The business case for selling LTC insurance to small-business owners

When it comes to long-term care insurance, many producers focus their efforts on selling to individual consumers. But it may be a mistake to overlook small businesses, since many of them may not be aware of the benefits of owning LTCi and how it can be used to enhance their operations. Craig Roers, marketing manager at Thrivent, recently shared a few reasons agents should discuss LTCi with their business clients and some helpful hints for selling it.

There are many reasons agents should try to sell LTCi to small business owners, Roers said. First, he said, there is the opportunity:

• 1 in 6 workers is currently providing care to someone. They understand the impact that caregiving can have on others, but don’t necessarily know how to plan for it themselves, he said.
• 70% of family caregivers report missing work because of caregiving (The Unspoken Costs of Caregiving; Carewell, November 2020.)
• There are 31.7 million small businesses in the U.S.
• Most people don’t understand that every business owner in America is eligible for an above-the-line deduction for LTCi. “It may be one of the most tax-efficient ways to fund future care needs. Benefits are generally paid 100% tax-free, and most business structures allow an owner to deduct some (or all) of the premiums paid by the business for both the owner and their spouse,” Roers said.
• The agent may go from a single sale (the owner and a spouse) to multiple sales if there are others in the company that may get coverage.
• Business owners also don’t have to meet the bar of having medical costs (including LTCi premiums) be over 7.5% of adjusted gross income to deduct premiums. It can be more difficult for individuals to reach that threshold.

Why should business owners be interested?

Roers added that business owners should be interested in LTCi because it offers them many benefits, including the following:

• Owning LTCi is one of the ways that business owners can recruit, reward, and retain employees, as well as ensure additional tax deductions for their business, Roers said. “It is a fully portable benefit,” he pointed out, “and provides the ability to select employees to receive it (i.e. tenured or top performers, or by job level, etc.).”
• A small business may be successful partly because it is a family business, or an entity that has developed a family-like culture. “Employers with a high degree of caring for their team may be more invested in ensuring they have some protection from risks, such as LTC,” he said.
• Having insurance may help a business owner maintain a legacy or help protect the business from potential impact of care costs or losing the services of an employee who must care for a loved one.

Selling LTCi to business owners

So, what are some of the steps that agents can take to sell LTCi to business owners? According to Roers, they should:

• Ask all prospects or clients if they (or a spouse) are a business owner. “Some may have a side business that you are unaware of and may be able to pay their premiums through that business,” Roers said.
• Think creatively about small businesses and how they’re structured. Farmers can set up their business in a variety of ways, but no matter the business structure, they can deduct some, or all, of the premiums. “Think of businesses or vendors you work with – your chiropractor or dentist may have a small practice, your local print shop, your small IT support firm, etc. Non-profits can pay the LTC premium for their employees, spouses
  and dependents without the premium being taxable to the employee,” Roers said.
• Consider partnering with local tax professionals or accountants. Many are not familiar with the various tax advantages that LTCi offers and it gives them value-added content to share with their business owner clients. “You could send them tax guides from the carriers, or provide updates on annual changes to the age-banded tax deductible amounts,” Roers said.
• Find an advocate in a company who is invested in having access to a solution. This could be someone with a recent family experience with caregiving.

Additional strategies

There are also additional strategies that business owners may appreciate, Roers said. Among them:

• Buy-up options when the business is performing well. Some policies allow annual buy-ups of additional coverage at the new age.
• Accelerated premium payments, like a ten-year pay, may allow them to pay off their policy by the time they retire or exit the business.
• Employers may use cash bonuses to help employees pay for some of their LTC premiums if they do not want to pay the entire premium.

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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].