5 ways to sell LTCI to boomers

By Jeff Sadler

October 16, 2013 at 02:00 AM

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Getting through to the boomers has been the greatest challenge of the fledgling long-term care insurance industry, and the key to the future financial success of both boomers and long-term care insurance depends on better matching them up before advisors everywhere have their nineteenth nervous breakdown.

One of the primary obstacles is that boomers still picture themselves as young, and their knee-jerk reaction is that long-term care events happen to people much older than themselves. So how best to get their attention on this issue?

Statistics show that today's average purchase age for long-term care insurance is 57. Boomers. The largest number of applications (fifty-five percent) is from individuals aged 55–64. Boomers. The largest percentage of applicants rejected for long-term care insurance: ages 70+. Not boomers.

Here are some longevity trends that might further motivate this age group to act:

The poverty rate among seniors is about ten percent (lower than the national rate of 13.2), but an additional twenty-five percent of seniors are near the poverty line, and the picture may be worse depending on the results of the Great Recession, due primarily to rising health care costs.
More than seven percent of the age group 40–59 is classified as depressed. This is not the best diagnosis with which to obtain long-term care insurance.
Chronic health problems are more than double for folks age 65 and older. The boomers began to hit this age benchmark in 2011. A simple formula: more chronic conditions equal higher out-of-pocket medical costs. Also, it's not easy to obtain long-term care insurance after the diagnosis of a chronic condition.
Alzheimer's is expected to become the leading cause of death in the future, having increased more than forty-six percent between the years 2000 and 2006. According to the Alzheimer's Association, people over age 60 live an average of four to six years after diagnosis. Long-term care insurance covers this risk.

This information supports the notion that, if one wants to defend against future long-term care costs with insurance, the earlier it is purchased the more likely that it will be a viable financing alternative for boomers. They are in the prime age category to purchase this coverage now.

Granted, insurers have not helped themselves much by the long-term care insurance message they send boomers' way. Long-term care insurance brochure photos of the elderly send the wrong message to this youth-oriented generation. Focusing on disability is also of little value for a group that cannot imagine this scenario. Additionally, complex products are difficult to sum up in a sound bite. This is the USA Today generation, after all.

In her book Helping Yourself Help Others: A Book for Caregivers, former first Lady Rosalynn Carter states that there are four kinds of people who need long-term care insurance: someone who is a caregiver; someone who was a caregiver; someone who will be a caregiver; and someone who will need care in the future. If that doesn't describe the boomer generation, nothing does. They are the first generation of mass caregivers, thanks to improving medical technology that has facilitated their parents' longevity.

Their experience with the demands of long-term care should make it easier to demonstrate the importance of planning ahead. And boomers have been very protective of their own children, giving them the best of everything whenever possible. Shouldn't that extend to keeping the kids out of a caregiving role, if avoidable?

By and large, boomers believe that this problem is years away, leaving plenty of time to solve it. Providers of long-term services contradict this assertion, pointing out that more and more of those under age 65 have had to access this care because of health problems. The number of under-age-65 nursing home residents has risen by about twenty-two percent in the last eight years. About fifteen percent of nursing home residents are younger than 65. And that is the last place a boomer wants to end up.

Communicating this message to the Woodstock generation is about as easy as it was to get to that concert more than forty years ago. But the message remains — consider it early! A study of more than 250,000 applicants conducted by the American Association for Long-Term Care Insurance found that a large number of people under age 65 were likely to be granted preferred rate status, saving ten to twenty percent off their premium cost, while thirty-three percent of those between ages 60 and 69 were declined coverage because of an existing health condition.

The most successful way to sell long-term care insurance to this generation has been to reframe the discussion, making it less about long-term care and more about preretirement planning. Here's how.

1. Pitch LTCI as part of life-cycle planning.

Many financial advisors today practice life-cycle planning with their clients, creating a plan that addresses the five phases that span an individual's entire financial life cycle:

Early career (25 or younger to 35)
Career development (35–50)
Peak accumulation (50 to 58–62)
Preretirement (three to six years prior to planned retirement)
Retirement (62–66 or older)

In the peak accumulation phase, there is usually a point where a long-term care discussion is important. During this phase discretionary income may be at a high. This money could be used to fund the transfer of the long-term care risk to an insurer while still at an age to qualify and implement a solution with distinct economic advantages.

There are analysts who believe the best way to increase long-term care insurance sales is a reliable and objective financial analysis. Positioning long-term care insurance as part of a life-cycle planning approach accomplishes this strategy. Numbers are objective, and the math most vital to boomers is the money needed to enjoy retirement in the same lifestyle as when they were working and earning money.

