or she wants to is another discussion entirely). Because of that, you explain to them that you will insure the healthy partner with a 100 percent cash plan. Although it probably costs a lot more than what you had approached them with to begin with, remember that they had planned on paying two premiums. Now they will only be paying one. Once the insurable partner goes on claim, they can both utilize the cash benefit they receive. Because there are no restrictions on how that money is spent, it is a good solution --not a perfect one, but one that makes sense. Also, if you can, increase the benefit amount since they will both be utilizing the plan.

Sell 100 percent cash benefit long term care to a prospect who does not qualify for disability insurance. I want to clearly state-- before it's misunderstood -- that cash benefit LTCI and disability insurance are not the same product. The triggers are completely different. With disability, the benefit is triggered by not being able to work. With long term care, it's a loss triggered by two of your activities of daily living becoming compromised or a cognitive impairment. But, since the benefits are paid to the policyholder in the same manner, LTCI is the next best thing. So what can make a person ineligible for disability insurance? In my view, the four reasons would be occupation, income, avocation and health. If they have a risky occupation, too low of a reportable income, race motorcycles or go bungee jumping, or they could possibly be seeing a therapist for depression once a month -- in any of those cases, there is a good chance that the prospect would be insurable for LTCI -- but not disability. Once last thing... the cost of a disability insurance policy can be as much as three times the price of a cash benefit long term care insurance plan. Think about how many of those people are in your database.

I am positive that even if you took just one of these ideas and ran with it, your sales volume will increase in 2009. Your next step is to check out which LTCI carriers offer which types of cash plans --if you don't already know. Then, to help you through the maze, find yourself a managing general agency to partner with in this endeavor. Happy selling!

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