Offering Long-Term Solutions In A Short-Term World

Aside from the commonly known options that allow policy benefits to keep pace with inflation and provide for home health care benefits, there are four lesser known options that can provide solutions to additional needs and provide payment, ownership and reimbursement flexibility.

Non-level Premium: Some policies provide for significant cost savings by allowing for a larger premium payment in the first year of the policy and lower premiums throughout the life of the policy. This type of option will appeal to a client who currently has the ability to pay a large premium but who wants to have lower premiums in the future, perhaps after retirement. It also can result in significant savings to a client over the life of the policy.

For example, with a non-level payment option that requires a premium of 250% of the level premium in the first year and 75% percent of the level premium in subsequent years, the crossover point will typically occur between years six and seven of the policy. After year seven, the client will have paid less in premiums than if the level premium option had been chosen.

1=7 Elimination Period: Some policies allow for the insured to satisfy the elimination period with lower out-of-pocket costs by offering a "one day equals seven" feature. With that type of provision, if the insured has qualifying services on one day during a seven-day period, he or she will be credited with having satisfied seven days toward the elimination period. This type of provision reflects the way home care often is delivered, since home care services often are provided on some days by professional caregivers and on other days by family members.

Third-Party Ownership: Some policies allow someone other than the insured to own the policy. This can be attractive to a son or daughter who wants to pay for and own the policy on a parent, particularly when the full return of premium (sometimes called full nonforfeiture) feature also has been selected. With that combination of features, the son or daughter has the peace of mind of knowing that the parent has LTC insurance, if care is needed some day. They also know that upon the death of the parent, the amount of premiums paid into the policy will be returned to them, with no offset for claims paid.

Indemnity vs. Reimbursement: An indemnity benefit can offer flexibility in spending excess benefits over and above the cost of care for paying informal caregivers or family members, prescription drugs, services, or materials not specifically covered by the policy. Some producers recommend the indemnity approach for clients who want a higher daily benefit than the cost of care in their area and who want to help ensure any excess daily benefit is not "wasted."

Thinking long term

Identifying the solution of a less common LTC option or rider may be the result of an ordinary need-solution discussion. And if you're currently making the most of your client relationships, initiating this conversation may be as easy as asking a few friendly questions. Identify what motivates your clients by asking specific questions about the various "roles" they play in their lives (parent, business owner, professional, volunteer, caregiver, board member, etc.) and their concerns (tax advantages, asset preservation, preserving independence, etc.).

After identifying your clients' motivators, you can suggest options and riders that will provide the best fitting solution and help them achieve the financial and emotional security they deserve.