Thursday, March 28, 2024

To Switch To Level Funding, Or Not To Switch To Level Funding, That Is The Question

Level-funded plans offer a strategic blend of employer-sponsored health coverage, combining the predictability of fully insured plans with the economic benefits of self-funding. These innovative plans allow employers to set a fixed monthly payment to a carrier, which can help simplify the budgeting and financial planning process. The monthly fee covers estimated costs for expected claims, administrative costs, and stop-loss insurance, which limits the total annual losses for self-funded plans.

Level-funding was previously only used as a strategy for larger corporations but has expanded to become an accessible option for businesses as small as two lives, including startups and small companies. This evolution allows brokers to educate their clients on the advantages of level funding, showcasing it as a forward-thinking choice for managing healthcare costs effectively. It also unlocks the potential for businesses of all sizes to benefit from a model that was once out of reach.

Who Should Consider Level-Funding
Level funding is ideal for all types of small and mid-size businesses that find traditional, fully insured plans cost-prohibitive but still want to offer health benefits. These businesses seek more control over their healthcare costs, preferring a predictable, fixed monthly payment that helps with financial planning. Level funding is also attractive for companies that value transparency and want to see where their healthcare dollars are going. For those not quite ready to transition to an entirely self-funded plan but still want some advantages, level funding is a middle ground offering both cost savings and predictable expenses.

Benefits of Level-Funding
Unlike self-funded plans, the cost of a level-funded plan is consistent from month to month, creating more stability in financial planning for the year. At the end of the plan year, carriers make adjustments based on whether the total claims costs are higher or lower than what was projected for the year. Groups that experience lower-than-expected claims may be eligible for a refund of the surplus premium at the end of the year, another cost-saving mechanism of these plans.

As part of their level-funded plan offerings, some carriers include services and programs that make it easier for employees to make informed healthcare decisions and adopt healthy lifestyle practices. For example, telemedicine offers virtual visits that can be easier to schedule, more convenient, and less expensive than visiting an urgent care clinic or doctor’s office. Similarly, implementing wellness programs as part of a level-funded plan can help employees and their families build and maintain healthy lifestyle habits that lead to lower claims costs over time.

Though there are some cost-saving benefits to level-funded plans, businesses should consider the potential drawbacks of level-funded plans before making a commitment. Unlike fully insured plans, level-funded plans require the groups to go through underwriting. Smaller groups often have to get employees to complete individual medical questions, and the health of the group can significantly impact the rates. Unexpectedly high medical claims can also lead to large rate increases at renewal and no opportunity to earn back surplus premiums. There are also some additional regulatory burdens on the employer as level-funded plans are regulated differently than traditional fully insured options. Level funding offers an attractive alternative for savings, but companies need to think carefully about these risks and be ready to manage them. Working with a trusted insurance agent familiar with these options will help in assessing if level-funded is a good fit.

Considering the Transition to Self-Funding
Level-funding can be an excellent way for employers to test the waters of self-funding, but with lower risk and no long-term obligations. With self-funded health plans, employers must pay claims as they are received. The number and cost of claims can vary wildly from month to month, with no way to predict spending, creating risk and financial uncertainty that can be daunting for employers accustomed to predictable monthly costs. With a level-funded plan, employers will not have these concerns.

After a few years and a better understanding of the health of their employee base, some employers may want to move to a true self-funded model. Others may find that, for one reason or another, they are more comfortable offering fully insured health plans despite the higher costs and more stringent regulatory requirements. Still, others may find level funding to be the “just right” balance that’s right for their business and employees. The only way to find out is to start the conversation.

Layering Benefits To Effectively Safeguard Income

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Common sense and assumption based on experience in the life and health insurance industry have led me to the realization, which I’m certain most of you have witnessed and will wholeheartedly agree upon, that most clients and hopeful prospects—most, not all—are in no way proactive when it comes to their insurance needs. No matter how financially savvy a consumer believes they are, many tend to aim for a path of least resistance and lowest cost when it comes to the contemplation of purchasing insurance even though they may recognize that a claimable “event” could spell utter disaster from an economic standpoint. And in no industry sector is that more clear and relevant than with income protection—disability insurance.

Without financially protecting one’s paycheck, men and women stand to lose their single most vital source of economic freedom. Regularly-earned income provides for the necessities of one’s lifestyle and of one’s family—it allows for food, shelter, utilities, transportation, education, healthcare as well as the other numerous bills and costs the average American encounters on a daily basis. Income also provides for the luxuries and niceties that we often take for granted like vacations, entertainment and recreation costs. Unfortunately, most Americans making up today’s workforce are insufficiently covered by some, if any, form of income protection insurance.

It’s inherently natural to disbelieve in one’s own morbidity and physical demise, yet statistics show that a healthy person is at least three times more susceptible to disablement from accident or sickness than to death during their career. Disability insurance is quite often overlooked or simply an afterthought, and that needs to change in this country.

The U.S. Department of Labor and DI experts throughout the country have maintained for decades that a working American should have at least 65 percent of his/her income insured in the hopes of providing for one’s family during a period of total disablement. Some high-limit DI carriers, in certain cases, are now participating with coverage up to 75 percent of one’s income if any in-force benefits happen to be taxable to better allow for more substantial income protection.

Disability insurance is a necessity, and having less than 65 percent of income insured isn’t prudent nor viable financially if and when a disablement occurs. Insurance is all about preparation for the unknown and planning for the worst case scenario. A vast majority of Americans, even the wealthy, fail to maintain significant savings and liquid assets in cases of emergencies like unforeseen disablement. Retirement programs are certainly gaining a stronger foothold among the masses—more people in this country are planning for their futures after retirement, but they are severely lacking in protection for the here and now during their working careers.

Underinsurance provides a false sense of security for which you don’t want to be responsible. As an advisor you owe it to your clientele to get them appropriately insured to high-limit DI levels so they can economically care for themselves and their families if they were to suffer a short or long term impairment. You are not selling them just another redundant piece of paper. You are providing them with financial freedom from potential disaster.

The disability insurance needs obviously vary from client to client depending upon occupation, age, income and lifestyle. In my experience, many prospective clients require a layering approach to DI protection with the employment of multiple insurance policies over varying platforms. Income protection isn’t black and white. There typically isn’t one simple solution, no one formula for success. By nature and historical limitations of the market, one DI policy or one product just isn’t going to cut it. There are actually multiple levels of disability insurance, and all can be extremely important to your clients.

The first level or layer is group insurance, better known as LTD (long term disability). Many U.S. employers provide small layers of mandatory or voluntary guaranteed-issue group LTD benefits. Since the carriers of such plans offer terms on a guaranteed basis, underwriter guidelines commonly limit benefits to 50 to 60 percent of income with usual caps of $5,000 to $15,000 per month. For the majority of blue-collar workers and governmental employees, employer-sponsored group insurance combined with state disability benefits provides acceptable income replacement coverage. But most of the workforce in this country are employed by small business owners, are self-employed or are independent contractors. In these instances, group disability insurance is oftentimes not available or isn’t sufficient on its own.

