LTCi: Why some coverage is better than none at all

“A client doesn’t have to have something huge to make a difference” when it comes to paying for long-term care, said Holly Westervelt, vice president of sales for Krause Agency.

“A smaller benefit long-term care policy might make a real difference in a person’s situation, so don’t shy away from it,” she said during the National Association of Insurance and Financial Advisors’ long-term care impact day.

Westervelt said conversations about LTCi often begin with a client who knows they have a need for coverage, but they’ve heard the horror stories. They’ve heard long-term care insurance is expensive.”

Most agents lead the conversation by stating the often-heard statistic that the median cost of a private nursing home room is $100,000 annually, she said. Meanwhile, most clients think they will experience the worst-case scenario of a long and drawn-out need for care that lasts several years. This is where the conversation stalls because clients often believe the need at the high end of the spectrum is so large and unattainable.

“A hundred thousand dollars a year is not that experience of most people who have an LTC claim,” Westervelt said. “When we start with that sticker shock, most people think, ‘It’s too much. I can’t cover the need so why start?’”

She said that of those over the age of 65 who need LTC, 10% will need paid care for between two and five years and 4.4% will need care for more than five years.

In addition, those who require care still have some income. She said the average 80-year-old receives $2,000 in Social Security each month while 56% of this age group receives a pension, with an average monthly payment of $900.

Westervelt said that even $2,000 a month in LTC coverage can make a difference in paying for care when combined with a care recipient’s income.

Why modest LTCi benefits work

Modest benefits work, she said, for the following reasons:

• $2,000 per month, combined with Social Security and other retirement income, offsets a large part of the care costs, meaning the client’s money will last longer.
• Having earlier access to supporting funds allows the client’s asset base to be invested and grow for a longer duration.
• Premiums for smaller benefits are more affordable.
• Modest benefits can help advisors get to “yes” with clients more often.

A modest LTCi benefit also buys time for the family to make care arrangements and stretches a client’s income and savings further, she said.

Clients don’t need a “Cadillac plan” – just the plan that’s the right size for them, Westervelt said. Advisors should reframe the conversation by asking, “If care costs $6,000 a month, how much coverage would give you peace of mind?”

You don’t need to sell the biggest policy – just the one that makes a lasting difference, she said.

“It’s not about scaring people – it’s about covering them.”

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].