Long-term care expenses can wreak havoc with even the best-constructed retirement plans — unless they are accounted for up front. Manage them, and the program you design for your clients is more likely to stand the test of time.

2. Address health care concerns.

How to pay for health care is the single biggest concern people have as they approach retirement. The cost of health care trends at 2.5 percent above the general inflation rate, according to the Kaiser Family Foundation. You simply can't plan for retirement without factoring in the out-of-pocket cost of health care, which includes long-term care expenses.

Let's say you have as clients a couple who has saved $400,000 for their retirement. You have determined that they need to be closer to $800,000 to cover their retirement living expenses to maintain their preretirement lifestyle. They are both 50 years old and just coming into their peak earning years, and they have time to make up the rest.

The problem? This amount covers only your estimate of the expenses needed during retirement when both are well. What about health care costs that slip through the cracks of Medicare and Medicare Supplements? What about the cost of long-term care? Without planning for this contingency, some of that $800,000 will have to go for these expenses — which may change the way they both live.

Plan Administrator Fidelity Investments estimates that a couple would need the equivalent of $225,000 in savings at age 65 to offset future medical expenses, not including long-term care costs. So then, what about those costs? See Table 11-1 for estimates of costs now and in the future.

Table 11-1. Forecast Long-Term Care Costs
	*1 Year of Care*	*3 Years of Care*	*5 Years of Care*
Cost today	$73,000	$225,570	$387,500
In 10 years	98,100	303,200	520,800
In 20 years	131,850	407,500	700,000

Where will this money come from? Pick any number in Table 11-1 that the couple feels comfortable with, add it to the $215,000 for health care costs cited earlier, and you will be close to what will be needed for the unhealthy retirement years.

Health and long-term care costs can derail many a solid retirement plan. Is this what boomers want to hear? The National Retirement Risk Index indicates that sixty-one percent of consumers are ill-prepared for retirement due to lack of planning for out-of-pocket health care costs. All of this occurs during retirement, when you are not working and bringing in money to offset these expenses.

Even while working, many Americans are blindsided by health care costs. In the Employee Benefits Research Institute's Health Confidence Survey, thirty percent of the working Americans contacted for this survey had to decrease their retirement plan contributions because of higher-than-expected health care costs. Moreover, fifty-two percent of these workers slashed other savings; twenty-nine percent had trouble paying for basics like food, heat and housing; and thirty-six percent reported difficulty paying other bills. What do you do when you're retired?

Now that you have, in Rolling Stones parlance, "painted it black," it is time to introduce a solution to the long-term care cost part of the equation.

The preceding couple is $400,000 short of normal retirement savings; when you add in health care costs that is an additional $225,000. And long-term care could be (from Table 11-1) another $400,000 apiece. This leaves them about $1.5 million short and with not a lot of time to raise it. No wonder thirty-six percent of retirement dates for couples are pushed back because of financial reasons, shorthand for not having enough money to retire.

Now you have the boomers' attention.

But what if you could alleviate their concerns about long-term care costs with a long-term care insurance policy? If they are comfortable with $400,000 apiece, you could design a plan for them beginning with that amount of coverage and increasing annually with an inflation option for a combined price of about $3,500 annually. Baby boomers like numbers, and exchanging a reasonable $3,500 a year for an increasing benefit that starts immediately at $400,000 each is a highly advantageous investment.

More important, you have adjusted the retirement money to be raised from $1.5 million to $600,000 or so — for a fraction of that cost.

Boomers like to think they can do it better themselves and have learned to mistrust the insurance industry over a lifetime. But where else can you invest $3,500 and immediately have a total of $800,000 at your disposal if both parties need care? Insurance is fully funded from the start (not counting the increases one will receive from the inflation option), an often-overlooked advantage that you can't stress enough.

With the retirement conversation approach, you have literally marked a turning point in the discussion with the client. Today, retirement is seen as a financial hurdle that seems impossible to surmount before the age is upon us. People are postponing retirement or working in some way to bring in enough income to make it work. It is not their parents' retirement, that's for sure.

Confronted with the amount of savings needed for a secure retirement, the fiscal mountain seems too high. But, with one purchase, a nice chunk of dollars that had to be set aside can disappear. Risk transferred.

Concerns about retirement are experienced across the board, but the youngest boomers express the most concern. See Table 11-2 for an overview of generational angst.