The second layer of income protection is IDI (individual disability insurance). Those without group DI or without a sufficient level of group DI can seek individual disability insurance from a handful of large, reputable U.S. carriers. These insurers employ individual underwriting and morbidity analysis to provide prospects with policies similar in comprehension to group LTD certificates. Most Americans can find acceptable levels of disability coverage from a combination of group and standalone individual benefit sources.

However, there are many income-earners in this country that have salaries in ranges that cannot be effectively covered by group and/or standard individual disability policies. That brings us to a third layer of DI. Most in the white-collar market as well as physicians and dentists, and many in the rapidly-expanding grey-collar market have annual earnings that can hardly be insured by such a combination of group insurance and a single, traditional disability income policy.

Consider an executive making $300,000 per year. Is a group LTD plan providing 60 percent of income up to $10,000 per month going to allow enough protection to maintain that person’s lifestyle or the lifestyles and financial needs of their spouse and children? Families with a high net worth require more insurance than most, as their average expense ratio is significantly higher than an average household.

The third tier consists of high-limit DI and is only accessible through the Surplus Lines market and specialty carriers like Lloyd’s of London which specializes in providing income protection above the usual disability benefit limitations of most U.S. carriers. High-limit or “excess” disability insurance is readily available on a fully-underwritten, individual basis as well as for groups large and small on a multi-life guaranteed-issue basis.

For moderate to high-net-worth individuals, the risks of underinsurance can prove to be severe and financially disastrous. Your clients need to understand the importance of the varying layers of income protection and, with your guidance, properly tier and layer supplemental benefits on top of existing group and/or individual policies. Safeguarding 50 percent of one’s income is not enough. Safeguarding 60 percent of one’s income is not enough. The multi-layer benefit approach to disability insurance will successfully fill the subtle and blatant gaps in your clients’ risk exposure.

The Sudden Resurgence Of Long Term Care Insurance

(This article first appeared in the August/September 2023 issue of Aspire Magazine)

It has only been about 15 years, but long term care insurance (LTCI) is popular again. All of us in the LTCI biz knew this might be inevitable. After all, we can see the demographics “writing on the wall.” There are over 50 million family caregivers in the United States. They can only do so much until professional home care or facility care is needed. The collision of baby boomers needing care, states paying attention to the crushing need, and the impact on family caregivers has made LTCI popular again. Well, sort of.

You may have heard this story: Without long term care planning, extended care is paid out of pocket. Once income and assets are depleted, Medicaid kicks in. But what happens when Medicaid runs out of money?

The year is 2021. Washington State is ground zero with the second highest cost of home care in the nation. Leaders in the state can see a crisis on the horizon. As a result, Washington passed a law requiring a long term care payroll tax on all W2 employees who do not own private insurance. With a deadline set for six months after passage of the law, a fire sale ensues. The result was the sale of over 400,000 LTCI or hybrid policies in a single state in six months. In the prior year, less than 100,000 policies focused on long term care were purchased nationally—a generational low.

One group hybrid LTCI carrier sold nearly 200,000 policies, or $100 million of premium, representing almost half the policies in Washington. While an incredible stat, the one that may be more incredible is that this same carrier sold over $100 million in 2022, without a payroll tax looming. There was continued demand for this product.

New Long Term Care Funding Solutions
The group hybrid long term care market is growing 50 percent per year. Carriers are paying attention, and other states are as well. California and New York are slowly exploring their own payroll taxes, as are as many as 30 percent of all other states according to a recent Nationwide study. There are many more carriers entering the market with long term care riders on their group life policies.

These new options are popular not just because of the payroll taxes. They nailed a target market: Guaranteed issue underwriting, affordable price points of $500 to $1,000 per year, easy to access product offerings through education and enrollment through employers and associations.

LTCI as a starter plan through the employer helps the 97 percent of Americans who currently do not own long term care insurance. The best way to help someone get comprehensive coverage in the future may be to get them a smaller plan now.

Whether you work with individuals or groups, you will feel the impact of the demand. When your neighbors, friends, families, and clients start asking you about the insurance offered through their employer, what will you tell them? Do you think the policies are too small to make a difference?

A Closer Look at Guaranteed Issue Products
Let’s look at these long term care extension riders for the masses. You may be surprised what you can get for $1,000 per year on a guaranteed issue basis. One of the most popular products in the individual long term care market is a life insurance hybrid that not only accelerates the death benefit, but also extends long term care coverage once the death benefit is exhausted. Following in those footsteps, these features have become popular on group products too. For $1,000 per year, you not only get a $100,000 death benefit if you don’t need long term care, but should you run out of coverage over 25 months, you might get another 25 or maybe even 50 months of additional coverage—as much as $300,000 total.

Value plus ease of access is driving this renaissance in long term care planning solutions.

An Opportunity to Build Your Business
What can you do to participate in this market growth? First, realize that even if you work with individual clients, they may have links to an employer group or association that can set up a group long term care program. We see guaranteed issue carve out solutions for as few as 25 executives at price points that are affordable for employers to comfortably fund the entire group. Your individual clients may be business owners and white-collar professionals who you already help with life, annuity, or disability income planning. Funding a plan for 25 of their colleagues on a guaranteed issue basis is within reach.

As more carriers enter the market and more states take further steps to implement their own long term care payroll taxes, it is inevitable that this market will continue to surge. What are you doing to prepare yourself for the resurgence of LTC insurance?

Life Settlement Annuities: Unique Financial Solutions for Seniors

Life Settlement Annuities combine the uniquely advantageous features of both annuities and life settlements to help address the financial challenges brought on by aging and declining health for seniors in retirement. A Life Settlement Annuity is the seamless rollover of the funds realized through a life settlement into an annuity that can be underwritten to provide higher value relative to an individual’s rated age and health than a standard annuity.

As the American population ages, retirees face myriad financial concerns ranging from maintaining their lifestyle to the fear of running out of money. The looming specter of declining health and the eventual need for long term care adds another layer of complexity and urgency for seniors. In this challenging landscape, an emerging financial option called a “Life Settlement Annuity” combines the advantages of annuities and of a life settlement to help address the desire for financial security and independence.

The fears haunting retirees—running out of money, facing dependence, and grappling with healthcare costs—are
becoming more urgent as the population ages. Statistics paint a sobering picture: by 2025, Baby Boomers will begin hitting 80, and a staggering 70 percent of individuals over 65 will require formal long term care.

In this landscape of financial uncertainty, the insurance industry stands as a rock of stability. With a significant portion of Americans owning life insurance, the creative uses of these assets can unlock unique opportunities for the policy owners. As retirement unfolds, people can outlive their need for the life insurance policies they purchased in years past and decisions need to be made. Enter life settlement annuities—an innovative solution changing the retirement game for seniors with some new options for their assets to consider.

