The Reality of Long Term Care

Who will pay for these costs?

Most of the answers to this question will fall into the following three categories:

1. Government

The current reality is that Medicare and Medicaid pay a small percentage of medical costs for eligible recipients.  There are maximym payouts for rehabilitative care, occupational and speech therapy.  Medicaid may not cover a large percentage of these expenses.  The common perception of many clients is that they can keep their income, assets investments and property and still qualify for Medicaid.

2.  Self-Insure

The advantage is that the client maintains control of all their assets and they dont pay for coverage they don't use.  The main disadvantage is that the clients has to set aside assets to pay for the possible need and the client may deplete assets too quickly.

3.  Insurance Policy

The traditional Insurance Policy has the advantage of guaranteed benefits, can be paid monthly and covers all levels of care. The main disadvantage is that premiums may be expensive, recurring premiums may go up every year, and the client has to qualify medically.  Also, typically, the client doesn't get money back of the benefits are not used.  

The Linked Asset Based Plan has the advantage of return of premium guarantees, cash value growth, life insurance chassis products have a death benefit, and the annuity chassis products maintain tax deferrral staus while the client is still living.  They also have single premium and flexible premium options.  The disadvantages are that typically the initial cost is higher than traditional policies and the client still has to qualify medically.

Click here to download the Reality of Long Term Care Costs.

How do you know who is the ideal candidate for Linked Benefit Products?

There are four basic types of candidates that should be approached as a prospect for these products. 

1.  Current Owner of a Long Term Care Policy

• They may be getting rate increases
• They may not like the idea that they are paying for something they may never use
• They may ask you if they need to drop their policy
• The monthly payments may be a burden

Bottom Line for your client:  It may make sense to transfer an existing asset which will leverage your current money for Long Term Care needs and help with your monthly cash flow.

2.  The Procrastinator

• This client has done nothing to plan for LTC expenses
• Never transferred the LtC risk to an insurance company
• This client may be uniformed or misinformed
• He/she did not want to pay the premiums

Bottom Line for this client:  Your objective is to determine if they are comfortable self-insuring the risk.  Do they understand that self-insuring may be risking their retirement income and legacy?  The inability to make a decision is to decide to carry this risk personally.

3.  The Self-Insurer

• Plans to use Existing Assets to Self-Insure
• Mass Afluent to Wealthy
• Can be Working or Retired with income needs met
• Minimum of 300 to 500K in net worth
• Ages 50 to 87 max
• Children are off the payroll

Bottom Line for this client:  Your objective is to determine if they are genuinely comfortable self-insuring the risk.  Some people are merly procrastinating this decision, therefore, they are risking their retirement income and legacy due to inability to make a decision.

4.  Investment Manager Approach

• Client is usually 65 years plus
• Has a Conservative asset allocation
• Client does not have time to make up money lost in the market

Bottom Line for this client:  This approach is usually done during a normal portfolio review or perhaps when a product comes up for renewal.  The client usually has assets that you were not aware of and is inquiring about assistance and/or guidance.

Selling the product is the easy part, bringing up the subject is the hardest part.  How can you get your clients to buy into the concept and make a purchase?    The most important thing that you need to know upfront as a producer is that as logical as these products may sound to you - Do not present it logically!  This is an emotional sale.  It is a four step process of Reviewing, Asking, Planning and looking at existing assets.

Four Questions You Must Ask Before You Ever Mention These Products Exist

1. What is your objective for your money?
2. Have you experienced Long Term Care needs in your family?
3. If a Long Term Care need comes up for your family, is your long term goal to pay for this yourself?
4. Which asset would you use first?

Click here for a detailed look at the PreQualifying Questions and and exclusive LTC Exlusions fact sheet.