Marketing LTC Insurance In Today's Economy

A well diversified plan is another option to consider. It's a fact that two of the biggest selling LTC carriers in the past are now no longer selling new policies. In fact, both carriers have blocks of business that were performing so poorly they needed state government intervention to support the policyholders. These blocks were also subject to large rate increases. Given that, and the fact that we have seen several brand-name financial services companies implode in the blink of an eye, is it any surprise that consumers aren't convinced a carrier will be there in 30 or 40 years?

A prudent response might be to purchase two LTCI policies. For example, someone could purchase a base reimbursement plan that has built-in inflation coverage and would qualify for many of the state Partnership plans. In addition, he could purchase a cash-benefit plan with no inflation protection. The combined policies could meet the LTC need, and if there is a future rate increase from one policy or a carrier encounters financial difficulties, this wouldn't have as great an effect as it would on a single-policy LTC plan.

The obvious downside to this plan is that two applications are required, with two underwriting episodes. Additionally, two policies need to be maintained and their bills paid each year. If, however, a client balks at buying both policies, they may still buy the base reimbursement plan.

Buy, don't rent

A main complaint about LTC insurance is that if you never use it, you lose the money you invested. It is possible to acquire a LTC planning solution with little risk by purchasing an asset-based LTCI product, such as a single-premium life-LTC or annuity-LTC combination plan. Many of these plans offer money-back guarantee provisions, so if a person changes his mind, he can get his investment back. Note, too, that in 2010, provisions of the Pension Protection Act of 2006 will take effect allowing current annuity holders to do a 1035 exchange into an annuity-LTC plan. The tax implications of withdrawals from these plans for LTC needs have also been clarified.

There are many advisors who would be uncomfortable with a less-than-complete LTC solution right off the bat. However, there is a large part of the market that has never purchased a LTC policy or even started planning for LTC. This group needs to begin the process of planning, and one of the approaches discussed here may be advisable.

Regardless of the approach taken, one thing is a must–an annual review of the performance of the chosen plan. Each year, market conditions may change, and the plan must be looked at and further action considered, if necessary. In the end, however, listening to clients' wants and needs is the most important piece of the puzzle.

Tom Riekse Jr. is managing principal at LTC Insurance Partners L.L.C., Libertyville, Ill., a brokerage general agency. He can be reached at [email protected]