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The Evolution of the LTC Sales Strategy
by Mark Doherty
We adapt as times and perceptions change. It’s the nature of things. Sales of products such as long-term care (LTC) are no exception. The industry has been evolving. Linking the benefits of life insurance and long-term care is emerging as the choice for thousands of clients who are looking for a more efficient and effective solution to their need for protection. We need to expand our sales possibilities by adapting and evolving our sales strategies to include these new asset-based LTCi products as well.
As the affluence level in the United States continues to increase, especially among women, a growing number of people are seeking more sophisticated solutions that protect against the risk of long-term care and protect the value of their estate, presenting a tool for legacy planning. This more sophisticated set of concerns is creating a new client base for LTC sales, and has created the need for new sales strategies as well.
We need to think beyond the conventional long-term care sale and consider all the asset-based LTC insurance product has to offer. Our main focus is not about trying to convince clients why long-term care insurance is something they can’t afford to live without. The objective must be to provide clients with as much money as possible at the time of need to affect their lives in a positive way. This change of focus takes you out of the realm of narrow expense-based “product sales” and moves you into a real client-focused and an asset-based risk mitigation strategy.
Our clients are the people who deem traditional long-term care insurance as an expense. They are self-insuring against potential LTC needs, with liquid assets in interest-earning accounts. These “rainy day funds” are kept in money-market accounts, bank CDs, or savings accounts. Those who plan to use the “rainy day fund” in the case of a long-term care need really believe is that they will never need LTC insurance and thus their savings will become part of their legacy plan.
Now, we can show them how even just a portion of the “rainy day fund” can fuel an asset-based LTC insurance product and provide tremendous leverage for the LTC need or legacy plan. The attraction of asset-based LTC products is simple. It provides the benefits of traditional life insurance or long-term care insurance. If LTC insurance is required, the life insurance benefit and long-term care benefit are combined and provide tax-qualified LTC protection. However, in the event no LTC need arises, the death benefit provides a tax-free legacy plan. All of this is accomplished without sacrificing control over the asset, through a contractual return of premium feature.
Additionally, the asset-based LTC product’s current interest rate is more competitive than a bank CD, a money-market account, or a savings account.
LTC is no longer simply an “expense” oriented sale. It’s really about working with clients who already see the value of having some long-term care protection even if they feel they will never need it. These clients are planning to self-insure through their own liquid assets. It’s about finding the most appropriate strategy for these clients and finding the proper allocation and vehicles for these funds.
By using a linked benefit product that combines life insurance with a long-term care, we can reposition an appropriate percentage of these assets into a tool that will help mitigate the risk of LTC while giving clients the control and tax benefits they want with the protection and asset leverage they need. For example, using $50,000 to purchase an asset-based LTC policy with a death benefit of $100,000, would double the client’s leverage of that asset for legacy planning purposes. With the addition of the LTC rider, which could add up to another four years of coverage, the overall amount of LTC protection (accelerated death benefit + LTC rider) is equivalent to up to six times the original asset: 100,000 + (4 yr rider @ $50K/yr = 200,000) = $300,000 or 6 years of $50,000.
In this scenario, the life insurance creates a $100,000 tax-free legacy plan for clients to transfer to their beneficiaries if it is unused for LTC purposes. That’s double the amount of the legacy the client would have left if the cash had remained in a CD, money-market account or savings account.
Asset-based long-term care plans are quickly gaining popularity as the LTC market evolves. We’ve seen dramatic growth in our business as a result, which reinforces the fact that they are truly meeting the needs of the market.
Here are some of the key features to look for in this type of product:
Money-back guarantee — This is most significant to clients from an emotional standpoint. Even if they never want to pull all their money back, the mere fact that they could helps bring them peace of mind. They relax knowing it’s not an irrevocable decision. Think twice about any product that doesn’t offer this when purchased with a large single deposit.
Qualified LTC benefit — Part of the purpose of putting money in this type of product is to cover potential long-term care costs. Make sure you offer a product with qualified LTC benefits, which are therefore tax-free when paid to your clients; maximizing the financial impact of those eventual benefits.
Complete LTC benefit — Make sure the LTC benefits are complete. They should cover all various LTC situations, such as nursing homes, adult daycare, home care, etc. Your goal here is to help your clients keep their options open; the product you offer should be in line with that.
Highly rated carrier — We’re talking about long-term care and life insurance here. Make sure the product is offered through a highly rated company. You and your client should feel confident about the company’s commitment to this type of coverage.
Offering this type of quality product is a holistic way to address the long-term care issue. Clients don’t have to be convinced they will ever have a long-term care need. You are simply suggesting that that client selects the best place to store that asset. The same money will be available for any small emergency; more money will be available to their heirs if it’s not used prior to death; and more money will be available to the client if long-term care is ever needed. It’s truly the best of both worlds.
Guarantees are based on the financial strength of the issuer.
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Mark Doherty is second vice president, MoneyGuard business line leader with the Lincoln National Life Insurance Company (Lincoln). The Lincoln National Life Insurance Company is an affiliate of Lincoln Financial Group(r) (LFG(r)). Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. For more information, call (877) 275-5462.