Table 11-2. Retirement Concerns by Generation
*Concerns*	*Gen Y*	*Gen X*	*Younger boomers*	*Older boomers*
Having to work full-time or part-time to live comfortably during retirement	61%	68%	68%	62%
Outliving retirement money	63%	69%	72%	68%
Providing for long-term care needs	52%	67%	69%	69%

Critical concepts to put across to boomers:

The younger they are when they purchase the coverage, the less expensive the policy will be. In addition to buying it at a younger age, the opportunity to take advantage of a preferred risk discount is much greater, further reducing the price your client will pay.
The younger the consumer, the easier it is to qualify for coverage. Postponing the decision not only fails to save money in the long run, it puts your clients' insurability at risk. It is not worth the gamble to possibly lose the insurance option if they aren't healthy enough to buy it in the future.
Plan design elements can help keep costs down considerably. I'm working now on insuring a couple who was set on the amount of long-term care insurance coverage to purchase — until they saw the price tag. It was about $2,000 more a year than they had budgeted. No reason to panic; by altering some of the coverage options, the price came down to what they could afford without sacrificing many of the benefits they wanted. You can do many things on this front.

3. Draw on caregiving experience.

This won't be easy. You would think that the hands-on caregiving many boomers have participated in would be enough to send them to their financial advisors to figure out a way to be better prepared for their own futures.

Not so, according to a 2011 study. Baby boomers overwhelmingly report that they learned the consequences of being unprepared during this experience; however, few have done anything about it. Further, boomers recognize the family's financial and emotional burdens in the face of a long-term care event, and they value highly what long-term care insurance can do to alleviate these burdens. But they haven't taken the actions necessary to secure this coverage.

The study goes on to evaluate situations in which their parents had long-term care insurance and the effect it had, according to the boomer:

• Eighty-four percent said the insurance lessened the family's contribution to care.

• Seventy-seven percent said it reduced the time family members had to provide care.

• Seventy-six percent said it increased the quality of care.

• Seventy percent said it preserved the parents' nest egg.

• Sixty-six percent said it helped them focus on their own financial goals.

But, despite this direct evidence, they are not rushing out to obtain the long-term care insurance plans they need. You can watch CSI, but that does not make you a forensics expert. And the actual call to action here requires a monetary outlay. Easier said than done.

This disconnect comes down to a couple of factors: the need to act now, and the concept of purchasing a product they may never need. The need to act now was outlined above in the critical concepts to convey to boomers. The "I may never need it" excuse is just that, especially if they have just seen their parents experience it. Why should they be exempt?

But it is a real and repeated objection that may best be dealt with using a combination product. The question is asked and answered, because combo products can be used for something else if the need for long-term care never arises. This basic boomer objection is the reason that combo products were created and that they are now available as a solution to the long-term care expense financing issue.

Boomers' insistence on being the healthiest generation in history makes a good case for them to plan ahead for long-term care costs. "With increased longevity and advances in medical science, boomers will be exposed to more chronic LTC expenses." A longer life is potentially both a blessing and a curse. Boomers talk a lot about aging with dignity. Having a source of income for long-term care expenses enables that to happen.

The idea of preparing early may well jibe with what boomers are discovering about their own parents' situation when the caregiving call comes. Caregiving boomers find serious debt when they take over the checkbook. Half of those caring for a loved one 50 or older — about 17 million Americans — spend more than ten percent of their income on caregiving. They do not want to replicate this situation with their kids; there goes the dignity of aging.

In fact, informal family caregiving costs outpace Medicaid's total expenditures. About 34 million family caregivers provided care at some point in 2007 to the economic tune of $375 billion of unpaid contributions. This is based on the average caregiver providing 21 hours a week of care at an average value of $10.10 per hour. The minimum wage is catching up to that number. It was more than the $311 billion Medicaid paid out in total that year.

Living through the experience of caregiving should guarantee a conversation about planning ahead for long-term care expenses for your boomer clients. Remember some of the axioms above and you may be able to turn that into a sale, if suitable.

4. Consider generational nuance.

When working with a boomer client, remember that there are two and perhaps three subsets of this generation. They are at different points in their lives and will entertain the long-term care discussion in different ways. After all, this group spans eighteen years, from 1946 to 1964.

See our infographic: What boomers want from agents.

