Early in my financial services career, a respected mentor taught me something that has stayed with me throughout the years: “In the absence of value, price is the only thing.”
While those words of wisdom are applicable to any product, they seem especially true of long-term care insurance (LTCI). As I travel across the nation, helping financial services professionals present long-term care solutions to both individual and corporate clients, I’ve come to realize that many are struggling to communicate the true value of LTCI.
It’s about positioning, not product
As long-term care policy features and benefits continue to evolve and grow more complex, it’s easy to understand why some professionals tend to dwell on the mechanics of LTCI.
Unfortunately, when you emphasize daily benefits, COLAs and other policy details, you’re much more likely to confuse clients than to inspire them to take action. Indeed, according to a Genworth/Age Wave study, confusion is the most common reason — other than cost — why Americans don’t buy LTCI.
The most successful advisors avoid falling into the product trap. Instead of pitching an insurance product, they position LTCI as a solution that plays a vital role in a client’s broader retirement planning.
By doing so, you won’t just be putting yourself in the company of successful LTCI producers, but also in the company of comprehensive financial planners, investment advisors and retirement plan providers, who almost universally include long-term care on their retirement readiness checklists.
As Americans near retirement, their focus begins to shift from the challenge of accumulating assets to the even more difficult challenge of converting those assets into income that can last 40 or 50 years. Additionally, they’ve got to guard those assets against a variety of risks.
Long-term care insurance helps manage three significant retirement risks:
• Health expense risk. Long-term care expenses — which aren’t covered by Medicare — could consume hundreds of thousands of retirement dollars.
• Longevity risk. Ever-lengthening life expectancies, enabled by medical advances, increase the likelihood of needing long-term care services at some point in our lives.
• Lifestyle risk. Long-term care needs pose more than a financial risk. They also jeopardize clients’ ability to enjoy the quality of life they deserve — whether that’s with home health care or at a care facility.
Keeping it positive
Nobody enjoys picturing themselves having physical difficulties and living in a nursing home — least of all baby boomers, who typically think of themselves as 10 years younger and 10 pounds lighter than they are. Despite that fact, many financial services professionals continue to beat a drum of negativity, hoping to disturb their clients into action with an array of alarming statistics.
The beauty of a retirement-centered approach to long-term care is that it lets you take a much more positive and aspirational approach. Rather than telling a couple that one of them is likely to be confined in a nursing home for two or more years, try using language like this: “It’s exciting. Thanks to better medical care, we’re living longer, fuller lives. We need to make sure we’re planning for that in a way that helps you keep your independence as long as possible and enjoy the type of living environment you deserve.”
It’s not about nursing homes
Too many clients and even financial advisors think of LTCI as nursing home insurance. However, today’s policies serve many more needs — which also helps you emphasize the positives as you communicate the value of long-term care coverage.
Two of those needs deserve special emphasis in your discussions:
• Home health. Many people shy away from LTCI because they don’t want to contemplate the possibility of living in a nursing facility. Home health and home modification benefits turn those very same feelings into a motivation to buy, as clients now view long-term care coverage as a way to remain in the comfort of their own home for as long as possible.
• Coordination of care. A need for long-term care isn’t just challenging financially — it’s also an emotional and confusing administrative challenge. One of the important and valuable benefits of LTCI is the coordination of care — where policyholders benefit from the counsel of an expert in determining what kind of care is needed and finding competent care providers.
Communicating the economic value
Once you’ve established the valuable role of LTCI in safeguarding your clients’ retirement and helping them maintain the highest possible quality of life, the path to action becomes much clearer. Of course, that’s not to say that price becomes irrelevant.
I’ve found that one of the most effective ways of disarming price objections — or preventing them in the first place — is to show clients the enormous potential leverage contained in any long-term care policy.
Emphasizing a policy’s daily benefit tends to distract clients from the much more powerful potential of a long-term care policy. Consider, for example, an agent who describes a policy as offering “a $200 daily benefit for two years with a 3% cost of living adjustment.”
When the benefits are described in that manner, they can be confusing and — even worse — underwhelming. After all, if a client is weighing a several-thousand-dollar annual premium that may be paid for decades, a $200 daily benefit may sound somewhat insignificant.
Long-term care recommendations are much more compelling when the potential benefits are aggregated. For example, the very same policy could be described like this: “We’ve designed a plan so that, if something happens, you’ll have access to $200,000 in five years and more than $400,000 after 15…and it’s all paid out without incurring federal income tax.”
Thoughts on “younger” clients
According to the American Association for Long-Term Care Insurance, only 27% of applicants are below age 55. I think our industry has an opportunity to do a better job with that segment of the population and, particularly, with those in their late 40s and early 50s.
Many of these individuals are in the so-called sandwich generation, with children at home or in college and parents who need an increasing amount of assistance. While helping their parents heightens their awareness of long-term care needs, they face competing priorities, like college funding and retirement savings.
While lower premiums at younger ages are an important consideration, I don’t advocate a price-only, “blue light special” approach. Although premiums are indeed likely to be higher in the future, it’s even more important for clients to realize that their very ability to purchase coverage can vanish in an instant.
Since few of us have ever met someone whose health gets better over time, we can all appreciate the value of doing the right planning today — while we can still secure coverage. As I’ve heard one exceptional producer say, “This is about planning 20 years before something happens…rather than 20 minutes after.”
LTCI: It’s only as complex as we make it
It’s often said that long-term care is a complicated product. Surprisingly, those sentiments are often voiced by insurance producers who routinely help their clients with products — like variable universal life and equity indexed annuities — that are arguably just as complicated or even more so.
As with so many things in life, long-term care is only as complex as we make it. To me, it has a very simple value proposition: “If your doctor determines you’re chronically ill or need extended health care, LTCI will help cover the costs in a way that leverages your premium dollars and helps you have the best retirement possible.”