Selling long-term care insurance in today's uncertain economic climate can be a challenge, as prospects and clients are likely to be more concerned with short-term financial considerations than with strategic long-term financial planning.
Despite the tough economic backdrop, multi-life long-term care insurance continues to be a fast-growing segment of the long-term care insurance market, accounting for 14% of total individual LTCI sales in the first half of 2008 according to LIMRA International data. That's up 21% from the first half of 2007.
This type of group long-term care policy allows an owner of a business with fewer than 500 employees to purchase coverage for himself and his family as well as his employees and their families. And all of that can be done while taking advantage of a number of tax benefits.
Multi-life policies also present a significant opportunity for producers. With a multi-life deal, a producer can gain access to a group of potential asset management clients, including the business owner and his family, as well as to employees and their families. By introducing clients and prospects to this product, producers can also reinforce their status as trusted advisors who are truly knowledgeable about the industry and committed to finding the best solutions for clients.
Before speaking with your clients about this product, here are some pointers on how best to begin the dialogue regarding multi-life long-term care insurance with clients and prospects.
Opening the LTCI discussion
Before a broker introduces the idea of multi-life long-term care insurance to a client, he or she should first highlight the importance of planning for long-term care expenses as part of any retirement strategy. When initiating the conversation about long-term care planning with clients, brokers should begin the discussion with these two questions:
How do you plan to pay for a long-term care event?
Do you have a written plan for long-term care?
These questions generally lead to a discussion that helps the client realize that long-term care planning should be an integral element of any sound financial-planning strategy. The broker can help make this point by highlighting the fact that nationally the annual cost for a private nursing home room exceeds $74,000 a year, or more than $200 a day, according to Genworth Financial's 2009 Cost of Care Survey conducted by CareScout.
Introducing multi-life long-term care insurance
Once producers have established the importance of long-term care considerations in any financial plan, they should also bring up the idea of exploring multi-life long-term care options. The biggest selling point for clients will be that a multi-life product offers tax advantages for the company. This is because multi-life long-term care insurance uses business dollars to protect personal assets. The premiums may be deductible, yet the reimbursements from the policies are not taxed. An additional benefit is that if a business owner chooses a policy that covers three lives or more, the owner can purchase coverage at a discounted premium.
Something to note is that under federal regulations self-employed individuals, C corporations and all other types of businesses including partnerships, limited liability companies and S corporations all receive tax benefits.
If clients are worried about scope of coverage, brokers can reassure them that multi-life long-term care insurance products offer similar benefits to an individual policy. They can provide coverage in a number of environments, including home and facility-based care. Additionally, for some multi-life policies, if purchased in a state where the plan meets requisite State Partnership Program minimums, individuals may be able to take advantage of those benefits as well.
Generally, Partnership-qualified policies offer dollar-for-dollar asset protection under a state's Medicaid spend-down requirements. Therefore, Partnership Plans enable a policyholder to protect some or all assets and still be eligible for Medicaid if he or she exhausts the benefits of a long-term care insurance policy. As a result, policyholders are able to retain assets that would otherwise have to be "spent down" prior to qualifying for Medicaid benefits.
A win-win for business owners
Multi-life long-term care insurance is a win-win proposition for business owners because of the following selling-points: Selectability, spousability, deductability and portability.
Selectability: Multi-life policies offer business owners the choice to "carve out" a select group of employees to receive benefits, which makes it possible to reward and retain a subgroup of valued employees. The owner may also include himself in the mix; however, the class of employees set up to receive benefits may not be a class that includes only officers and shareholders. This is unlike some retirement benefits, such as 401(k) plans, where employers are obligated to offer the benefit to all employees.
Spousability: Another beneficial aspect of a multi-life policy is that spouses can also be part of the "carved out" group that can receive benefits, and are not required to be employees.
Deductability: As previously mentioned, another major draw for business owners to multi-life policies is that they are tax deductible. Although the tax advantages vary by type of business entity, all realize tax benefits. For C corporations, the premiums are deductible as a business expense, the premium is not considered income to the stockholder employee and the benefits paid as a reimbursement from the policy are not considered income.
Portability: Lastly, multi-life products offer portable coverage, meaning that employees who own the policy can retain the coverage if they leave the company while also continuing to take advantage of the group discount.
Benefits to producers
Multi-life products are not only a great idea for business owners; producers can take advantage of their popularity as well. Given that multi-life long-term care insurance is the fastest-growing segment of the industry, producers who invest in becoming experts at selling such policies will likely see nice growth in premiums. Another benefit is that having one client who is interested in a multi-life product could lead to the writing of multiple policies.
Finally, the multi-life product offers a connection to other owners and employees who have been selected to receive the insurance, presenting an opportunity to gain more insurance and asset management business.
Looking forward
Multi-life long-term care insurance is a compelling choice for business owners, employees and producers because potentially all can benefit. As a result, the market is expected to grow even more.
To take advantage of this momentum, it is imperative that producers are comfortable bringing up the subject. Therefore, you should consider investing time in becoming as knowledgeable as possible about multi-life policies in general, their specific tax benefits and the protection this product offers to individuals.
Jeff Levin currently serves as the Multi-Life Leader for Long-Term Care Insurance at Genworth Financial, based in Richmond, Va. Levin entered the LTCI business in 1990 and has served in several roles including wholesaler, brokerage communications leader, relationship manager and sales leader.
