Broadtower Base

LTCi

What Can We Do?

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In dealing with the day-to-day trials and tribulations of the insurance business, agents and advisers spend a great deal of time putting out the “fire” of the day. Over time, our primary job of helping customers identify and mitigate risk can blur as we go from one hotspot to another without asking the most important question, “What can we do for you that will help you sleep better at night?” After all, isn’t peace of mind the greatest service we provide?

In my small corner of the insurance world, we wring our hands about higher premiums, tougher underwriting, and worries about carriers staying the course. No doubt these are topics of interest, but obsessing on real or imagined problems robs us of the bandwidth required to provide some level of financial security in a rather menacing world. While most of our clients don’t have to worry about real lions and tigers eating them for lunch, they do need to be wary of not having the fiscal means to put food on the table or afford the care they need.

As our customer’s guide in the financial wilderness, job one is to help them identify risks and arm them with the weapons to fight the unexpected costs of a lost love one or a chronic medical condition. We can’t always provide 100 percent of everything our client needs or wants, but some protection always beats a blank. Getting better at helping consumers take incremental steps towards financial security is the world we live in today. The reality is that most consumers would be well served if they could at least co-insure many of the financial risks they face.

The good news is we have numerous options to supplement retirement income and savings and to ease the burden when long-term care is needed.

Here are some examples:

  • A traditional LTCi policy with a two-year benefit and a future purchase option;
  • A term or permanent life insurance policy with a chronic illness accelerated death benefit;
  • A critical illness policy that fills the gaps in care provided by today’s health insurance plans;
  • Reposition a rainy-day fund into a life or annuity product that provides long-term care benefits;
    • Great 1035 Exchange opportunities here; and
    • Some annuities provide simplified underwriting for tough cases

Sometimes an incremental strategy of small risk management solutions is the best option for consumers who are struggling with other financial obligations. Don’t overlook these mid-market sales. They can translate into sustained serious income for you and along the way, you may get the “elephant” that you’re hunting for.

Easy Answers

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We are all of course guilty of succumbing to the temptation of embracing easy answers. However, sometimes it seems our own profession may have a particular affinity for simplification excess.

This is evidenced by a statement I heard recently from the committee examining the wide, and growing world of Combo Products. “Hybrid, Linked and Combo products are the fastest growing segment of both life and long term care insurance.” When you add asset based long term care sales we have a several billion dollar industry with stand- alone LTCI sales accounting for only about $500 million. The interesting question is how much of the current life production is written with some form of chronic illness benefit? The current “guess” is approximately one third. This number will continue to grow as more companies move aggressively to provide some form of living benefit.

These riders are being produced across a very wide spectrum of quality and intent. I am concerned that many may not clearly understand what was sold or in some cases automatically included in their life policy. I am also concerned that consumers may not clearly understand what they bought..

Any leveraging of risk is of course preferable to ignoring the problem. It is also very helpful that we have so many more choices.

Here are a few of the questions that come to mind:

  • How can you sell any version of Long Term Care protection and not be trained or certified to have that conversation?
  • If you offer a benefit do you not have a responsibility to at least offer the lowest net cost to pay for the risk?
  • Did you evaluate 1035 opportunities before recommending any particular new coverage?
  • Did you clearly explain the difference between LTC ‘health’ riders and LTC ‘life’ riders?
  • Where do you place Long Term Care ‘Planning’. Is this a Health or Estate or Asset Management planning process or some mystical combination of all the above?

The ability to conveniently address more than one need for protection with one sale has always been attractive. The current popularity of this approach as it relates to LTCI however requires an understanding that the temptation of easy answers must be resisted. There is no one right answer, each situation is unique. Begin as usual with a careful review of what is already in place. What could be exchanged at what cost? How best do you enhance LTC protection and what is the net cost of those recommended options? We have not found a new, easy answer or an easy way of avoiding a more comprehensive conversation about all the insurance options. The truth is complicated and requires training in all the available solutions. The best answer may actually require a little of this and a little of that. Learn to Mix and Match with confidence and enthusiasm A frank and open analysis of all the good and all the bad of all the choices is best. Companies, agents and consumers need to abandon the quest for that “Easy” red button. Other than that I have no opinion on the subject.

Tax Deductible Premiums And Tax-Free Benefits For Business Owners

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If you’re in the group health marketplace or work with business owners, you’re getting ready to bring “news”: good, bad or indifferent, to your clients regarding ACA’s impact on their lives in 2015.  We understand your pain and theirs; we’re business owners and the impact on us and our employees in the past 18 months has been mostly unpleasant.

That being said, you can bring good news to business owners who are concerned about preserving their retirement income and their assets.  As we’ve said many times: traditional long-term care insurance benefits are always received tax-free; and for business owners the premiums are partially or fully tax deductible.  The benefits of this should be obvious.  Business owners can protect their income and assets with highly leveraged, tax-deductible dollars.  This is a great message to bring to clients who are getting squeezed by higher health insurance premiums and taxes.

This approach works for sole proprietors as well as for businesses with W-2 employees.  If there are at least three employees (including the owner) they get another advantage: simplified underwriting!  Your eyes are not lying!  Virtually every employee working in a company with three or more lives will qualify for long-term care insurance (ages 65 and younger), if they can answer “no” to a series of knock-out questions on a simplified application.

Here are the rules in a nutshell:

  • LTCi is available for groups of three employee lives and up.  The rules are more flexible as the groups get larger.
  • Groups 3 – 9: minimum of five approved applications, including spouses, to get Simplified Issue (“SI”).  Employer pays 100% of a defined benefit design for all applicants.
  • Groups 10 – 74: minimum 10 approved applications to get Simplified Issue.  Employer must contribute at least $25 or 25% of defined plan design monthly to get Simplified Issue. Spouses can qualify for SI if employer contributes for them.
  • Groups 75 – 499: can be voluntary, no employer contribution required; minimum 10 approved applications to get SI
  • Groups 500+: voluntary, 25 approved apps to get SI
  • All multi-life groups get the multi-life premiums; employees or spouses for whom employer contributes the minimum for each group size, get an additional 5% discount.
  • Additional discounts apply in most states for having a spouse/partner whether they apply or not, and a larger discount if spouse/partner applies and is accepted

The insurance company for this excellent simplified underwriting program is LifeSecure, a wholly owned subsidiary of Blue Cross/Blue Shield of Michigan.  The benefits are easy for consumers to understand and the rates are very competitive, particularly in California.  It is also available to individuals on a fully-underwritten basis.

In today’s uncertain economy, you have a duty to discuss the need for long-term care planning with every client.  Tax-free benefits are always in play for any consumer who purchases a traditional long-term care insurance policy.  Tax-deductible premiums are of great value to nearly every business owner, and simplified underwriting for employer groups with three or more employees sweetens the pot.

Take this good news out to your clients; they’ll thank you for it.