Bill Jones

Where does the money come from to pay for the care when someone needs long term care?  Whether done decades in advance or in a crisis, planning is necessary to properly fund this care.

Although I’ve been in the long term care industry since 1991, I have learned that though I may have been a long term care insurance expert, I did not know all the different ways people can choose to pay for their long term care.  

Back in the early 1990’s the long term care industry was defined solely by long term care insurance.  Those days are long gone. Does your practice reflect this reality?

I know I was not alone in my myopic approach to long term care planning.  Now, I hear every day from professionals who want to understand the true, complete landscape of planning options. 

There are many ways to pay for long term care.  You’ve heard about “combos” (I really don’t like that term) or “hybrids”, where long term care benefits are coupled, sometimes leveraged, in concert with a life insurance policy.  This new category of insurance products is the fastest growing type of product being purchased in the long term care industry today.  Do you know all of the different types of policies and how they work?  Even the ones that are available on a group chassis through an employer offering on a guaranteed issue basis?

What about short term care products?  Home health care only?  Critical illness policies?  Many critical illness events lead to long term care needs, and money from those policies can help cover costs incurred during a long term care insurance (LTCI) policy’s elimination period.

Then there are annuities.  Deferred annuities are now adding long term care benefits to their base policy, some with extended long term care benefits or leverage.  And medically underwritten immediate annuities are available for older clients who wish to convert an asset into income to pay for current long term care needs.  The sicker the client is, the more leverage the client obtains in creating income.

Finally, there are non-insurance choices such as home care service contracts, life settlement plans and reverse mortgages.  Do you know the six different ways a reverse mortgage can help a client pay for, or prepare for, long term care-whether it is for insurance protection or current long term care costs? If you didn’t know, it might be helpful to get in touch with a reverse mortgage broker who could shine some light on any questions you may have.

So What?  What Does This Mean To You?
First, it means opportunity.  Many agencies and producers will not go through the effort to learn, contract, market, and become proficient in offering all of the new funding solutions that are available.  Has the long term care need gone away?  Of course not.  

Are baby boomers, the wealthiest generation in history, aging every day and inching closer and closer to the day they’ll need long term care services?  Is their perception of that likely care need growing day by day?  Absolutely.  

The good news is this: as awareness of this need grows the solutions available to them have expanded–some with relaxed underwriting…or no underwriting at all!

Many agencies and producers built great businesses over the past 20 years focusing on selling long term care insurance.  The next 20 years offers an even greater opportunity for those who are willing to put in the effort now to become an expert beyond traditional LTCI.

Is this approach harder than focusing on one product category?  Absolutely.  That is why only a few will do it-which means a great opportunity for those that do.

Second, it means work and commitment.  If you really want to be a long term care expert in today’s industry, you have to learn, contract, market, and become proficient in offering all of the solutions that are available.  

The reward and satisfaction that comes from being an expert are tremendous.  Virtually every prospect you talk with-and every referral someone sends to you-will have at least one option to consider to privately pay for their long term care needs.  

Why would any of us limit the long term care planning market to only the healthy and wealthy?  And how uplifting will it be to know you have at least one solution to offer to almost everyone?

Third, it means applying a new planning approach to long term care funding.  This is the most important point I want to make.  

When you go to your doctor, he doesn’t just ask about one aspect of how you are functioning! He does a complete systems check on you, right?  

How about financial planners?  Ever complete their questionnaires so they can learn more about you?  It is not just, “do you want to move your IRA over here for a better return?”  Most important in that process are your goals.  

And finally, what about estate planning attorneys?  How much information do you give them when preparing to protect your assets and provide for your children and grandchildren?  It is soup to nuts information about everything you own, your income sources, your family and what your goals are.

Shouldn’t the long term care planning process mirror the approach of other professionals?

I have surveyed many LTCI agents and asked what they do to prepare for an appointment.  The answer I invariably receive is that they ask their prospect to complete a medical pre-qualification questionnaire.  That is because almost all representatives that sell LTCI are focused on selling only long term care insurance, and they want to make sure their prospect has a chance to get LTCI issued.  What about all the other products that are now available, and in some cases may be more attractive or more appropriate for your prospect?

Shouldn’t today’s long term care “expert” approach their prospect in much the same way that other professionals do?  Shouldn’t we be taking a more planning approach to helping our soon-to-be-client in managing their long term care risks?

The planning approach means getting a complete picture of not only who our prospect is medically and financially, but what their family dynamics are, who advises them in decision making and, most important, what their goals regarding long term care planning are.  

I suggest using a comprehensive questionnaire as a consistent guide in gathering information.  In short, apply the long standing success principle of “First seek to understand, then seek to be understood.”  Don’t go into a meeting with the prescription for the problem without first knowing the details around their long term care risks and what their goals are.

