THINK LONG TERM
Making the case for long-term care insurance
By Todd Villeneuve
Think for a second about one of your favorite clients. You’ve worked with them to protect their home, their car, maybe even a boat. But for one reason or another, you’ve never talked about long-term care insurance (LTCI). Now, consider what happens if they get sick or injured, or they’re otherwise unable to care for themselves. Suddenly, they’re paying $7,500 a month for a nursing home, or $11,000 a month for in-home care. As a result, they’re struggling to make ends meet. They take out a second mortgage on the house, sell the boat, and it’s still not coming together.
It’s not an easy scenario to contemplate. But it’s more common than many people realize.
According to the U.S. Department of Health and Human Services’ long-termcare.gov website, an estimated 70% of people will need long-term care at some point in their lives; it can be expensive and disruptive when they do. The average long-term care episode reportedly lasts around 18 months, and according to a 2019 Genworth survey can cost an average of $250,000.
We’re diligent about protecting the income already in our bank accounts or the possessions we’ve already acquired, but we struggle when it comes to protecting income we have yet to earn.
When professional care isn’t an option, caregiving falls to loved ones. In 2013, for example, unpaid caregivers—typically family and friends—logged an estimated 37 billion hours of unpaid caregiving, according to the Family Caregiver Alliance, an effort valued at $470 billion. In addition, AARP reports that caregivers spend an estimated $7,000 per year out of their own pocket on expenses related to care.
Those are sobering numbers that most people aren’t prepared to face. Whether it’s because they mistakenly believe they’re already covered or they simply believe they’ll never need it, only about 13% of people age 65 and older and 6% of people age 50 or older carry LTCI. Think about that in comparison to homeowner’s insurance. For people in their 50s—the prime time for buying LTCI—a policy costs about the same as insuring a $250,000 home. Yet, while nobody would dream of leaving their home unprotected, Americans overwhelmingly neglect LTCI protection against situations that can be just as financially devastating as a fire or flood.
Part of the problem is the way society views income and possessions. We’re diligent about protecting the income already in our bank accounts or the possessions we’ve already acquired, but we struggle when it comes to protecting income we have yet to earn. That’s the income that would be affected by a long-term care episode.
As insurance agents, it’s our job to broach this topic, and to help people find the right protection.
A changing product
The LTCI products available today are very different than what was available a decade or more ago. Fifteen years ago, more than 100 companies offered long-term care products. Now, there are just seven. But the products offered by those seven providers are in many ways superior to what was previously available.
Today, providers have significantly more underwriting information, which leads to increased rate stability. Hybrid life and LTCI products offer increased flexibility for purchasers, and guaranteed policies ensure purchasers will get exactly what they expect when their policy pays out.
All about education
Given the clear benefits of long-term care insurance, why don’t more people protect themselves? In most cases, it comes down to education—or lack there of. Here are three tips to help your clients better understand the value of protecting against the expenses of a long-term care event:
- Focus on the facts. People like to think they’ll never need LTCI, but statistically speaking we are more likely to need long-term care than we are to experience a house fire. Given the likelihood of a long-term care event and the potential cost of such an incident, adding protection makes sense.
- Educate about insurance. One of the biggest reasons people fail to consider LTCI is a misunderstanding about what their existing insurance will cover. People believe, mistakenly, that Medicare or their retirement plan will cover a long-term care event. Help them understand the limitations of other forms of insurance when it comes to long-term care.
- Get personal. The best doorway into a conversation about long-term care insurance is experience. Find out if your clients know somebody who has gone through a long-term care situation. Talk about what happened in that situation, and how that individual either benefited from insurance or could have fared better if they had been protected. If a client doesn’t have personal experience but you do, share your own story.
Start broaching the topic of LTCI when clients reach their 50s. That’s the prime time for purchasing these products. If priced right, LTCI policies should sell as easily as homeowner’s insurance for people who are healthy enough to buy them. The same clients who invest in fire and casualty insurance to protect their physical possessions should invest in long-term care insurance to protect their income.
There is a seven-in-10 chance of undergoing a long-term care incident, after all, and the cost is potentially greater than the cost of replacing a home.
If you make your case and your clients choose not to purchase long-term care insurance, consider having them sign a waiver indicating that you offered coverage. That protects you in the event a family member comes to you asking why their loved one wasn’t covered.
Although long-term care episodes can be financially and emotionally catastrophic, and statistics show they’re more common than most people realize, they’re also easy to protect against. By offering education and advice, you can help that favorite client protect the life they’ve worked so hard to build.
Todd Villeneuve is president of IFC National Marketing, Inc., an independent insurance marketing organization that offers contracting, underwriting tools, sales training, and marketing resources to help independent insurance agents and financial advisors maximize business growth.