Despite the fact that most Americans will need some type of long-term care (LTC) during their lifetime, a recent survey revealed that only 54% of financial professionals surveyed recommend or offer LTC protection to their clients.
A recent survey conducted by OneAmerica in collaboration with Hanover Research was focused developing a better understanding of the behaviors and views of 400 financial professionals related to long-term-care planning and sales. This may be one of the factors that explains the relatively slow growth of long-term care insurance, despite the growing need.
About one in five of those survey said they have never offered such protection to clients.
These results highlight a potential gap in helping clients prepare financially, the survey said.
The Administration for Community Living estimates that almost 70% of individuals over the age of 65 will require a form of LTC services at some point in their lives.
LTC insurance can protect retirement income
"As an industry, we can – and should – be doing a better job of helping people prepare for the risk of a major expense that, statistically, we know they're likely to face," said Jeff Levin, vice president of distribution, Care Solutions, OneAmerica. "LTC protection can help protect the retirement income that financial professionals and their clients have worked so hard to build."
The survey of financial professionals follows the LTC Consumer Planning Study, which examined perceptions of consumers about LTC. The two studies show that the top two reasons financial professionals sell long term care insurance are the same reasons clients purchase it – to remove the financial burden of LTC events from clients' families (73%) and to provide financial security (67%).
Clients who inquire about LTC protection are most likely to have family members who have experienced an LTC event. Other clients who express interest in LTC are those who are about to retire, those who have recently experienced a health challenge, or those who have been diagnosed with a health condition.
Most advisors are reluctant to start a conversation about long-term-care planning for multiple reasons, explained Levin. First, advisors are extremely knowledgeable and experts in their field and present solutions in great detail that are tailored to meet their clients’ needs. When they are approached about a product they don’t know in great detail or don’t frequently present, there is a concern about being embarrassed about their lack of knowledge or how to properly present solutions, said Levin.
LTC part of a holistic financial plan
Secondly, LTC planning is part of a holistic financial plan. The potential for a client to be declined in underwriting creates a concern that the advisor could “lose” the portfolio. Finally, many advisors want to focus on the client’s assets and financial planning – not on their health conditions, the medications they take, the doctors they see, etc., Levin said.
Echoing similar sentiments is Kathleen Owings, principal and financial advisor with Westbilt Financial Group. “I think advisors are hesitant to talk about LTC insurance for a multitude of reasons, “ she said.
“First, talking about LTC is not the most comfortable conversation. I think advisors are fearful of bringing it up because clients don’t really want to talk about it,” she said, adding, “There are many variables that are involved in the conversation such as the cost of care, how long care will be needed and if long- term-care insurance will ever be used. I believe that long-term care should be addressed and can be planned for accordingly.”
“We talk to our clients about planning for their long-term care needs and addressing the cost from various sources such as LTC insurance, hybrid products or self-insuring, to name a few vehicles that can be used. It is important as financial professionals that we guide our clients through difficult conversations such as LTC planning to be sure they are best prepared for future life events,” she said.
Some advisors may be hesitant
Scot Macfarland, practice management consultant with Momentum Independent Network, said that some of the advisors he works with are reluctant to discuss LTC planning with their clients, as LTC needs can be financially challenging for many of their clients. Some may also be hesitant because they may not know the answers to common questions from clients immediately.
In addition, some hesitate because of an emotional aspect of the conversation. “These advisors,” he said, “are not comfortable asking about a client’s health situation or fears related to health, although many of these advisors have a good relationship with their clients.”
There are many tools available to help advisors reach a higher comfort level with LTC solutions, Levin said. First are the insurance carrier representatives. They are experts in their field and can be an additive member of the advisor’s practice.
Second, and really the easiest approach, is at every portfolio review, the advisor should ask the client what their written plan is in the event of an LTC need, Levin added.
Most clients will have discussed long-term care with their family or friends, and few will have a written plan in the event care is needed. “By asking the question at every review, the advisor can say that they have this conversation with every client and often uncover an unprotected need,” he said.
In addition, there are numerous industry designations that can be obtained with a focus on LTC planning and education, Levin added. “These programs provide a great foundation for learning about long term care and the various solutions available,” he said.
Asset-based LTC viewed more favorably
The survey also pointed out that 85% of the financial professionals surveyed had a positive impression of life insurance with a long-term care benefit, while 60% had a positive impression of traditional LTC insurance.
While financial professionals said they like selling traditional LTCI because of cost and ease of use, they shared that their reasons for recommending asset-based LTCI were more substantive and more aligned with the needs of their customers. According to the survey, the top three reasons they gave for recommending asset-based LTC protection were:
• Unused amount passed to heirs
• Clients can combine life insurance with LTC benefits.
• Tax advantages of repositioning assets
When asked why asset-based LTC insurance is preferable to traditional LTC insurance for so many advisors, Levin started by saying that the best LTC solution to have is the coverage or plan that’s in place when someone actually needs care. “Some protection is better than no protection and both traditional LTC and asset-based LTC come with their own sets of advantages,” he said.
The primary advantage of an asset-based LTC solution is that regardless of whether the client needs long-term care, cancels the policy, or never needs care and passes away, there is always value in the contract, Levin said. If the client needs LTC, the solution in place will help pay for the care and services needed by the policyholder. If the client decides to cancel the coverage, certain plans have a cash value component or a return of premium option, under which a portion to all of the premium paid in will be returned. Third, if the client passes away and never needs LTC, a death benefit will be paid to the beneficiary.
“Long-term-care planning does not need to be something an advisor avoids,” Levin said. “There are a myriad of resources available – from websites to training programs to carrier representatives. All of these resources can help the advisor reach a level of comfort when discussing LTC planning. At the end of the day, if you aren’t talking with your clients about LTC planning, someone else is.”
Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].