Marketing Key-Employee LTC Insurance Should Work In The Corporate Market

While we LTC specialists still sulk about the mess created by having both tax-qualified and non-tax-qualified LTC products on the market, it doesnt pay to sulk too long. Now, there is much to be done in the corporate market with tax-qualified LTC sales, using the concepts already cultivated in the DI field as noted above.

Lets face it. Employers are always looking for ways to retain key employees. They see LTC events as a potential nightmare for their employees, especially during retirement, but they want nothing to do with any funding responsibility for that after the employee retires.

Enter "key employee LTC." Once again, the same carve-out procedures can be used. If youve already set up a carve-out plan with this business, you can add LTC to it. If not, use the same criteria as above to establish a program for just the key employees the employer wants to cover with a tax-qualified LTC insurance program.

Keep in mind that there are two significant differences between the LTC and the DI plans you can set up. First, even if the employer pays for the key employee LTC policy (C-Corporations get the full deduction; in 2003, S-Corp owners, partners and sole proprietors can deduct 100% of the premium up to the individual deductibility limits), the benefits of a tax-qualified LTC plan (the only policies that allow deductibility) are received income tax-free. Thats a substantial difference from the DI policy where a deductible premium translates into taxable benefits at claim time.

Second, if the employer (C-Corporation most likely, due to the unlimited deductibility) buys a policy from a LTC insurer offering short-pay options (paid up in 10 years or paid up at age 65), you have a great story to tell the key employees. The employer is paying for the LTC policy that the employee will receive as a paid-up policy, with no future rate increases to worry about. This is a critical wealth protection vehicle with which to go into retirement. It may well soften the blow for retirees of employers that have found it impossible to fund retiree health insurance. And, it may likely help employers retain key people for a number of years.

This product creates a great opportunity to explore a market that has been underserved. Key employees are often older, experienced people, and they may well be aware of LTC events that have happened to someone they know. Paid-up LTC provides the best of all taxable worlds for employer and employee, along with having vital protection for the future.

In the 70s, Harry Chapin sang his "Circle" song. In the 1990s, Elton John added "The Circle of Life" for "The Lion King." Now, agents can complete the trilogy with The Circle of Disability, adding LTC to their corporate clients employee benefit package.

Reproduced from National Underwriter Life & Health/Financial Services Edition, January 20, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.