Even though sales of stand-alone LTCI are declining, the long term care industry is growing due to all of the new funding solutions.  Yet there remains a significant gap between the number of professionals capable of offering the new solutions, and the public and other professional advisors that are interested in acquiring these options.  How many families–and their legal and financial advisors–aren’t aware that their optimal long term care funding plan is just a phone call away–to a long term care planning expert?  Will you receive that call?

The long term care industry has evolved.  For those that want to also evolve their professions to become more of a long term care planning expert, not just a LTCI product expert, great opportunity lies ahead. 

The long term care insurance (LTCI) industry is in a state of decline, right? Just look at sales of traditional LTCI products. They are continuing to decline at a steady pace. Estimates are that stand-alone LTCI sales in 2014 will have ended around $300 million, approximately 70 percent lower than the peak of $1 billion in 2002. But sales of traditional LTCI are only part of the industry picture.

Let’s back up a second. Carriers know the same facts you know. Less than 10 percent of seniors have some LTCI protection, government programs are strained and not a solution, and most of the nation’s wealth sits in the hands of baby boomers and seniors, the very folks who are closest to needing long term care services. So carriers do see a tremendous market in providing LTCI protection for the benefit of their clients and agents. They simply have needed to find ways to participate in the LTCI industry with products that are properly priced and sustainable, have market appeal, and meet reasonable profit expectations. And they have been doing just that.

You have all heard about “linked benefit” or “hybrid” products that include the need for long term care services as a benefit trigger. The concept of enabling access to claim dollars for more than one reason is not new, but it is certainly the tool being utilized by carriers to expand their product lines and participate in the LTCI industry. Let me frame this product evolution more broadly.

Most insurance policies are single risk focused, designed to cover the risk of only one unexpected adverse event occurring. Traditional LTCI has been in this category for decades. However, the decade-long decline of traditional LTCI sales has sparked the expanded use of a very simple product concept. What if we make the pool of dollars available to our client if more than one adverse event occurs? What if we cover more than one risk in a single policy?

Here is my new term for this type of policy that enables claim dollar access for multiple reasons: the M-TIP.

M-TIP is a Multiple Trigger Insurance Policy. Get access to the claim benefit pool if more than one bad thing happens. This is the new trend in insurance policy design and has redefined, some say revolutionized, the new, real LTCI industry. The need for long term care services has become one of the main additional triggers being added to other core, formerly singular-need focused policies.

We can find M-TIPs with a long term care trigger in many different forms today. You can find life/LTCI, annuity/LTCI, CI/LTCI, and soon likely other health-based products offering claim access for long term care services. Most products are built on an individual chassis, but some are also offered on a true group product platform. The true group products provide underwriting concessions, including guaranteed issue. There are now several carriers participating in the real LTCI industry through the use of M-TIPs. The advent of this product development trend is having significant consequences to participants in the LTCI industry. Here’s why.

The traditional tax qualified LTCI products created a very standardized, single product solution LTCI industry. Those days of standardization are now gone. The new, real LTCI industry is far from standardized. There are so many different M-TIP product variations with a long term care trigger on the market today, and more will be coming. Carriers see this product development trend as a growth opportunity and a way to differentiate themselves as they seek competitive advantage.

What about long term care risk management tools that are solutions with no long term care insurance component, like life settlements that create specified long term care benefit plans, or even the use of reverse mortgages? Immediate annuities that help create an income stream for someone who already needs care now? Are these alternative product solutions part of the new LTCI industry? Many argue they are, since they help clients and their families manage the costs of long term care services.

So what does an LTCI industry that is no longer standardized mean to agents, brokers, agencies and distributors? It means a few things. First, when someone seeks long term care protection there are many risk management options available, only one of which is traditional LTCI. Second, to properly help a client and family plan for future or even current long term care needs, you need to be knowledgeable about all of the various long term care risk management tools available. Third, there is tremendous opportunity for those who wish to be long term care planning specialists.

Not everyone will want to become truly well versed and able to deliver all of the product solutions available in the real, now non-standardized LTCI industry. Lack of standardization in an industry keeps compensation levels high. Also, diversity of risk management solutions demands that professionals learn all of those solutions to properly advise their clients. Those who choose to be long term care planning experts, as compared to LTCI-only experts, will be rewarded well into the future.

The truth is that the real LTCI industry is expanding at a rapid pace through innovative product development that is insurance and non-insurance based. Here are some questions you may want to ask yourself: Am I an LTCI expert or a long term care planning expert? What should my role be in the real LTCI industry? How can I best run my business to properly advise my customers regarding long term care risk management and planning?