In a perfect world, a client would never show up at your office requesting that you cobble together a financial solution for them after they'd encountered some sort of problem. Often, however, that isn't the way it works. And if such a client shows up on your doorstep in need of late-in-the-game long term care insurance coverage, there's more you can do than duck and run for cover.
Enter the stereotype
While there isn't a completely "typical" picture of someone who is likely to show up in need of LTCI, the scenario too often looks something like this: An individual comes to your office only after receiving a diagnosis of Parkinson's disease or Type 2 diabetes. At that moment, he's finally realized his health isn't going to last forever and that now is the time to pursue LTCI coverage. For better or for worse, he's come knocking.
Unfortunately, at such a crossroads, seeking LTCI can be a bit like buying a fire extinguisher once your home is in flames. According to Maureen Lutkins, long term care manager with Underwriters Marketing Service in Mt. Laurel, N.J., it's a predicament.
"Unfortunately, so many people are still in a state of denial and they don't understand that LTCI just isn't like normal life insurance." People haven't gotten to the point [i.e., old enough] where they need to have it, Lutkins adds, then they determine the need for it once their health begins to decrease – and then they can't qualify.
With the bulk of sales issued to clients between the ages of 58 and 64 (58 is the average age of issue for LTCI), it's clear that those who don't approach the issue of coverage until their late 60s are pushing into a statistical risk zone. And those who do seek out coverage are overwhelmingly offered LTCI as a benefit through coverage in the business market.
If there's any panic button, it's not only that clients themselves don't have LTCI on their radar, it's that producers and planners haven't gotten their clients to focus on the risk it presents.
"I don't think producers have really gotten their clients to focus on long term care," Lutkins says, "and the government just isn't going to cover it – they've got to take care of it on their own."
According to Tom Beam, professor of insurance at The American College in Bryn Mawr, Pa., another stitch in the LTCI cloth has to do with its complexity. "I think a lot of people, if they consider getting LTCI at an early age, they'll be able to get it," Beam says.
"And if the person can get LTCI, I would recommend [finding] a good agent; it's probably one of the most complex products there is."
But, if they wait until they have health problems, Beam cautions, "They might want to go to a financial planner to talk about different options" in how to utilize their estate to pay for their long term care.
Thinking outside the box
Bear in mind one thought should be first in a conversation geared around alternate long term care funding: how to utilize various resources to pay for care. Medicare funding options have been dealt a blow recently, so spending down a client's assets to qualify for that care is no longer the option it once was.
According to Nancy Morith, CLU, president of NP Morith Inc. in Princeton, N.J. (Morith also serves as adjunct faculty at The American College), clients who seek LTCI after it becomes difficult to qualify have to start looking at alternate private financing options.
"The thing you need to do is look at what other assets are available and how they could be re-positioned to help fund care," Morith notes.
This discussion should include the use of not only life insurance and possibly annuities but also home equity conversion mortgages or annuities that have LTCI riders attached. The challenge, as Morith sees it, is to address how assets can be reshaped to provide what's necessary. "Is there existing life insurance that isn't needed – can that be converted? Can you put an LTCI rider on an annuity? Then you can access not only the annuity without penalty, but there'd be a separate fund of money coming from the insurer. It's looking at pots of money that exist that people hadn't previously considered."