Unlocking Hidden Value for Retirees through Life Insurance and Annuities
Life insurance and annuities have been experiencing a surge in growth. In 2021, there were 260 million life insurance policies in force, amounting to $21.2 trillion in death benefit. Annuities, a key player in retirement planning, saw $2.53 trillion in-force with $310 billion in sales in 2022, marking a 22 percent increase from the previous year. As annuities continue to rise in popularity, the industry predicts a 14 percent overall increase in annuity sales in 2023, with fixed-indexed annuities expected to rise by 25 percent and fixed-deferred annuities by 20 percent.

More people are worried about their ability to retire and outliving their money than ever before. In recent years, as interest rates have gone up, annuities have emerged as a flight to safety and financial stability for retirees, providing a range of benefits that address the fears of seniors including guaranteed income for life, income for spouses or beneficiaries, tax-deferred growth, protection from market volatility, and income acceleration for long term care needs.

Life settlements have become a mainstream financial option for seniors due to high public awareness generated by large advertising campaigns. The settlement of an unneeded or unwanted policy provides numerous advantages for policy owners including: Economically rewarding seniors for advancing age and impairments; providing liquidity for retirement income and health/long term care needs; offering tax-advantaged income for health and long term care need; and, there are no costs or ongoing premium obligations for the policy owner.

Consumer awareness of life settlements is at an all-time high, with the annual market reaching $4.5 billion in 2022. Shockingly, that same year, 9,000,000 policies lapsed compared to the 3,000 settled, revealing a significant industry disparity in leveraging these assets. For these policy owners, the life settlement option resulted in 7.8 times higher payouts than the available cash surrender value (or in the case of term life policies, no CSV at all). As the market continues to grow the upside is enormous with Senior-owned life insurance accounting for a staggering $230 billion annually that could potentially qualify for a life settlement—a potential financial windfall that seniors and advisors should not ignore.

Life Settlement Annuities
The life settlement annuity is an ideal way to help people overcome retirement driven fears. By accessing the higher market value of an unneeded or unwanted life insurance policy through a life settlement, the policy owner can leverage its full market value with a seamless rollover into a mix of annuities specifically created to address financial challenges driven by aging and declining health.

First, annuities offer guaranteed rates of return, financial protection from market volatility, tax advantages, income for life, and ongoing income for spouses and beneficiaries. They can also be set up to provide tax-advantaged income and income acceleration for qualified long term care services.

Second, a life settlement is the sale of an existing life insurance policy and is designed to reward policy owners with higher value as the insured gets older or sicker. Life insurance policies are legally recognized as assets and life settlements are a way to unlock the hidden value in an unneeded or unwanted policy—just like when a homeowner sells their home if they are no longer going to live there. This is a way to access liquidity for retirement income, health or long term care needs after years of paying premiums.

By combining these two transactions into a life settlement annuity, the funds realized through the life settlement are rolled over into an annuity that can be underwritten to provide higher value relative to an individual’s age and health than would be received through a standard annuity. Also, according to industry statistics, life settlements can generate five to 10 times higher payouts than cash surrender value to rollover into an annuity. Based on the form of life settlement annuity selected, the policy owner can create a guaranteed income stream for life, increase monthly payouts through an underwritten SPIA, benefit from guaranteed returns and tax-deferred growth with a FIA, and, in the case of a need for long term care, increase the value of the funds in the annuity two to three times with a unique long term care rider.

Types of Life Settlement Annuities

  • Impaired Risk Single Premium Immediate Income Annuity (SPIA): Underwriting based on life settlement life expectancy data increases monthly payouts over standard risk scenarios. This SPIA option provides lifetime income, survivorship benefits, and a return of premium option.
  • Multi-Year Guaranteed Annuity (MYGA): MYGA offers a guaranteed rate of return over a set period, allowing clients to choose from a two, three or five year rate guarantee period with optional free withdrawal benefits. A five year guaranteed rate of return at six percent or more ensures a steady income draw equivalent with the principal remaining.
  • Long Term Care Based Fixed Index Annuity (FIA): FIA provides financial resources for long term care services, offering a guaranteed rate of return at five percent and an enhancement rider option to pay for long term care benefits by increasing the principal up to two or three times tax-free.

Life Settlement Annuities harness the untapped market value embedded within life insurance policies, allowing policyholders to extract five to 10 times more value than the cash surrender value of their policies—a potential game-changer for those facing lapse or surrender.

Moreover, life settlement annuities create multiple income streams for agents via referral fees, annuity commissions, and potential term conversion commissions. These financial instruments not only reward seniors for their age and impairments, but also offer liquidity to meet health and long term care needs without ongoing premium obligations.

Conclusion
As the U.S. population ages, the financial challenges associated with retirement and declining health become more pronounced. Agents in the life insurance industry are uniquely positioned to address these challenges by introducing innovative solutions like life settlement annuities. These annuities offer a lifeline for seniors—providing liquidity, tax-advantaged income, and unlocking hidden asset value in the form of illiquid life insurance policies. By embracing these solutions, agents can not only provide invaluable support to senior clients but also create new income streams for themselves in the process. In the evolving landscape of retirement planning, life settlement annuities stand out as a powerful tool to help seniors live out their retirement years with financial security and peace of mind.

Auld Lang Syne: A New Years’ Resolution

Happy New Year! It is now 2024, and it promises to be a tumultuous year in our country, as well as the world, as presidential politics, two international wars, criminal trials, inflation, rising costs, and the specter of long term care fill the headlines.

As 2023 came to an end, we lost some of our country’s most notable and influential non-elected leaders. Former Secretary of State and National Security Adviser Henry Kissinger passed away at the age of 100, still relatively healthy and presumably active. In May of 2023, he celebrated his 100th birthday and in interviews around his birthday, Kissinger said that many world leaders—including Chinese President Xi Jinping and Russian President Vladimir Putin—would most likely answer his call were he to telephone them unscheduled. Most recently, Dr. Kissinger focused his attention on the implications of artificial intelligence. He was a frequent guest with media and on panel discussions, writing, and traveling abroad. A remarkable life lived to the fullest until the end.

The same cannot be said for retired Supreme Court Associate Justice Sandra Day O’Connor who also passed away in December at age 93, suffering from advanced dementia.

Justice O’Connor broke the glass ceiling for a great many women. She was the first woman appointed to the Supreme Court of the United States, elevated to the Court by Ronald Reagan in 1981. Her early years were often referred to as the O’Connor Court because she cast the pivotal vote on several cases. This was only two years before I began my own law school experience, and the cases that we read during that time had long lasting impact for decades.

O’Connor was an amazing person in so many ways. She graduated from high school at age 16, went to Stanford University and was only 19 when she started law school as one of just five women in the class. Former chief justice William Rehnquist was a classmate and they briefly dated.

O’Connor graduated near the top of her class but was rejected for most law firm jobs. A Los Angeles-based firm offered a job as a legal secretary, but she declined and eventually found work in the San Mateo County, California, county attorney’s office where she initially began working for free.

What a lot of people do not know or remember is that Justice O’Connor left her lifetime appointment on the bench in 2006 after serving twenty-five years because of the health of her husband. In 2005, O’Connor’s husband was suffering from Alzheimer’s disease, and when the ailing Chief Justice William Rehnquist told her that he was putting off his retirement, O’Connor decided that, with her husband’s health declining, she could not wait and risk the possibility that the court would have two vacancies at once.

