For agents and advisors, dispelling LTCI myths is crucial to building sales

As agents and advisors look for ways to increase their long-term-care insurance (LTCI) sales, they are making an important discovery along the way: Dispelling common myths and educating clients about LTCI usually go a long way in helping to make a connection and attract new buyers.

The need for client education is pretty compelling. According to recent LIMRA data, many consumers lack a full understanding of what LTCI is. For example, a LIMRA survey reveals that more consumers think they own LTC insurance than those who actually do. While 29% of survey respondents believe they own some form of stand-alone LTC insurance coverage or combination life/LTC insurance coverage, data (based on U.S. population estimates and LIMRA estimates) show that actual LTC ownership is closer to 3.1%.

In addition, according to LIMRA, many consumers mistakenly think their health insurance or Medicaid will cover various aspects of LTC services when that might not be the case. Medicaid coverages, for instance, are limited to certain services and times, vary from state to state, and may require consumers to limit their assets to qualify. Such misconceptions could cost consumers who have not adequately prepared for long-term care.

“There’s a significant need in our industry to educate more consumers on the importance of long-term care planning,” notes Alison Salka, senior vice president and director of research for LIMRA and LOMA. “Companies that offer understandable solutions may have an advantage when attracting new buyers.”

Educating clients

It's understandable that consumers are confused about what insurance coverage they have and many who think they may have LTC coverage do not, explained Tom Riekse, managing director of LTCI Partners LLC. First, he pointed out, are the consumers who have Medicare coverage. They may mistakenly assume that Medicare will pay for long-term care when Medicare clearly doesn't.

A second group of people who may mistakenly think they have LTC coverage comprises those individuals who have disability coverage either through work or individually. Disability coverage is crucial, but it is geared towards replacing income, not paying for care. And it typically ends at age 65.

Finally, people with life insurance may have a living benefit rider that can pay for long-term care. Many of these riders are underwritten LTC riders that require additional premium and can be part or all of the LTC plan. However, many could be “no-cost” chronic-care riders, under which benefits won’t be determined until claim time. These benefits could be substantial or very little, depending on the riders and when they are triggered.

“There is only one way to cut through this confusion,” Riekse said. “Have a financial security professional analysis of the current client situation to determine his or her LTC coverage.”

According to Riekse, some of the things that need to be looked at are:

1. Amount of current LTC benefits available from insurance if someone were to need care tomorrow, and what those LTC benefits would be when claims are typically paid, such as at age 85.
2. A look at where LTC benefits are paid (home, assisted living, nursing home) and whether the plan will cover unlicensed informal caregivers, such as family members.
3. At the same time, a calculation of the current long-term-care costs--both now and in the future.
4. The difference between the expected cost of care and the insurance coverage is the coverage gap, which can be addressed.

Choosing the right approach

The advice from Bill Comfort, an independent LTC specialist agent with Comfort Long Term Care, is for agents to stop looking at the decision to buy LTCI as a “product decision.” Instead, he advises, they should start the conversation with their clients as a “planning conversation.” “We don’t have a product problem,” he said. “We have great products that have worked well.”

As agents talk with their prospects and clients, they should not be focused on the risk of needing care but on the consequences of needing care. It is a consequent engagement. “You should approach your clients by asking them this question, Comfort said: “If you were to need care, what would happen personally and financially to those you love--your spouse, your partner, or your children, those you love?” Once clients understand the severity of the consequences, then advisors can have a meaningful conversation with them.

The question then becomes: “How do you pay for professional care that relieves the burden on your loved ones?” After that, it comes down to designing the right product and the appropriate premium for that client.