John Melchinger The Marketing Coach

Market Savvy

John Melchinger--The Marketing Coach™

Getting the Message: Long Term Care Now!

By William L. Willard, CLU

I think it was Hemingway who said we all owe God a death (doesn’t matter who said it first; it’s demonstrably true). It’s also true that before we check out about half of us (a coin toss) are going to do a hitch in a nursing home.

If people need help with life insurance, annuities and investments, they’re even more lost when it comes to the staggering costs and life-altering implications of a chronic, long-term illness. So it shouldn’t come as much of a surprise that Long-Term Care insurance (LTCi, for short) is arguably the hottest corner of the financial services industry.

LTCi can be a wee bit confusing, but the reasons for buying it are pretty simple. The Underwriter’s LTC Council says the chance of eventually needing some sort of long-term care is 1 in 2 (that coin toss I alluded to), while the cost of long-term care services--$50,000 to $100,000 a year (depending on where you are)—is expected to triple by 2020.

That’s not self-insurance territory for most people. Medicare, HMO’s, major medical and Medigap insurance don’t cover these costs, and Medicaid only pays if you’re poor.

The government never promised us free care in our old age; people who can pay their way, should pay for it. LTCi isn’t cheap, but it beats the alternatives:

Ironically, a lot of people become eligible for Medicaid only after footing the bill for long-term care with the money they’d saved for retirement -- They underestimate the costs of long-term care or fail to plan for it, or both.
Spending-down to qualify for Medicaid – Legal loopholes inevitably led to asset protection strategies to help people qualify on paper for Medicaid reimbursement. But this can be risky: The government is cracking down on people who impoverish themselves by transferring assets to nonqualified individuals (other than a spouse of disabled children).
People who have “spent-down” assets find two things -- The best facilities won’t accept Medicaid reimbursement, and the places that do are usually pretty hideous. Be careful what you wish for.

Opportunities Unlimited

Over the next few decades billions of dollars are going to be moved at the discretion of people who will be increasingly aware of the risks they face, yet unsure of their options, and looking for help. As Leonard Wiener wrote in U.S. News & World Report, June 5, 2000: “Long-Term Care insurance can reduce the incentive to manipulate finances and provide peace of mind about getting care. Insurance can also increase a family's leverage to choose the care it wants.”

Long-term care is not confined to nursing homes. It can be provided at home, in community settings or residential care facilities. Policies that reimburse only for home health care cost less than comprehensive plans reimbursing for both nursing home and home health care. Still, the trend is to provide coverage from the lowest level of required care, typically…

Custodial care, for people who need help with the activities of daily living.
Intermediate nursing care, for people requiring daily but not full-time nursing supervision.
Skilled medical care, for those who need 24/7 hands-on services from registered nurses or professional therapists.

If you’re going to work in the long-term care market, you’ll need to know the costs of these services in your area (to find out, visit local nursing homes, and check in at office for the aging or similar agencies).

Also get to know people who’ve had family members “self-insure” long-term care with their life savings, as well as those who’ve already done long-term care planning. Their stories will help you create compelling word pictures for other prospects.

Long-term care planning should be coordinated with other insurance, financial and estate plans. So consider getting prospects’ adult children and other advisers involved. The kids may want to help with the premiums, and you’ll want to avoid working at cross-purposes with other advisers who may have their own views of long-term care costs and funding options (including spending down assets to qualify for Medicaid). At the same time, accountants can help assess a prospect’s suitability for LTCi protection, especially older people who may have trouble assembling the necessary financial information.

A Matter of Suitability

While nearly everyone will eventually need some form of long-term care, not everyone can buy this insurance. Whether LTCi can or should be purchased now, later, or ever depends on the prospect’s age, health, income, retirement goals and other financial obligations. Some carriers won’t even accept applications from people earning less than $35,000 per year or with fewer than $75,000 in assets.

For those who qualify, these are not one-size-fits-all products, and developing suitable coverage is more art than science.

At one level, long-term care planning is about helping people understand their options and determining the best possible solutions. But it’s seldom that simple. Family relationships, cultural attitudes, lack of foresight, even stubbornness come into play. LTCi needs can be complicated by a person’s physical condition and circumstances: marital status, availability of family and supportive friends, the design, adequacy and safety of housing, and financial resources. While it’s axiomatic that fact-finding is where sales are discovered, with long-term care coverage, fact-finding is a mutual discovery.

People are buying LTCi well into their 70s and 80s, but prospects in their 40’s and early 50’s may want to lock in lower premium rates. It can be unpleasant for them, but by getting younger customers to plan ahead you can save them a lot of grief. Irrespective of the prospect’s age, however, it’s usually best to run two or three proposals from different carriers, with increasingly comprehensive coverage.

The market for Long-Term Care insurance scarcely existed 10 years ago, but there’s no getting around it: LTCi is now firmly part of retirement security arrangements and estate planning. Without it, people can be stuck with insurmountable expenses that quickly deplete their life savings and severely disappoint their heirs.

Bottom line, like their homeowner’s and auto coverage, smart people buy long-term care insurance and hope like hell they never need it.

Want to Know More?

Financial services representatives who want to know more about Generational Marketing should not miss these Marketing Guides available from Pelican Island Publishing:

1. The Mature Market - A Generation at the Crossroads

2. Boomers! - Marketing to the "Me Generation"

3. Marketing to Generation X - New Ideas in a Changing World

(Each is available for about $25. per single copy at http://www.mronline.com)

These publications offer profiles of key generational "markers," a review of the expectations each age group has of financial services advisors, plus cohort-specific prospecting tips and hands-on approach techniques. Interested? See William L. Willard, CLU below and address inquiries to Bill at w.willard3@knology.net.