Studies say 70 percent of seniors can expect to use some form of long-term care (LTC) during their lives. That’s well over half of the senior population that could be exposed to high out-of-pocket costs without specialized insurance coverage!
Insurance agents have an incredible opportunity to protect more clients and create an additional revenue stream by offering long-term care insurance. And nowadays, there are more ways to obtain long-term care insurance than ever before, allowing more people to qualify and afford coverage!
What Is Long-Term Care Insurance?
Long-term care insurance (LTCi) helps cover the costs of extended medical and personal care for chronic and disabling conditions, including nursing home care, assisted living, and home health care. This type of insurance is intended to help pay for services that Medicare and most health insurance plans don’t cover.
There are different kinds of LTCi, and they are important to understand so you can help your clients get the right coverage efficiently.
Traditional Stand-Alone LTC Insurance
Long considered the only method of obtaining LTC coverage, stand-alone policies have a handful of points that clients and advisors alike should consider.
This coverage lacks the cash value buildup of other options. Their premiums can also be very expensive. Since those premiums are tied to the insurer’s claims expenses, they are subject to rise. This makes these policies increasingly difficult to maintain for those living on a fixed income.
Despite the expense, stand-alone offers the most benefits per premium dollar compared to the hybrid policies. It also can help prevent the depletion of your client’s savings and assets that would be used to pay for expensive LTC.
Your clients can choose the benefit amount, wait period, and add inflation protection that could protect against losing money with rising costs.
On the flip side, clients fear the “use it or lose it” nature of stand-alone LTC insurance. A policyholder can pay premiums for years and years into the plan, with the risk that they’ll pass away and never use the benefits.
A policyholder can pay premiums for years and years into the plan with the risk that they’ll pass away and never use the benefits.
However, stand-alone LTCi policies can also offer more care options, including professional facilities and in-home services, based on your client’s preferences rather than their financial limitations. This gives your client a double bonus as it relieves the physical, emotional, and financial strain on any of their family members that would otherwise become caregivers.
Currently, there are only six carriers left offering traditional LTC plans. But there are alternatives to tradition, and we’ll provide reasons we think they’re worth considering.
Hybrid Products
With the myriad of linked-benefit products that are now available to your clients, we now have an opportunity to begin a discussion about LTC planning through life insurance or annuities.
This includes annuity or life insurance/LTC linked-benefit products. Many are unaware that these products present alternative ways of preserving wealth and funding expenses.
Fixed Annuity with an LTC Rider
One way to secure the insurance is to attach an LTC rider to a fixed annuity. These riders can typically multiply a client’s initial investment by two or even three times.
Clients can retain access to their money if they should need it.The policy will continue to grow if nothing is withdrawn for LTC. Two attractive features of this option are:
- Leverage money — multiplies the annuity amount
- Underwriting — less stringent than it is for traditional LTC insurance or life insurance policies
However, these policies are typically paid via a single premium, so many require a larger amount of money up front.
Life Insurance with an LTC Rider
You can fill two needs with one deed when you provide a client’s life insurance policy and attach an LTC rider:
- When the rider is triggered, these policies allow clients to pull money tax-free from their life insurance death benefit to pay for long-term care if neeeded.
- Note: This may differ from policy to policy.
- In contrast to traditional LTC insurance, the policy builds value, leaving more money for long-term care.
- If long-term care isn’t needed, the policyholder has been saved the cost of LTC premiums.
The main drawback of these policies are the rider fees, which don’t feed — and sometimes reduce — the death benefit. However, these fees are typically significantly less than traditional LTC premiums.
The client’s initial life insurance purchase can provide sometimes double or triple the death benefit in LTC benefits. When the benefits are needed, some policies pay out a percentage of the funds.
This is usually a fixed monthly amount while others reimburse LTC expenses as they are incurred. Either way, these funds are an acceleration of the initial death benefit.
Traditional vs Hybrid
When comparing the two, there are pros and cons to both traditional and hybrid LTC options. Use the table below to see what might or might not benefit your clients:
Notice the upsides and downsides to each type of life inusrance policy. Considering your clients’ specific situations is key when advising them on purchasing or switching their insurance coverage.
How Do You Sell It?
Starting the conversation about an LTCi plan can be challenging. Clients in good health now might assume that they’ll be part of the 30 percent who never need LTC. Others might not even want to think that far ahead. LTCi plans are the ultimate “What if?” policy.