As it turned out, that’s what happened anyway. O’Connor announced her retirement, and the chief justice died weeks later. She stayed on for another six months while confirmation hearings proceeded, and in a cruel twist of fate, her husband’s health took such a precipitous downward turn that he had to be placed in a facility where he eventually died. We do not know if they had a long term care insurance policy, nor do we know the true havoc his illness caused financially or emotionally.

As we have observed on countless occasions, O’Connor’s retirement was the last step in a long balancing act between family and career. We often talk about the impact that the need for long term care in the home has on unpaid family caregivers. Aside from the physical, emotional, and mental toll, there is of course the professional impact. The caregivers often have to miss hours at work to accommodate doctors’ appointments for their loved ones, as well as other demands on their time. Quite often they lose out on promotions or may even suffer the indignity of losing their careers.

Sandra Day O’Connor gave up lifetime tenure on the Supreme Court—a job she loved and one with extraordinary power—to care for her husband of 52 years as he deteriorated from dementia.

That decision, in 2005, began a poignant final chapter of her extraordinary life. Her choice, at age 75, reflected her attempt to integrate the often-conflicting demands of professional achievement and family expectations in a country still adapting to changing gender roles and an aging population.

Justice O’Connor had hoped to care for her husband at their home in Arizona. But when that soon became untenable, she moved him to an assisted living facility. He was unhappy about the move, but then something remarkable happened: He found romance with another woman who was a patient there.

And Justice O’Connor, who not long before had been the most powerful woman in the country, was thrilled because he was content and comfortable again—even like “a teenager in love,” as their son Scott put it. The justice kept up her regular visits, beaming next to the happy couple as they held hands on a porch swing.

John O’Connor died in 2009, at age 79. In 2018, Justice O’Connor announced she was formally stepping back from public life because she, too, had dementia, most likely Alzheimer’s.

Then 88, she shared the news in an open letter to “friends and fellow Americans,” urging them to put “country and the common good above party and self-interest.” She wrote that she would continue living in Phoenix, where John had been, “surrounded by dear friends and family.”

“While the final chapter of my life with dementia may be trying, nothing has diminished my gratitude and deep appreciation for the countless blessings in my life,” she wrote. She hoped that she had inspired young people toward civic engagement, “and helped pave the pathway for women who may have faced obstacles pursuing their careers.”

Retired Supreme Court Justice Sandra Day O’Connor, the first woman to serve on the court, died of complications related to advanced dementia, probably Alzheimer’s, and a respiratory illness, the court announced. She was 93 years old. We can only imagine what her last years were like for her, her family, and those who cared for her.

We continue to live longer and age as a Society. It is nonsensical to believe that we are going to escape this world without needing some form of assistance. The COVID-19 pandemic drove up the cost of care like we have not seen in several years. The very idea that we can afford to self-fund this critical need is more nonsensical than ever before. It is incumbent upon all of us, regardless of the relationship we enjoy with our clients, to be educating and making them aware of this great risk we all face.

To this end, every January, we escape the cold and snow and head to my “happy place” in Cabo San Lucas. I go with the intention that I am going to work out daily, read voraciously while soaking up the rays, eat exceptionally well on a diet high in seafood, see some sights like the original Hotel California in Todos Santos, about an hour away, and talk to people in one of the two infinity pools about long term care insurance. What? Yes, I go on holiday fully prepared and mindful that I am going to advocate for the importance of long term care insurance. To this day my children take exception to this last point, but, when they were in the LTCI business with me they always welcomed the referrals generated–essentially policies waiting to be written—which I always returned from my holiday and shared with them.

How were these “sales” made in the pool or around the firepit after dinner? Very simply, I opened my mouth. When fellow vacationers would ask me the proverbial “What do you do for a living?” I remain very quick to say that I help people avoid disaster in the latter years of their lives. This always prompts the desired follow-up question of how I do this, and we talk about the growing need for long term care in our aging society. By asking about their own family experiences (which are becoming more and more frequent), it is becoming easier and easier to transition from identifying need to personalizing it and projecting their own potential future needs for these services, and to talk about the financial, physical, and emotional toll a lack of preparedness will have on their families.

Clearly, I am not afraid to talk about long term care insurance or Medicaid Compliant Annuities. Just as important, I have reached a point in my career where I am simply an advocate for these critically needed products. The industry has been very kind to me and my family, and I can honestly say that I do not care if these people ever purchase long term care insurance, but their failure to do so will not be because they did not hear about it from me. It has been very liberating to achieve this status, and to truly be able to dance like no one is watching. I have no fear or embarrassment or reticence in talking about what we do in an effort to help people protect themselves against this deadly age and health related tsunami that lurks offshore.

My New Year’s resolution for this year remains the same as it has been for any number of years now: To raise awareness and to educate people on this need in their lives, and to help them protect themselves while they have the requisite health and financial options available to them. I hope you will make this a resolution of your own. Whether you are an insurance professional, financial advisor, or attorney, we all share in this grave responsibility. P.S. The costs associated with these “marketing events’’ conducted in the pool are fully deductible according to the Internal Revenue Service.

Annuity GLWBs And My 1999 Pontiac Grand Am

I remember when I was young and dumb and buying my first brand new car. I pulled into the dealership with my beat up 1999 Pontiac Grand Am and told them I was looking to trade it in for a brand-new Toyota. Yes, I was a big hitter!

Again, because I was young and dumb, I told them that I was not going to be ripped off on the trade-in value of my car which was still in “great shape” and was “one of a kind” (sarcasm). After the salesperson pulled the old “let me talk to my manager,“ he came back with a killer price that they were going to give me credit for on my trade-in. I knew I had this salesperson right where I wanted him because he must have been clueless to give me that type of price for my beat-up Grand Am. Then we proceeded to discuss the price of the new Toyota. This is where I quickly learned the used car sales game. He would not drop the price of the Toyota one penny from sticker! I would’ve had to effectively pay full sticker price for that Toyota. This ticked me off since I knew the game they were playing so I walked out.

In the end, I realized that it was just a game of teeter-totter they were playing with me. They knew my “emotional trigger” was a good trade-in value on my car, so they offered that to me. However, the better the deal they gave me on my trade-in, the worse the deal they would’ve given me on the price of the new car. I was not a complete idiot and knew that the net price was what was important. P.S. The above demonstrates How car companies are able to occasionally do promotions where they “guarantee you” a big trade-in value even on junk cars.

What I just explained above is similar to how annuities with guaranteed lifetime withdrawal benefits work. GLWBs are one of my favorite financial products of all time but it’s important that you understand the difference between the emotional sizzle and true steak.

