Filed Under:Health Insurance, Ltci

The Benefits of a Multi-tasker

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Today’s pre- and post-retirees are a savvy bunch. They’ve lived through the upheaval of the ‘60s, the height of the Cold War, multiple economic recessions, ups, downs and all-arounds. Most of them raised children, put them through college and now have the greatest reward of all: grandchildren.

It should come as no surprise, then, that this group that has "seen it all," demands value and is hesitant to pay a large annual premium for an insurance "unitasker."

If you are a "foodie," you know the expression. But for the uninitiated, "unitasker" is a term made famous by a well-known food commentator. It describes a kitchen utensil or machine that can only do one thing. In the cooking world, a "multi-tasker" is preferable since it can do many tasks and represents a better value for the money spent. It might be obscure, but it is a great analogy in the long-term care insurance world.

Traditional health-based long-term care insurance (LTCI) has been around for decades. For many clients it can be a great fit. For what it does, it does very well. The reason it is such a hard sell, though, is that it only does one thing. LTCI only provides long-term care benefits. The same benefits that your clients believe they will never need.

It does not matter what the statistics say. It is human nature to believe "it won’t happen to me." Most people (even those who have had family in a long-term care situation) believe it will never happen to them. That’s just one of the challenges of trying to sell LTCI today.

So we are left in the unenviable position of asking clients for a sizable annual premium, in perpetuity, to pay for a product that only protects against a risk they believe will never happen. Therefore, it’s a difficult case to make to a client that he or she should spend a considerable amount of his or her retirement money funding this "unitasker."

Or maybe not…

A long-term care "multi-tasker"

There are long-term care (LTC) products available that can do more and provide your clients with benefits beyond long-term care while avoiding annual premiums.

Asset-based LTC is a concept that has been around for quite a while and, as traditional LTCI sales decline, these alternative solutions continue to expand. You may have also heard them described as "combo" or "hybrid" products but, in short, asset-based LTC consists of life insurance and annuity products that can provide LTC benefits.

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By taking time-tested concepts and adding an LTC component, asset-based LTC offers clients a number of attractive features. First, because of the permanent life insurance or annuity foundation, these products accumulate cash value that can be surrendered should the product no longer fit the client’s needs. Second, life insurance-based products provide a death benefit to heirs should care never be needed, and annuity solutions provide their accumulated cash value. Finally, there are LTC benefits should most forms of care become a need. Many will recognize this value proposition as similar to the old life insurance "live, surrender, die" presentation method. The idea being benefits are there whether you live, surrender the policy or die.

Several options to choose from

Life insurance and annuity asset-based LTC products differ in their structure and benefits. Life-based products provide immediate leverage in the form of a death benefit that can be accessed for qualifying LTC expenses. At death, any unused benefits pass to heirs income-tax free, and LTC benefits are also typically income-tax free. Annuity-based products have benefitted greatly from the effect of the Pension Protection Act legislation. If certain criteria are met, withdrawals from the annuity are income-tax free for qualifying LTC expenses. Annuity-based products provide accumulation for future LTC expenses rather than a death benefit, with unused cash value passing to heirs at death.

Both life- and annuity-based products usually offer the ability to extend LTC benefits beyond the death benefit or annuity value—some can even offer your clients lifetime benefits.

Existing assets instead of annual premiums

As stories continue to be told about the troubles in the traditional LTCI market, unfortunately the media has tended to focus on how large a single premium it takes to provide adequate coverage via asset-based products. While it is true and, as I’ve already stated, the products aren’t for everyone, what they fail to realize or report is that most consumers of a certain age already have money set aside, whether it is a CD, fixed annuity or money market that they will not depend on for income down the road. Each of these assets can be reallocated into asset-based LTC without impacting the clients’ monthly income. It’s up to you to refocus their thinking from a negative (large premium) to a positive (that monthly income remains intact). By repositioning an existing asset, we are moving dollars from one pocket to the other but still keeping it in the client’s pants.

There’s another very powerful lesson for your clients. They must understand that by not addressing long-term care, what they are really doing is putting their hard-earned assets at risk. Everything they possess may eventually be needed to fund long-term care, should it be needed. I say to them, "Let’s proactively repurpose a portion of your assets and leverage it for long-term care—thereby providing more resources should care be needed. And if you are among the fortunate ones who don’t use the benefit for LTC, your beneficiaries receive it."

Guarantees and joint benefits can be had

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Perhaps traditional LTCI’s greatest challenge has been the bad press it continues to receive from in-force rate increases. No client wants to receive a notice that their premium has gone up, especially if it means the product they’ve funded for years is now unaffordable. And certainly, no producer wants to pick up the phone and deliver that message. Most asset-based LTC products can overcome this worry with their guaranteed premiums.

There are even options for spouses to share benefits from a single policy. With the reallocation of a couple’s assets into one premium, a pool of benefits can be created for either spouse to access during a care need. If the worst case scenario happens, each spouse could draw their own monthly benefit at the same time.

Not for everyone, but for more than you may think

Many make the mistake of assuming only very high-net-worth clients find asset-based LTC appealing. In actuality, asset-based LTC clients reflect the vast majority of your client base. They are people that have worked very hard to accumulate what they have and wish to protect it. They may have even reviewed the other options on the market and decided not to purchase.

Protecting against the cost of long-term care is an important discussion that we owe our clients. It’s not always an easy conversation, but the good news is that we are no longer limited to offering a "unitasker." Asset-based LTC options can offer clients more value and can appeal to those looking to avoid another premium bill.

In the end, it might just make the difference between your clients gaining the LTC protection you know they need, instead of going unprotected.

Adam Eisenberg is the president of Eisenberg Insurance in Bexley, Ohio. He travels throughout the country educating clients, attorneys and accountants on the asset-based long-term care products offered by The State Life Insurance Co., a OneAmerica company.
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