Long-term care insurance: from hesitancy to urgency
By Mark S. Jones
Remington Insurance Group, Inc.
It is only natural to shift your conversations with clients from disability coverage to long-term care coverage as they age. The priority should no longer simply be insuring the paychecks of your clients once they are 50 to 55, it should be insuring their retirement savings – making sure there are enough assets in place to financially survive the worst case scenario when they are no longer bringing in income.
When your client is 10 to 15 years from retirement, the timing is appropriate to discuss adding long-term care to their portfolio. Begin by asking two questions:
1) Have you thought about insuring your retirement assets?
2) Have you had any personal experience with long-term care for a friend or relative?
In some cases, it has taken years for a client to come around to the idea of long-term care insurance. Many are skeptical, and haven’t yet witnessed an event that warrants this type of coverage. It’s important to stay in front of these particular clients until they do understand the need. I send out periodic reminders with statistics from recognizable industry resources to illustrate the urgency. And, I share with them the “62/92 Law” which is a basic but very effective concept. If a married couple is in pretty good health at age 62, then there is a 50 percent chance one of them will live to age 92. Thirty years is a long time to live off what many deem suitable for retirement. It’s no secret that advancing medical technology coupled with genetic longevity means life expectancy is far surpassing that of prior generations. Our clients need to be prepared for that.
As a result of my mailings and the media bringing retirement issues to the attention of the general public, many of my clients are coming to me out of concern. Those who have worked hard to build up a legitimate retirement fund are realizing they have to protect it. Naturally, the most common objection you’ll encounter regarding long-term care is cost. However, the cost of not having this coverage is probably 50 to 100 times more than what the client will ever pay. Nowadays, hybrid products are popular and can make a lot of sense. They essentially allow a person to transfer existing assets over to an insurance policy where there is a 100 percent refund of those premiums if it’s never utilized. If a client needs some form of long-term care, money is available on a tax-free basis. Plus, there is a tax-free death benefit, which means someone will benefit from the policy. The policy can be paid for in a lump sum up front, transitioned from a CD or money market or treasury account – something with very low interest.
Another option we use is to pay over a 10-year period on a fixed basis, which eliminates the risk of premium increases. I’ve found once you start educating a person on what is available, they begin to realize the cost is negligible. The ideal client is one who has some low interest-earning assets, is frugal and loves the idea of not having to spend money to secure long-term care coverage; they just have to transfer some of it into a different bucket.
My advice to young agents who are newer to the business is to remain patient and keep the process simple. Target your own age group as prospects, and from age 30 to around 50, stress the necessity of insuring their paychecks. It typically costs about 2 percent to 3 percent of a paycheck amount to secure a disability insurance policy – a very basic sale. As part of this sale, ask your client what their parents have in place in terms of long-term care coverage. A few might know, but most will be unsure. Ask permission to reach out to their parents and explore this. Not only could the parents be potential clients, the child client will see that they may ultimately bear the financial weight of their parents’ long-term care needs if a policy is not in place. Indeed any hesitancy will turn to urgency!