I’m sure you have heard the parable of the blind men who encounter an elephant. Let’s explore the story and how it relates to you selling LTC Insurance. [Read more…] about Blind Leading the Blind Thru LTC Insurance
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Every professional salesperson understands “people buy emotionally, then rationalize their decision logically.”
The discussion of Long-Term Care can quickly become an emotional time bomb for insurance agents and financial planners:
- I will never go to a nursing home
- My family will care for me
- I will just go on Medicaid
- I won’t buy insurance that I lose if I don’t use
None of these “objections” are rational, logical arguments, but they are highly charged emotional responses that will result in agents being shown the door.
Why People Don’t Buy LTC Insurance – It Costs Too Much!
According to Life Plans “Who Buys LTC Insurance: 2010-2011?” Report, 87% of consumers who did not buy LTC Insurance state “LTC Insurance Costs Too Much” as either a very important reason or an important reason why they did not buy.
We could simply accept this as the truth and focus on selling Annuities or Medicare Supplements.
But we’re going to simply call this “BS!”
As former AMEX Life president Sam Miller used to tell us, “you are never really in trouble until you start believing your own BS!”
We think it is time for the LTC Insurance industry to get out of the trouble of declining sales, but first we need to stop believing our own BS.
Is it possible that “LTC Insurance costs too much” because agents have been prospecting for people who have neither the income nor assets to afford the premium?
Yes, it is … and for those people it is true that LTCI costs too much. Maybe.
What is more likely is that the selling skills of the agent, in particular their plan design skills, need to improve dramatically.
Have You Read the Secrets of LTC Insurance Plan Design?
In our FREE Report, “Secrets of LTC Insurance Plan Design,” we describe how agents have designed plans over the past quarter century:
- Long and Fat: the industry sold policies that were of long duration and fat on daily benefits until both insurance carriers and consumers said enough is enough – no one can afford it!
- Long and Thin: we moved towards policies that were still long durations, but started to sell thin benefits that didn’t cover the costs of care. Those policies were not only too expensive, they didn’t make sense to the consumer because of the exposure they had for the nursing home costs.
- Short and Fat: we then tried to sell shorter durations and fattened up the benefits again. That didn’t work either as consumers felt they were exposed to that pesky lengthy nursing home stay.
Our prescription is SHORT and FIT.
There is no need for 5 year or more policies, especially if you are selling Partnership Plans, so you can confidently recommend your clients go SHORT!
Tailor the daily benefits to where care is provided – at home and in the community, in assisted living or residential care facilities – based on both the costs of care and the how care is provided in those settings.
You surely must address institutional care as well, but with nursing home claims rapidly approaching less than 10 percent of all claims, you need to explore a co-payment approach with your clients as it relates to the nursing home daily benefit.
In other words, you FIT the benefits to reflect the associated risks in each care setting.
How Many Ways Can You Spin 90 Days?
Of course you know that long-term care encompasses the organization, delivery and financing of a broad range of services and assistance to people who are severely limited in their ability to function independently on a daily basis over a relatively long period of time (i.e., 90 or more days).
Hopefully you haven’t done this, but we have seen far too many agents explain that the best elimination period is one of 90 days or more. Their rationale is that if LTC must be 90 days or more, then why would you need anything less than 90 days? All we can say is OMG! These are two entirely different concepts!
The elimination period is a lever to both discover an affordable premium and of course to define the “deductible” that the client must pay before insurance benefits are paid. It’s a pay me now or pay me later equation which also reveals your prospect’s belief system … will I need long-term services and supports?
If they are leaning towards a shorter elimination period, you have helped them understand the high probability that they will need long-term care at some point in the future.
If they lean to longer elimination periods, it may be because they don’t yet believe they may need care. You may need to return to the beginning and help them understand their risks of needing LTC before you even calculate the premium.
What about Inflation?
Unless your prospect is age 70 or older, they should be screaming “Yes! Yes! Yes!” like Meg Ryan in When Harry Met Sally when selecting a compound inflation option.
The question you do need to help your prospect answer is “how much” inflation is right?
The costs of care continue to increase year by year. In some areas, costs are increasing only 1% to 2%. In other areas, they are increasing by 3% to 4% and sometimes more.
The conservative play is to choose a 5% compound benefit option. The consequences of that choice, however, are far too often unaffordable premiums.
What should you do?
- Choosing NO inflation protection is malpractice – better make sure your E & O premiums are paid in full.
- If you have an indexed inflation option available, that’s a good basis for keeping the benefits in line with rising costs. It’s not perfect, but nothing is in this area.
- If an indexed option is not available, you’ll find both adequate protection and affordable premiums with a 2% to 3% inflation option.
One last consideration here is a Guaranteed Purchase Option (GPO) allowing your client to defer purchasing higher benefit levels at various points in the future.
While this approach has merit, we’ve found that the total costs are much higher with this approach and that the premiums do become potentially unaffordable at some point in the future.
It’s just much easier for most clients to “pay as they go” rather than face the significant leaps in premium.
You Can Design an Affordable Premium
We strongly believe the “LTC Insurance Costs Too Much” objection is truly BS.
You can help your client stop believing that BS by educating them on what the real costs could be if they choose to “self-insure” and pay for LTC themselves.
Another way to address this concern is to demonstrate the value of LTC Insurance. Life Plans “Who Buys LTC Insurance?” Report shows the value of the benefits at more than 10 times the cost of premiums.
If your client still thinks LTC Insurance is too expensive, it may be time for both agent and client to stop believing their own BS!
Sometimes called the waiting period, the elimination period is the period of time that must elapse from the time a benefit-triggering event occurs and coverage payments begin.
Conceptually similar to an insurance policy’s deductible, elimination periods are a means of controlling premium costs; the longer the elimination period, the smaller the policy’s premium, all other factors being equal.
As a physical assessment, ADLs do not always show if a person needs care.
More elaborate functional assessment instruments, such as the OARS Multi-Dimensional Functional Assessment Questionnaire 5 have also been widely used to determine the incidence and prevalence of functional limitations as it relates to mental impairments.