I speak with dozens of agents every day, and I am always surprised with how many agents are infatuated with some blast email they got from another company discussing a huge “benefit base bonus” and a huge “roll up rate” on XYZ’s guaranteed lifetime withdrawal benefit. Those large benefit bases are emotional triggers, for agents and clients alike. The agents often call to ask me if my IMO has access to that product. At that point in time, I will discuss if that product is “sizzle” or “steak.” After running them a comparison report showing the top paying GLWB annuities in the industry, they realize that the net payout is what matters most. And many times those massive GLWB benefit base bonuses and roll ups don’t really matter if the end payout factor is small. After all, here is the formula for the client’s income: Benefit Base X Payout Factor = GLWB Lifetime Income. All that matters is the GLWB lifetime income. So, the benefit base can have massive rollup rates in it, but it doesn’t matter if the end payout factor is small and vice versa.

For instance, with my $100,000, if I were to need income two years from now at age 65, and had a choice between two products, which one would I choose?

Product 1. Has a roll up rate of 25 percent simple each year and then, at age 65, has a payout factor of five percent.

or

Product 2. Has a roll up rate of 10 percent simple each year and a payout factor of 6.5 percent at age 65.

Let’s do the math for product one. If you put in $100,000 and get 25 percent simple interest two times that means at age 65 your benefit base is equal to $150,000. When you multiply that by the five percent payout factor, your end income is $7,500.

Now for product two. With a 10 percent simple rollup rate, your $100,000 will equal $120,000 at the end of year two. When you multiply that by a 6.5 percent payout rate you are looking at lifetime income of $7,800.

Number 2 wins in this scenario.
My point above on these hypothetical products is that, although you, the agent, will get a massive amount of blast emails singing the virtues of product number one and how it has a massive 25 percent benefit base rollup, that benefit base should be viewed as “funny money.” Afterall, it is not like the “benefit base” can be cashed out by the client. To the contrary, all that the benefit base is, is a basis for calculating the end GLWB payout.

Again, when there are massive benefit base bonuses and massive rollup rates, just beware that the actuarial teeter-totter can be at play whereas the bigger the benefit base rollup is, the smaller the payout factor.

In the end, what is most important is that you do not let the marketing sizzle influence you and you have your independent marketing organization do the analysis on what product has the best net payout. A good IMO will have these tools at their disposal. Furthermore, a good IMO will also provide you with additional context beyond just the numbers. There is so much more to these products than just the numbers.

7702(b)Or NotTo Be

Or Why 7702(b) Matters for Long Term Care Planning

No, this is not a dissertation on Hamlet Act 3 Scene 1, although considering whether a product meets the IRC section 7702(b) guidelines can seem like it.

Let’s set the scene and provide the backstory. Some states, like Washington, are considering offering a minimal long term care benefit funded by a payroll tax. California, with its 16 million strong workforce, is also considering this publicly funded benefit. Rumor has it (via the feasibility study) that the legislation may allow an exemption from the payroll tax if the employee already owns private long term care insurance. Like Hamlet, it’s important to understand what is “to be or not to be” by looking at the product types that may qualify for an exemption. In this article we explain what section 7702(b) is, how it works, how it differs from chronic illness riders (IRC 101(g)), and the advantages and disadvantages of each.

What is Section 7702(b)?
Not all long term care insurance policies and riders are created equal. Some may offer more benefits, more flexibility, and more tax advantages than others.

Section 7702(b) is a part of the Internal Revenue Code (IRC) that defines what constitutes a qualified long term care insurance contract and how it is treated for tax purposes. According to Section 7702(b), a qualified long term care insurance contract must meet certain requirements, such as:

  • It must provide only coverage of qualified long term care services.
  • It must be guaranteed renewable.
  • It must not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed.
  • It must provide that refunds (other than refunds on the death of the insured or complete surrender or cancellation of the contract) and dividends under the contract be used only to reduce future premiums or increase future benefits.
  • It must meet certain consumer protection standards set by the National Association of Insurance Commissioners (NAIC)

Qualified long term care services are defined as necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services that are:

  • Required by a chronically ill individual; and,
  • Provided pursuant to a plan of care prescribed by a licensed healthcare practitioner.

A chronically ill individual is someone who has been certified by a licensed health care practitioner as:

  • Being unable to perform at least two activities of daily living (such as eating, bathing, dressing, toileting, transferring, and continence) without substantial assistance from another individual for at least 90 days due to a loss of functional capacity; or,
  • Having a severe cognitive impairment (such as Alzheimer’s disease or dementia) that requires substantial supervision to protect his or her health and safety.

Why is Section 7702(b) Important?
Section 7702(b) is important because it provides certain tax benefits for qualified long term care insurance contracts. Specifically:

  • The premiums paid for qualified long term care insurance contracts are treated as medical expenses and may be deductible (subject to certain limits) if the taxpayer itemizes deductions on Schedule A.
  • The benefits received from qualified long term care insurance contracts are generally excluded from gross income as amounts received for personal injuries or sickness.
  • The distributions from life insurance policies or annuities that have qualified long term care insurance riders are also excluded from gross income (up to certain limits) if they are used to pay for qualified long term care services.
  • Business owners may be able to take a first-dollar tax deduction as a business expense on some or all of the qualified long term care insurance premiums for themselves or employees.
  • Individuals may be able to withdraw premiums as a qualified medical expense pre-tax from a health savings account (HSA), health reimbursement arrangement (HRA), or medical savings account (MSA) annually up to an age-based limit.
  • States considering a payroll tax to fund a minimum long term care benefit may exempt individuals from the tax if they own a long term care policy that meets the 7702(b) requirements.

These tax benefits can make qualified long term care insurance contracts more affordable and attractive for consumers who want to protect themselves from the high costs of long term care.

What are 7702(b) Qualified Riders?
Besides a 7702(b) traditional LTCI policy, a 7702(b) rider is an add-on or feature to a life insurance policy or an annuity contract that provides long term care benefits in accordance with Section 7702(b). It allows the policyholder to access some or all the death benefit or cash value of the policy or annuity while he or she is alive if he or she becomes chronically ill and needs long term care services.

A 7702(b) rider can offer several advantages over a stand-alone long term care policy, such as:

  • Providing multiple benefits in one product: Life insurance/annuity plus long term care coverage.
  • Avoiding premium increases: Once the rider is purchased, the premium is often fixed and guaranteed not to increase unless the base policy premium increases.
  • Preserving some value for heirs: If the rider benefits are not exhausted by a long term care event.

How do 7702(b) riders work?
A 7702(b) rider allows you to access some or all your life insurance death benefit or annuity value while you are still alive if you meet certain conditions. Typically, these conditions include:

  • Being certified by a licensed health care practitioner as a chronically ill individual. This means that you are unable to perform at least two activities of daily living (such as bathing, dressing, eating, toileting, transferring, and continence) without substantial assistance for at least 90 days; or you have a severe cognitive impairment that requires substantial supervision for your health and safety.
  • Satisfying an elimination period. This is a waiting period (usually between 0 and 180 days) before you can start receiving benefits from your rider.
  • Submitting proof of claim and receipts for eligible expenses. You need to provide evidence that you have incurred qualified long term care expenses that are covered by your rider.
  • Depending on the type and design of your rider, you may receive benefits in one of the following ways:
  • Reimbursement: You receive a monthly benefit equal to the actual amount of qualified long term care expenses that you incur up to a maximum limit.
  • Indemnity: You receive a fixed monthly benefit regardless of the actual amount of qualified long term care expenses that you incur if you meet the eligibility criteria.
  • Cash Indemnity: You receive a monthly cash payment if you meet the eligibility criteria.

