Wealthy prospects want to hear about but aren't interested in long-term care insurance, according to prevailing wisdom. But does that claim hold up? We asked several advisors and industry leaders how they use LTCI to reach high-net-worth clients.
Third-Party Ownership
Irrevocable life insurance trusts are a proven technique for generating tax-advantaged liquidity for estates. Tracy Shaw, MassMutual's assistant vice-president of long-term care insurance marketing, suggests following that model for LTCI with insurers like MassMutual that allow third-party ownership of the contract.
The trust owns the LTCI policy, pays the premiums and is the recipient of any benefits paid under the contract. The insured gifts the policy premiums to the trust; structured properly, this arrangement can remove the gifted premiums from the insured's estate. If the insured files a claim, the policy benefits are paid to the trust as the policy's owner.
The trustee can then pay for the insured's cost of long-term care or the insured can pay those costs out of pocket–further reducing his or her estate–and allow the received benefits to accumulate within the trust.
Keeping Control
Control is important for wealthy clients, says Terry Sandvold, a financial professional with The Prudential Insurance Company of America in St. Louis Park, Minn. Consequently, when he discusses LTCI with these clients, he stresses how the insurance gives them greater control of their financial futures and enhances wealth preservation.
It's essentially risk analysis, a concept that wealthier clients understand. "In almost all cases, they end up buying the 5 percent compounded cost of living, which is the best cost of living feature you can buy," he says. If they don't purchase a lifetime benefit, they usually select shared care, in Sandvold's experience. "That will increase the probability of using more of the benefit," he notes. "They like to have the odds on their side and that's one way they can see shared care is a very good benefit for them."
Integration with Wealth Management
Scott Wirtz, CLTC with Eslick Financial Group in Waterloo, Iowa, is a rare breed: He's an LTCI expert within a wealth management firm. Many wealth managers refer their clients to outside LTCI experts, but in Wirtz's case, the referrals come from his colleagues. "Our firm has done a really good job of positioning me as the long-term care planning go-to person for our local advisor community," says Wirtz.
The LTCI business also builds prospects' and new clients' interest in the firm's other services. Wirtz attributes that interest to an emphasis on creating a learning environment instead of pressing for quick sales. "I hear so much in the long-term care industry about one-interview sales," he says. "I've never experienced that.