Now, the conversation has been made significantly easier with these many new life insurance and annuity hybrid products with LTC riders.
These products have been designed to assuage clients’ fears of losing their money by providing a tax-free death benefit, leveraging assets for LTC coverage, and offering return of premium options.
Can you clients afford long-term care? Maybe they can’t afford to be without it. Because of the specific surrounding enrollment, the answer is going to be different for each of your clients. Evaluating the cost, age, knowledge level, and pre-existing medical conditions will help you to determine that answer.
Have any clients who may benefit from LTC insurance but are not sure where to start? Use our prescreen form to determine the best company for their health profile!
Addressing LTC Rising costs
Expensive LTC insurance premiums deter interest. A policy including a daily benefit of $150, four to five years of coverage in home and institutional settings, and three percent inflation protection would cost $2,200 annually for a person under the age of 55. That’s a little over $180 a month when you get in early. But it doesn’t stop at cost.
Age isn’t just a number when it comes to long-term care policies. The older you get, the more expensive plans become. The cost of the exact plan outlined above nearly triples to $9,300 per year for a 70-year-old client.
Carriers offer plans for ages 18 to 79; the earlier you can get your client covered with an LTC policy, the less expensive it will be. LTC premiums can rise for an entire class of policyholders, so the recent trends are something to consider with your client.
Things to Keep in Mind
Also, note that pre-existing conditions are considered with LTC insurance, so purchasing early can protect those who end up facing medical hardships later in life. Those currently using long-term care services or who need help with the activities of daily living (ADL) at the time of purchase will not qualify.
Clients with serious medical conditions might also find themselves ineligible. If they have a pre-existing condition, such as AIDS, Alzheimer’s, Parkinson’s, and metastatic cancer, LTC carriers will not issue coverage.
Education is key as well. Many Americans mistakenly believe that their health insurance or Medicare will cover the costs of long-term care.
In fact, Medicare only covers medically necessary care, like skilled nursing or rehabilitation, not assistance with daily living. As their trusted advisor, it’s important to make sure your clients understand exactly what they can’t count on Medicare to provide.
As their trusted advisor, it’s important to make sure your clients understand exactly what they can’t count on Medicare to provide.
With an array of LTC options in your portfolio, you’ll have the tools you need to help any of your struggling clients figure out what works best for their situation.
Understanding Rising costs
The median bill for a private room in a nursing home is now $10,646 a month. That’s practically $127,752 a year. Yikes. That’s not chump change.
Increased demand, higher medical costs, and shortage of medical professionals are all contributing factors to these price increases. But this all begs the million-dollar question: Are your clients prepared?
It’s important to help them, and, in some cases, their adult children, understand the reality of health facility costs — not to scare them, but to prepare them for what they’re undertaking.
Costs are also expected to continue to increase, anywhere from three to five percent yearly. Your clients may even need to adjust their LTC coverage, such as adding inflation protection. This protection increases your client’s benefits automatically each year to keep up with the rising costs.
With this information in mind, you can assist your client in adjusting any existing policies they may have, explore alternative insurance solutions like short-term plans, and review their financial strategies.
Make It Work for Your Client
Now that we’ve explored all the options, you likely want to know: what do we suggest? We can never give you better advice than to do what’s right for each of your individual clients.
Determine the likelihood they’ll need LTC, or a hybrid product, and their financial situation. With this information, you can decide if your client can afford the monthly premiums or if they would be better off making a lump sum payment in an annuity or life policy.
The more your clients understand about their options for senior living, such as nursing homes, hospice care, and assisted living facilities, the easier it should be to get them into a plan that meets their needs.
Set an appointment or send out a letter to present to your clients these key factors in their care, costs, and benefits. Since even a short stay could deplete a senior’s life savings, it is paramount that they are given every opportunity to secure the protection and peace of mind they deserve when it comes to their health coverage.
Additionally, consider the cash buildup of the policies available and the liquidity of your client’s assets. When you’ve thought through all these things, you’ll be able to guide any client in their LTC planning.
Before recommending an LTC or hybrid policy option to your clients, consider their need for adequate life insurance and desire to provide for their loved ones.
Be prepared to discuss any alternatives. If your client has no or insufficient life inusrance and no LTC in place, a linked-benefit policy could be an excellent option.
With a brilliant FMO like Ritter at your side, you can easily assist your clients and build your business. Register with Ritter todayfor access to essential tools, resources and support!
Not affiliated with or endorsed by Medicare or any government agency.
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