The benefits from your rider will reduce your life insurance death benefit or annuity value by the same amount. If you exhaust your entire death benefit or annuity value through your rider benefits, your policy or contract will terminate, and no further benefits will be payable.

Advantages and Disadvantages of 7702(b) Riders

Advantages of 7702(b) Riders:

  • Tax advantages: The benefits from your rider are generally income tax-free if they do not exceed certain limits set by the IRS.
  • Your premiums for your rider may be deductible for income tax purposes if they meet certain requirements.
  • Certain products offer riders with an extension of long term care benefits that significantly exceed the original death benefit.
  • Certain products offer features that significantly enhance the long term care coverage like guaranteed compound inflation protection to grow the long term care benefits annually on either the base coverage, the rider, or both.
  • Flexibility: You can use your rider benefits for any qualified long term care expenses regardless of where they occur (at home, in a facility, etc.). You can also choose among different types of riders depending on your needs and preferences.
  • Protection: You can protect yourself from the rising costs of long term care services without having to buy a separate stand-alone policy. You can also preserve some assets for your beneficiaries if you do not use up all your death benefit or annuity value through your rider benefits.
  • No use-it-or-lose-it risk: Products allow the unused portion of the death benefit to remain intact and paid to the beneficiaries or will even pay a residual death benefit in addition to long term care benefits being used in full.

Disadvantages of 7702(b) Riders:

  • Cost: Adding a rider to your life insurance policy or annuity may increase your premiums or fees significantly depending on factors such as age, health status, type, and amount of coverage.
  • Qualification: Not every life insurance or annuity policy offers a long term care rider and some riders have limited health underwriting.
  • Premium payment flexibility: Several products require premiums to be paid over a shorter period of time such as a lump sum or over 10 years to get the best value for the long term care benefits.

Chronic Illness Riders: How 101(g) Riders Differ from LTC Riders
There is confusion regarding how a long term care rider differs from a chronic illness rider, a rider that does not qualify as a long term care rider under section 7702(b). A chronic illness rider is a type of rider that complies with IRC section 101(g). They can be added to a life insurance policy to help pay for permanent qualifying events. More recently, some 101(g) products allow for payments even if the chronic illness is not expected to be permanent. A chronic illness rider is like a long term care rider, where two out of six Activities of Daily Living (ADLs) or severe cognitive impairment can trigger benefits, and a licensed health care provider—such as your doctor—will have to certify this.

  • A chronic illness rider may provide some flexibility over a long term care rider, such as:
  • Less extra rider premium: The extra premium for the chronic illness rider may be minimal or already included in the base life insurance policy. However, often the result of the no extra rider premium products is a reduced death benefit.
  • Better life insurance features: Often 101(g) products offer greater death benefits, better cash value accumulation, and other features desirable for life insurance protection.
  • Speed-to-market: For carriers, the 101(g) filing process may be quicker, and agents may not have to take additional long term care continuing education to offer these products.

A chronic illness rider may have drawbacks, such as:

  • No standard benefit language: Chronic illness riders vary widely in their contractual definitions and special care must be paid to whether permanency of disability is required, the definition of chronic illness that results in claim eligibility, whether the death benefit is discounted, and many other contractual details.
  • Limited benefit amount: The 101(g) benefit amount may be capped at a percentage of the death benefit. For instance, an acceleration of two percent to five percent per month up to a total of 50 to 90 percent of the death benefit.
  • No inflation protection: The benefit amount usually does not increase with inflation and may lose purchasing power over time.
  • Not marketable as long term care insurance: Chronic illness riders are not allowed to be called long term care insurance and may be excluded for the purposes of the exemption from a potential payroll tax depending on a state definition.

Wait, what?

This is where the confusion happens. States allowing for an exemption from a payroll tax, like Washington and possibly California, may require that a product meet the 7702(b) requirements. One of the reasons for requiring a policy to comply with the 7702(b) guidelines is to make sure that it offers sufficient and suitable coverage for long term care needs, and that it matches the state’s goals for its own program. The goal being to reconcile the exemption criteria with the federal standards, and to prevent possible conflicts or confusion between state and federal tax rules.

“To Be or Not to Be…?”
Choosing between a long term care rider and a chronic illness rider depends on several factors, such as health status, financial situation, tax bracket, and personal preferences. But when considering a product that will qualify as long term care insurance, particularly for tax purposes, make sure that it is compliant with IRC section 7702(b). For that is, indeed, the relevant question.

Fibromyalgia

Fibromyalgia is a disease categorized by widespread musculoskeletal pain, fatigue and poor sleep of at least three months duration that is not characterized by any other systemic or rheumatic disorder. While fibromyalgia is often a disease of exclusion after other causes are ruled out (such as rheumatoid arthritis and lupus for example), a good detailed history and physical exam can lean strongly toward the diagnosis. Changes in the diagnostic criteria in the recent literature have resulted in more cases meeting the diagnostic criteria for this disorder.

It is estimated that about two percent of the population in the United States has fibromyalgia. It is significantly more common in women than men and may be diagnosed in both adults and children. Other terms given to the disease include fibrositis, chronic pain syndrome, muscular rheumatism and myofascial pain syndrome. While the exact cause of fibromyalgia cannot be pinpointed, it appears to involve disordered signal processing that involves the pain pathways. Suggested as possible causes are hypothalamic-pituitary-adrenal axis dysfunction, inflammation, small fiber nerve problems, and infections such as Epstein-Barr, Lyme disease and even viral hepatitis. Bottom line—it remains unknown.

Pain is the most common symptom, involving muscles and ligaments and most common in neck, shoulder, back and hips. Diagnostic criteria historically involved multi-site pain from six or more of nine possible sites: Head, left arm, right arm, chest, abdomen, upper back and spine, lower spine, left leg and right leg. Sleep disorder, cognitive symptoms (such as poor concentration and forgetfulness), and diffuse tenderness in multiple areas are also accompaniments. The three-month period is used to exclude such causes as acute injury, viral infection, etc., owing to the chronic nature of fibromyalgia as a disorder.

The differential diagnosis of fibromyalgia is difficult because it shares symptoms with so many other diseases. In addition to the aforementioned rheumatoid arthritis and lupus, systemic sclerosis, polyarthralgia rheumatica, Lyme disease, hyperthyroidism, hypothyroidism and even early multiple sclerosis have to be considered and ruled out. Even medications such as statins in treatment for high cholesterol may cause symptoms similar to fibromyalgia. There are no specific blood tests or imaging that are specific for the disease, and as such it remains an exclusion diagnosis.

