Short term care products: A new addition to your portfolio
By Stephen D. Forman (LTCA)
Long Term Care Associates, Inc.
If there’s one thing I’ve learned in my 18 years in this industry, it’s that agents are creatures of habit. We have a tendency to lock on to sales concepts, carriers and products we are comfortable with, and lock out the new, unfamiliar or strange. If you lock out short term care from your portfolio, you are probably trying too hard to make sales that are right before your eyes.
If there’s one thing I’ve learned in my 18 years in this industry, it’s that agents are creatures of habit. We have a tendency to lock on to sales concepts, carriers and products we are comfortable with, and lock out the new, unfamiliar or strange.
For example, when viewing the well-know optical illusion of the old hag, do you lock on to her? If so, you may inadvertently lock out the image of the extraordinarily pretty young damsel (who, by the way, would love to talk to you about buying a policy). Such is the power our minds exert when locking in and locking out.
And so it is with the long term care products we sell. So many producers begin their pitches robotically, quoting some recent cost of care survey (“Mr. Smith, did you know that the cost of nursing facilities now exceeds $86,000 per year in your state?”) and then proceeding to illustrate coverage which is exorbitantly expensive. When you try to sell a policy that expensive, you're trying too hard.
I'm about to explain how your career can become a whole lot easier.
In 2010, our industry's most comprehensive LTC policy claims study discovered that less than one-third of benefits were paid for nursing facilities, while more than two-thirds were paid for care in home- and community-based care settings.
Think about that for a moment: The coverage you sell ends up paying for care in the exact setting most of your prospects would most prefer. There’s a serious disconnect here. So instead of building a policy around the cost of nursing homes — and I’m just throwing this out here — why not design a plan which addresses their explicit desire to be cared for at home? Seems reasonable, right?
If we can agree that a) most prospects want to receive care in their own homes, and b) only a decreasing minority of claims are even paid for nursing facilities anymore, then the only question becomes c) How long do most home care claims last? The good news — which also derives from the same 2010 study cited above — is that even a modest one-year benefit period is ample to cover the majority of policyholders. The odds of anyone exceeding one year are negligble.
Given the scaled-back benefit periods we are now talking about (also called short term care), and the focus on care received in one's home (as opposed to a nursing facility), it's fair to expect that the underwriting approach might differ from what you are used to.
Lucky for you, it does.
When utilizing short term care products, producers are able to employ abbreviated underwriting, which may consist of as little as five questions and an Rx screen, and in some cases an additional phone interview. The turnaround time to complete these requirements is typically one to two days. When compared against traditional LTC underwriting, which may take 30 to 90 days, the advantage is clear.
Lest anyone put words in my mouth, I sincerely believe in the need for long term care insurance in this country. I understand the risks associated with a catastrophic, extended care event.
However, before you finish reading this article today, I would ask you to go back to the very top once more and see if you can visualize both the old hag and the young damsel. Don't lock either one out. If you lock out short term care from your portfolio, you are probably trying too hard to make sales that are right before your eyes.