These subsets are:

Youngest boomers. In 2011, they would be 47 at the youngest and 52 at the oldest. They have probably not enjoyed all of the financial success of their older generational mates, and they are still working, with a long way to go to retirement. This is a good time to purchase long-term care insurance, but discretionary income may be an issue as well as the thought that a long-term care need seems a long way off. Depending on their employment circumstances, they may be good candidates for employer-paid coverage or, if self-employed, a tax deduction for this policy. These reasons should motivate them to take action today (and save money in the process).
Middle boomers. These are 53–59-year-olds who are suddenly serious about their retirement planning. Putting aside the money they have been able to build up so far, and protecting that and their future earnings are important to them. Long-term care insurance is just such a protection as well as (as outlined earlier) a vehicle that can reduce the amount of money needed for retirement.
Leading-edge boomers. This is the 60–65 crowd, virtually already in retirement. The oldest, at age 65, number nearly three million. Medicare is already feeling the impact of their arrival. Social Security is next. For these 65-year-olds (don't call them seniors), twenty-two percent already own long-term care insurance. And seventy-four percent are aware of their ability to apply for a reverse mortgage, a financial strategy that has been affected by the Great Recession. Long-term care should be front and center for them. Their net worth average was around $250,000 just three years ago, potentially vulnerable to long-term care expenses if no advance planning had been done. The premium will be higher, but on the whole this group is more affluent than those behind them. Their health may be the major obstacle to buying this coverage once you have determined that they are suitable prospects.

This is the generation that wanted it all, and that feels it is the most impactful group in history. Modest they are not. Some humbling lessons await them if some serious financial planning is not being done — today.

Part of this planning is addressing long-term care needs. For you, the advisor, there are many ways to start this conversation. Historically, it has been much harder to end it. Many boomers are willing to roll that Tumbling Dice rather than be proactive about this need.

Their personal experience and recent rocky economic times are good reasons for boomers to take this issue to heart. They are too large a group to hope to fall back on the public programs that might reimburse for long-term care expenses. Taxpayer money cannot support the full scope of needs for these aging rock and rollers.

5. Sell to women.

The most common worry for women after age 50? Not having enough money as they age.

Many have not saved much for retirement. Raising kids in a post-divorce, post-layoff world is a financial struggle for many. A number of women don't think they will ever be able to retire.

Ironically, women have the largest potential long-term care problem. Here's why:

Women live about five years longer than men.
Women are far more likely (than men) to reach age 85.
Women age 75+ are far less likely to be married (thirty-eight percent) than men (seventy-four percent).
Women over the age of 65 are twice as likely to be living alone.
Women over the age of 65 include 980,000 nursing home residents (vs. 337,000 men).
Women are far more likely to suffer from Alzheimer's disease.

Add in the hands-on caregiving that women are likely to be involved in during their working years and the long-term care story should jump off the page for them. An AARP survey reported that more than sixty percent of female caregivers made career sacrifices that included cutting work hours, passing up promotions or quitting their jobs entirely to accommodate their caregiving responsibilities.

Moreover:

Women who provide care for a disabled or ill spouse are six times more likely to suffer symptoms of depression.
Women who spend more than nine hours per week caring for a disabled or ill spouse have double the risk of coronary heart disease.
Women may also lose out financially when balancing work with caregiving. Losses average $565,000 in lifetime earnings, plus the loss of Social Security and pension benefits.
Female caregivers are more likely to suffer emotional stress, exhaustion, anger and anxiety, depression, reduced immunities, increased substance abuse, and poor physical health, resulting in higher mortality rates than noncaregivers.

If you think this is unfair, you're right.

Women see long-term care coming far more easily than men. In many of the cases where I've worked with couples, it's the woman who most often has a sense of urgency about the situation.

Still, they rarely initiate the conversation about planning ahead for it. In fact, an AARP survey a couple of years back focused solely on boomer women talking with their parents about future long-term care needs. The study found that sixty-nine percent of boomer women have talked with their parents about long-term care issues, but only forty percent had actually done any planning to help their parents should they need assistance.

And that is their parents! What about themselves? You can bet those lack-of-planning numbers are worse.

Long-term care insurance experience to date makes it vital for financial advisors to focus on female clients. Quite simply, women benefit more from owning long-term care insurance. Table 11-3 provides supporting data.

Table 11-3. Distribution of Long-Term Care Benefits by Gender and Marital Status
*Claimant*	*% of All Claims Paid*
Single Women	41%
Married Women	25%
Married Men	22%
Single Men	12%

Two-thirds of long-term care insurance claim dollars go to women. Chances are good that a premium dollar invested today will be returned during a time of great need in the future.

What does the scorecard look like so far?

Women are worried about having enough money in the future.
Women are enduring physical, emotional, and financial trauma from the caregiving tasks that typically fall to them.
Women who buy long-term care insurance tend to be the ones who end up using it.

But this is not the complete picture for the prospective female client. You should know that the U.S. Census Bureau reports that women make up forty-three percent of all individuals with more than $500,000 in assets. Women own fifty-three percent of all stocks. More than 1.3 million women professionals and executives earn in excess of $100,000 annually.

That seems like a formula for sales success. Initiate the conversation and you will have an empathetic female ear for your audience — who likely can afford a long-term care insurance premium to protect herself and her assets.

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