Treatment for fibromyalgia has been less than satisfactory. Patient education and self-management, exercise, cognitive behavioral therapy and hot and cold application have been used with only varying degrees of success. Studies with cannabinoids and marijuana use are early and have shown some benefit. Analgesics are given but not as primary therapy, as addiction to chronic pain medication is a worry. Antidepressant drugs such as amitriptyline (Elavil), pregabalin (Lyrica) and duloxetine (Cymbalta) also have been used, but often the side effects cause just as many problems as the disease itself. No universal treatment regimen to this point has proved satisfactory.

Fibromyalgia is generally not a concern in life underwriting for mortality, excepting that chronic pain may cause significant emotional distress and consequences. Associated depression, suicide, accidents, excessive use of alcohol or drugs, and adverse drug effects from treatment certainly affect prognosis. It is more the effects of chronic pain and disability (including absences and time off of work) that comprise the risk more the disease itself. Those must be considered in waiver of premium and disability riders and applications.

Perhaps the one limitation with fibromyalgia is in consideration for preferred status. Preferred consideration may be given when pain is mild, there are no physical limitations, low dose medication is used, there is no change in medication dosage and no continuous opioid or benzodiazepine use (which carry their own risks). Likewise there should be no concerns regarding alcohol or drug misuse and no associated psychiatric or concurrent medical diagnosis that increases risk on their own.

Why Younger Generations Are Shying Away From Health Insurance

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As Americans continue to live longer and lead more active lives, the workforce has evolved to cover five generations: Traditionalists, baby boomers, Gen X, millennials and Generation Z, the most substantial generation gap in history. Understandably, each of these generations has unique preferences and requirements when it comes to healthcare coverage. One of the current concerns in the insurance industry is getting younger clients to think about and buy coverage. For many individuals who belong to younger generations, this might be their first time buying insurance. An equal concern is a lack of employment within our industry from these generations. We work in a noble, purposeful industry. Collectively, we need to do a better job recruiting into these generations. More employees from the millennial and Gen Z generations would make it easier to provide a better experience for those like employers and employees we serve.

According to one report, nearly a third of Gen Z employees said they did not understand the concept of open enrollment, highlighting the need for clear and accessible information. Brokers must approach younger generations with plans tailored to their specific needs and provide them with the guidance they require to make informed decisions. This article will outline the distinct needs of the two youngest workforce generations. By understanding the generational context and identifying their particular coverage needs, brokers can gain a deeper understanding and establish stronger connections with existing and potential clients.

Understanding each generation’s unique needs
Millennials: Who They Are
Today, millennials make up the largest demographic covered by employer health plans. A recent Health Action Council (HAC) study1 looked at the primary reasons adults in their late twenties to early forties access healthcare compared to other generations. Millennials, born between 1981 and 1996, are entering the prime years for starting families, with pregnancy emerging as the leading factor driving their healthcare expenses. The study revealed the cost of pregnancy for millennials is currently 14 percent higher than that for the succeeding generation, Gen Z. Contributing factors to these costs include fertility treatments, high-risk pregnancies and C-section deliveries.

Growing up during the Great Recession also significantly impacted this generation, motivating them to be discerning shoppers and search for the best deals, even when it comes to health insurance. Millennials are also known for their reliance on technology, which influences how they approach healthcare. Being the father of two millennial children, it is obvious how dependent and comfortable they are with technology, not just in healthcare but in all aspects of their social interactions. This generation tends to research health conditions proactively, often turning to the internet for information. They also prefer urgent care facilities over traditional doctor-patient relationships, making them more likely to seek immediate, convenient medical assistance when necessary. Understanding their likeliness to use technology and their healthcare preferences gives us a tremendous opportunity to connect them to a much better experience.

What you can do:
Brokers can help meet the needs of tech-savvy millennials by ensuring their coverage includes virtual visit options. One of the key advantages of telehealth is its convenience. Through virtual consultations, employees can access medical support from anywhere and easily schedule appointments that fit their busy schedules. Telehealth services are also cost effective. By reducing the need for in-person visits, telehealth can help lower healthcare costs for employers. It may also mean reduced out-of-pocket costs for employees, making healthcare more accessible and affordable.

Furthermore, affordability plays a significant role in how millennials pick their coverage. One study found more than half of millennials chose their health insurance plan solely based on the cost.2 They also tend to have lower brand loyalty and are open to changing plans if it means saving money. However, this generation often lacks confidence in understanding the specifics of their plans, such as Flexible Spending Accounts (FSAs) and Health Spending Accounts (HSAs), creating an opportunity for brokers and employers to provide better education to employees.

Gen Z: Who They Are
Gen Z, the youngest workforce generation, covers a wide age range. Born between 1997 and 2012, its oldest members manage mortgages, while the youngest are still preteens. Like all generations, the world events around them helped shape their identity. The oldest Gen Zers were born when the internet was just gaining popularity and grew up using it as part of their daily lives. Like millennials, Gen Z leans toward telehealth visits over an in-person doctor’s appointment.

This generation also faced recent challenges like pandemic lockdowns, economic uncertainties, and the looming climate crisis. A recent McKinsey study shows that Gen Z is experiencing a behavioral health crisis.3 The results revealed that this generation has the highest rate of mental illness and the least optimistic outlook compared to other generations. The report revealed one in four Gen Z respondents said they felt emotionally distressed, nearly double the levels reported by millennials. As the father of a Gen Z child as well, I can attest that their challenges are real, and the impact of the pandemic is real and much different than on the millennial generation. Mental and behavioral health coverages have become more important to clients with higher levels of Gen Z employees.

What you can do:
When discussing coverage with clients, brokers should ensure they are informed about Employee Assistance Programs (EAPs) that might be included in their plans. Additionally, brokers must guarantee clients are adequately prepared to explain these programs to their younger employees, especially if it is their first time buying insurance. EAPs are voluntary benefits programs designed to help employees facing personal challenges that impact their job performance, health, and mental well-being. Third parties usually provide these services at no additional cost to employees. Unfortunately, many people are unaware this tool is included in their plans, despite 98 percent of mid to large companies in the U.S. offering EAPs.

Given their reputation for extensive screen time, Gen Z employees are also more likely to enroll in a vision benefits plan than previous generations. As they become a substantial part of the workplace, adapting and tailoring vision benefit programs to their specific needs is essential. This generation looks for plans that include full coverage of yearly eye exams and premium lens options to address issues like light sensitivity and digital eye strain. Furthermore, one study conducted before the pandemic found that Gen Z employees are more inclined to accept a job when vision insurance is offered.

Moreover, younger generations are more likely to quit their jobs if they are not getting the healthcare coverage they want, contributing to the phenomenon known as the “Great Resignation.” LinkedIn’s recent findings highlight this trend, revealing an 80 percent year-over-year increase in job transitions among Gen Z and a 50 percent transition rate for millennials. In today’s competitive talent market, providing healthcare benefits tailored to each generation with the appropriate level of technological support is a strategic tool for companies to attract and retain top-tier talent.

