If you’re like many financial professionals, your clients and prospects are more focused on value than ever before. Following several years of lackluster returns on investments, uncertain economic prospects and rising prices, consumers want to know they’re getting their money’s worth with every dollar they spend.
That’s one reason linked benefits products — also referred to as hybrid or combo products — are enjoying vigorous growth. By combining the benefits of universal life and long-term care insurance in a single policy, these products reduce the chance that your clients’ premiums will be spent on unused coverage.
While product structures, guarantees and options vary, these products generally have two goals: 1) to immediately create a death benefit for beneficiaries and a pool of money for long-term care, and 2) to provide flexible coverage for a wider range of possibilities. If your clients need long-term care, they’re covered, and their assets are better protected. Whether or not they need long-term care, their beneficiaries will get a death benefit. Some products also offer riders that allow clients to get their money back if they change their mind.
In today’s environment, that broader, more flexible protection is just what many consumers are looking for. That’s why, according to LIMRA, sales of such products increased by 56 percent in 2011, the third consecutive year of double-digit gains (all of which have occurred in a “down” economy).1
Why the excitement?
To understand this trend better, Genworth Life Insurance Company interviewed universal life and long-term care insurance agents regarding these products.2 Of the 45 participants in our research, 41 (91 percent) said they thought linked benefits products were “on the way up.” Only four said linked benefits products were “holding steady,” while none saw demand for these products falling. Eleven out of 16 financial professionals who currently do not sell linked benefits products said they likely would try to do so in the coming year.
One financial professional said, “I would expect this product to continue to grow. Clients are not willing to shell out so much for long-term care insurance without some sort of a guarantee that a portion will return to them or their beneficiaries.” Another told us he thought linked benefits products were “the wave of the future,” and yet another said, “I believe this market is only going to grow.”
Why do financial professionals see such a bright future for linked benefits products? As you might expect, it’s the sense of security these products offer their clients that makes them so promising. Interviewees told us they liked linked benefits products’ potential to help them:
• Diversify and protect their clients’ assets and provide a more holistic approach to insurance planning;
• Address multiple needs (retirement income, estate/family protection and long-term care coverage) with one product;
• Guarantee the product will be used by the client.
However, the agents we talked to also perceived some obstacles to selling linked benefits products. For one thing, many linked benefits products require a significant upfront premium and thus entail higher costs than some clients are used to or prepared to pay. The perceived newness and complexity of linked benefits products also can be barriers, especially as compared to more traditional universal life insurance policies.
As one financial professional said, “These products are still not widely known, and people sometimes question what they do not know.” Professionals themselves can be held back by this knowledge gap. One told us, “I am sold on the concept. It’s just a matter of getting up to speed on the product, and determining how to market it.”
As with traditional universal life and long-term care insurance, denial can be another major challenge. Because of the way linked benefits products solve for two major life challenges, just starting the conversation can be difficult. Indeed, according to one of the financial professionals we talked to, “Dealing with one’s mortality is hard enough, but thinking of nursing homes or skilled care is even tougher.”
Three selling success factors
To be sure, selling linked benefits products may require financial professionals to make some adjustments. Genworth Life’s interviews revealed three key success factors for adding these products to your portfolio.
Focus on the right clients. According to the agents we talked to, higher income coupled with liquid assets is a key client characteristic. Agents also told us the client should have assets set aside to buy protection against long-term care costs and leave a legacy for loved ones. In terms of age, as with universal life and long-term care insurance, younger and healthier clients likely will pay less.
As mentioned earlier, the client’s understanding of what they are buying also is important. One financial professional said the ideal linked benefits client should have “a strong understanding of both products and the wisdom of combining them.” Such an understanding can help clients appreciate the value-for-money aspect of linked benefits products, such as the way these policies instantly provide a pool of money for long-term care that otherwise could take years to accumulate.
Perhaps ironically, the ideal linked benefits client may in fact be the one most skeptical about the value of traditional long-term care insurance. Those who believe they are unlikely to need long-term care may be more receptive to the flexible nature of linked benefits policies.
Get educated. The agents we interviewed acknowledged they could benefit from more education on linked benefits products. In addition to information on the products themselves and how they work, agents said it would be helpful to understand the application process, the customer experience and the best ways of marketing these solutions to their clients.
Carriers themselves are one source for this information: Many offer webinars, seminars and a wealth of marketing and educational materials to help agents get up to speed. Financial professionals also should check out industry sources, such as the American Association for Long-Term Care Insurance, LifeHealthPro.com and LIMRA. In addition, the National Clearinghouse for Long-Term Care Information has useful insights and data on long-term care and aging.
Focus on “what if.” The agents we talked to who already sell linked benefits products agreed on what motivates their clients: answers to what-if questions.
“What if I don’t need long-term care?” is one such question, as is “What happens to my death benefit if I do need long-term care?” These are areas in which competing linked benefits products can vary — so be sure to understand the key differences. Clients also may ask what happens if they change their minds after buying the policy, which is answerable with the return of premium rider available with some linked benefits products.
The single-premium nature of many linked benefits products also can play into this approach, especially in an environment of economic uncertainty. As one agent told us, “Clients are seeing rising costs with everything these days, from prescription drugs to gas. It’s nice to offer a one-and-done strategy they won’t have to worry about again.”
And, of course, the combination of a death benefit and long-term care coverage is the key way linked benefits products satisfy customers’ desires for what-if answers. “It helps us sell the product as an always-win option,” one producer said. “It’s nice to know that some money will always go to the estate.”
At Genworth, we see a bright future for linked benefits products. They can help financial professionals solve more client challenges, and they can give consumers solid value for their money.
The true beauty of linked benefits products is the way they are aligned with today’s focus on value for money, yet are anything but a short-term solution. By educating yourself and your customers on these products, you can address their current demands for guaranteed value. Yet you also will have helped them make a smart long-term move that covers a wide variety of potential scenarios. That’s why incorporating linked benefits solutions into your clients’ financial strategies could be such a great move.
1. Passy, Charles. “Long-Term Care Insurance: Weighing the Alternatives.” Wall Street Journal, Sept. 21, 2012.
2. Third-party administered blind survey to 45 producers, March 2012.