"I can't afford the premiums." When some LTCI advisors hear that from a prospect, they assume it's just another objection to overcome. Others assume that if it's a true statement, the prospect's net worth is probably too low to justify buying the insurance. In some cases, though, the prospects are qualified and willing to buy the coverage but genuinely face difficulty paying the premiums. It may simply be a temporary cash flow problem, for example, or it may be a sign that they need to reallocate their assets to free up liquidity. If the objection is genuine, though, it's often not insurmountable. We asked a group of experienced LTCI advisors how they deal with this problem.
Review the cash flow
Robert L. Holland, Jr., CFP, is a registered representative with INVEST Financial Corporation in Denver, Colo., who recommends reviewing clients' budgets to determine where their income is going. It's the classic process of identifying needs versus wants: If the clients recognize the need for LTCI, they might be willing to give up some discretionary spending to pay for it. In Holland's experience, that review often uncovers the needed funds; other advisers agree with him. "Looking for common-sense ways to free up money sometimes can provide the simplest solution to the problem," says Stuart Armstrong, CFP, CLTC with Centinel Financial Group in Boston, Mass. "Frequently enough we can help identify expenses that can be adjusted or eliminated and even small expenses can add up to big savings."
Check other coverages
Armstrong cites an example in which he helped a couple free up cash flow by reviewing their health insurance. He discovered that they could change plans to a more affordable company because they were flexible with their physician relationships. Armstrong found a new health insurance benefit design that worked better for the couple and simultaneously saved $200 per spouse each month. Those savings were enough to fund LTCI for both spouses.
Kay Conheady, CFP, with Apropos Financial Planning in Rush, N.Y., also recommends a review of the client's other insurance coverages. She's found that some clients who are at the stage of considering LTCI have life insurance that they no longer need "because the responsibility to protect dependents against premature loss of the breadwinner, that whole stage of life has passed," she says. The premium savings and in some cases, policy cash values, can be used instead to fund LTCI.
Product exchanges can also provide funds in the right circumstances. "A lot of people may have old annuity contracts lying around," says Ray Benton, CFP, with Lincoln Financial Advisors in Denver, Colo. "Even though they are designed to provide retirement income, most people die owning them. They may have had them for years and they're not really using them for anything other than continued tax deferral. I can use a Section 1035 exchange to a contemporary contract that has a guaranteed minimum income benefit and that income benefit is doubled if they're admitted into a long-term care facility." Similarly, Armstrong cites a case in which he suggested the clients use a tax deferred annuity they currently owned and take payments for 10 years which could be linked directly to the LTCI company. This method gave the clients a paid-up policy in 10 years and protected them from possible future premium increases.