Reference:

  1. https://healthactioncouncil.org/resources/blog/millennials-and-their-children-whats-driving-healthcare-utilization/.
  2. https://www.millennialmarketing.com/wp-content/uploads/2017/11/Barkley_Report_NewPicOfHealth_FINAL2.pdf.
  3. https://www.mckinsey.com/industries/healthcare/our-insights/addressing-the-unprecedented-behavioral-health-challenges-facing-generation-z.

Dear Santa, All I Want For Christmas Is…

Further evidence shows that the holidays are coming earlier and earlier and are no longer dependent on the calendar. It is not even Halloween, and yet the aisles in the retail stores are already packed with Christmas trees, decorations, and other yuletide offerings. Both my regular [snail] mailbox and email account are jam packed with holiday catalogs offering stupendous savings. The Sirius XM airwaves are replete with many channels that are offering only holiday tunes. I see more Amazon and FedEx delivery trucks in my [small] neighborhood than I do regular cars. Did I miss Thanksgiving somehow? It used to be that Halloween ended, Thanksgiving took over, and Black Friday was the beginning of the Christmas season. The decorations in my home that made my house seem as if I were living in a Hallmark store have long followed this schedule as well.

Like the retailers who are actively pursuing their fair share of the holiday dollars that will be spent by you and me, it is never too early for us to sit with our clients and advise them on the one critical issue that most have ignored in terms of their future financial security: What is their plan for long term care?

Under the guise of asking “What’s Your Plan?” we can address the eventuality of their needing long term care, not outliving their money, maintaining their independence, avoiding government assistance and welfare, ensuring that they have access to the quality of care they will surely desire, and ensuring that they do achieve their vision for their own golden years. This is the time that we can be the Ghost of Christmas Present.

The odds of needing this long term care increases each year as our society continues to age in place. The most recent statistics still reveal about a 70 percent probability for anyone over the age of 65 requiring an average of three years of care before they leave this life. For couples, this statistic rises to a very sobering 90 percent that one or both can expect to require this care. With annual costs continuing to soar into the low six-figures, it is a concern that needs to be factored into annual reviews with clients regardless of whether you are a practicing attorney, financial advisor/planner, or insurance professional. As we have written about on other occasions, the cost of not addressing this issue while the client has the requisite health and wealth with which to purchase this invaluable coverage can be devastating to both the client and their family, but also poses a tremendous liability risk to the professional who elects to avoid the topic.
The Ghost of Christmas Past may remind them of other family members who required long term care. I can remember many a holiday season distinctly colored by the need to provide care for a grandparent or other family member. Even under the best of conditions, talk about a buzz kill. As we continue to age as a society, it is becoming more and more common to interact with clients who have themselves encountered a long term care need in their own family. We may have to help them identify these instances and explore why Grandpa had to come and live with the family after Grandma’s death because he could not be left alone, or the level of care that Mom required as her health or cognitive state declined. Whether it was informal care by an unpaid (family) caregiver in the home, adult day care in a local facility, or the expensive care of an assisted living facility (ALF) or skilled nursing facility (SNF), it is often up to us to “connect the dots” and to illustrate that all these examples are the long term care of which we are speaking.

Keep in mind that insurance companies routinely record a large spike in claims in November and December because families do get together and can better assess situations with family members who may be experiencing some form of decline in their health. As a result it naturally follows that we will also have a rise in sales, which has been the case for many years now.

Encourage families to talk to one another at Thanksgiving and to actively explore what the plan is for Mom and Dad and their care—maintaining their own residence, living with the kids, relocating to a facility, etc. Many years ago, I had a client say to me, “There’s no more significant gift that we can give to our family than to make an informed decision on how we are going to address this issue.” Many of the carriers have wonderful materials on how to start a conversation with older members of the family who may be either in a state of denial or lack the information necessary to make an informed decision.

Tis the season for end of year tax planning. The holidays remain a very good time with which to meet with clients you may have missed out on meeting throughout the year. With complete candor and humility, any appointment set in the month of December is a “virtual write” waiting to happen. For many holiday seasons we tracked as an agency the number of appointments that did not result in a sale because they were so few and far between.

The clients you see are going to be buyers because:

You have educated them—by definition, ignorance is the lack of knowledge. Once you have educated your clients and provided them with the necessary information with which to make an informed decision, it is easy.

They are in the buying mode—for years we have said that the only thing that could make it easier for us as agents is if the company accepted plastic as a method of payment or if Santa was footing the bill! Some carriers will accept plastic, but almost all of them will accept an Electronic Funds Transfer (EFT) and the advent of electronic applications has made the business so much easier. Ho Ho Ho!

They have the time to think—they are not “scheduled out.” They have time to sit and meet with you, either in person or via the Internet, and to make the right choice.

They are more relaxed—the homes are warm and decorated, and it is a more relaxed environment. It is fun to be a part of their holiday season! I love it.

It’s the End of the Tax Year—their financial advisors may have recommended that they buy now to take an end of year tax deduction.

It can be a Gift!—it can be a “gift” from one spouse to the other, or to their kids. Or maybe the kids will buy themselves a present by footing the bill for parents who cannot afford it. For this reason, it may be prudent to meet with the family who is in town visiting! Meet those third-party decision makers or influencers head on and maybe sell them too!

When my own children were younger, the words that brought angst to me were often printed on the outside of the package: “Some assembly required.” With the gift of long term care insurance there is no assembly required, but we do have to battle denial and procrastination. Be prepared on how best to handle the very common objections that you will
encounter repeatedly.

Like the Ghost of Christmas Future, you can ask them about what their vision is for their golden years? For the end of their lives? How will they deal with that unexpected illness or injury that debilitates them? Who will take care of them? Where will the money come from? Is this what they wanted or envisioned?

Sometimes we get a warning when a change in health is approaching, but most times not. The time to prepare for any eventuality is before it happens. Do they have a will? Do they have life insurance? Do they have a plan for long term care? If not, the time to put one in place is now.

I have had many friends say to me that they wish they could win the lottery and walk away a millionaire. In fact, I have one friend who has been saying that to me for about thirty years now. Ironically, he has never purchased a ticket! I have pointed out to him that he could vastly increase his chances of achieving this dream by plunking down a dollar and buying a ticket! Likewise, Santa can’t bring you what you want until you write him the letter. Our largest challenge is often exposing the client to the salient facts and risks associated with long term care but, once we do, most will take the necessary steps to work with you to develop a plan that meets these eventualities.

People do not plan to fail, but they do nonetheless fail to plan. Our responsibility is to help them help themselves by using the information that only a skilled long term care insurance advocate can provide them to make an informed decision.

The bottom line to success during the holidays is the same as it is during the other 46 weeks of the year—activity. It all starts with the phone, and the ABC’s: Activity, Belief, and Congruence. If you are committed to activity, and are in congruence, and avoid the negative paradigms and beliefs about phoning and appointment setting, you can overcome holiday phoning and make Thanksgiving to New Years a veritable bonanza for yourselves and your families. So, ask yourself, “Do I believe?”

Happy Holidays!

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