Thursday, March 28, 2024

Actionable Intelligence In Long Term Care Planning

Who’s Selling What? To Whom, How And Why?

The relative and apparently inexplicable success or failure of long term care insurance sales has persisted as a frustrating mystery for too long. The ability to reliably gain additional sales momentum and build upon successful sales results continues to defy the most empirical or deductive reasoning. The industry has repeatedly tried to examine prospective consumer predispositions to buy and then subsequently carefully examines consumer rationalizations of those who have taken definitive action to protect themselves and their families. Unfortunately, as you hold this kaleidoscope up to the light, we seem to have forgotten that it is the advisor that has the greatest influence and understanding of the patterns finally projected.

Last year, Oliver Wyman and Ice Floe Consulting, LLC, embarked on a joint effort to uncover and understand attitudes and opinions of the agents and advisors who, despite these challenging times, continue to discuss long term care planning with prospects and clients. The research reported in this article has been supported by a wealth of industry friends. Insurance companies, distribution organizations, professional associations and the media have stepped forward in an effort to enhance our understanding of the future of the long term care planning market utilizing all the tools at hand to help leverage care provision alternatives.

Refinement of the Who is Selling What? To Whom, How and Why? Survey was provided by the following insurance companies:

  • John Hancock
  • Lincoln Financial
  • Mutual of Omaha
  • Nationwide
  • New York Life
  • Northwestern Mutual
  • Pacific Life
  • Transamerica
  • Securian

National professional associations that stepped to the plate to support the effort include:

  • NAIFA
  • NAILBA

Industry trade media support came from:

  • Broker World magazine
  • Center for Long-Term Care Reform
  • NAILBA Perspectives

And of utmost importance, was the support and marketing efforts put forth by our colleagues on the distribution end of the equation, including:

  • Art Jetter & Co.
  • Borden Hamman
  • CPS Horizon
  • Long-Term Care Insurance Partners
  • The Marketing Alliance
  • LTCR
  • MasterCare America
  • National Brokerage Agencies
  • National Associations of Independent Agencies
  • National Long-Term Care Network
  • The Brokerage, Inc.

These companies and organizations helped us create a representative sample supplementing the generic master list of 400,000+ licensed life and health agents we would reach out to.

We need to emphasize that the current survey data is specifically agent/advisor centric. The desire to be vicariously present at point of sale helps us identify successful sales techniques and further product innovation. The sales success focus began here in Broker World magazine in May 2004 with the release of “The Producer’s Perspective on Long Term Care Insurance.” Hagelman Consulting facilitated this original work at the height of stand-alone sales with help from LIMRA and the Society of Actuaries. Changing the focus to the advisor’s views of what convinced the consumer to buy did provide an alternative perspective prevailing consumer research. In previous surveys when consumers were asked the most important considerations when purchasing long term care insurance, they identified their excellent judgement in financial matters to protect their assets. Advisors however overwhelmingly identified the consumers’ personal experiences with caregiving as the greatest factor in buying.

The transition over the last 15 years to a world in which 90 percent of all long term care insurance planning solutions are defined as combo life demanded a return to the agent’s perspective. It is our hope that with the continued support of our many long term care planning colleagues that on-going successful analysis from this viewpoint will become a permanent feature of ongoing research into best practices for sales success.

There is much data present in survey responses that helps us understand current practices and perhaps redirect product offerings by fine tuning sales efforts. Highlights of survey findings include:

  • An equal proportion of respondents start the long term care planning discussion by leading with a long term care need and those who incorporate it within an overall financial planning process.
  • 85 percent of respondents were over age 50
    • 59 percent were 60 plus.
  • 75 percent focus on an upscale market.
  • 87 percent include long term care planning in their practice.
  • Only 12 percent of those surveyed described themselves as exclusively long term care specialists.
  • Survey respondents equally preferred stand-alone and combo as their product preference.
  • Although there does seem to be a degree of confusion as to product features, particularly the difference between IRC 7702B and IRC 101g riders, 85 percent claimed to be comfortable discussing all product options.
  • The greatest product comfort level is with stand-alone policies.
  • The greatest discomfort is with chronic illness accelerated death benefit riders.

The 2019 LIMRA Combo Life Report found that 59 percent of all long term care insurance planning options sold included “zero premium riders.” In our survey:

  • 67 percent of respondents do not believe these riders help them close more sales.
    • The remaining 33 percent consider it an important feature.
  • Concern over IRC 101g ADBR’s utilizing the discount or lien method of benefit access raised concerns over professional liability.

Respondents indicated that little happens until the long term care planning conversation is initiated.

Consumer awareness enhances a proactive sales effort.

As previously mentioned, 81 percent of respondents proactively engage consumers in a long term care planning discussion. However:

  • 26 percent stated that consumers raise the issue first.
  • 42 percent indicated that consumers raise the issue more frequently than they do.
  • 40 percent indicated that consumers frequently ask specific questions about “financing” the long term care risk.

Understanding consumer buying pre-dispositions that facilitate a sales opportunity, as perceived by advisors, points to the prospect’s prior personal experience.

The second most expressed consumer motivation was a desire to avoid dependence. Protecting assets was a distant third.

One of our survey’s primary missions was to determine what “power phrases” get consumers to “yes.” They include:

  1. Peace of mind.
  2. Desire to age in place.
  3. Concern pertaining to the high cost of care.
  4. Personal knowledge.
  5. Running out of money.

Best practices as it pertains to policy review provides an optimistic marketing landscape for future sales opportunities.

Policy review is a balancing act between existing policy performance and enhancing quality long term care or chronic illness benefits.

Perceived quality of benefits, at the point of need, is an important aspect of current sales. Policy features that most enhance consumer purchasing interest are:

  1. Available policy features and options
  2. Premium rate guarantees
  3. Inflation protection
  4. Company experiences with long-term care insurance
  5. Joint policy or benefit pool
  6. Financial ratings and reputation

We have witnessed the market shift to combo life policies. With this comes an increased awareness and understanding of the value of a 1035 Exchange.

Additionally:

  • 85 percent of respondents consider adding a chronic illness or long term care benefit rider is in the policyholder’s best interest.
  • 79 percent say their policy review conversations with existing clients includes adding policy benefits covering long term care costs.

Three additional important takeaways from the survey include:

  • Agents/advisors realize that future sales growth will come when products become simpler and more affordable to the middle class.
  • Price (affordability) matters as much as meaningful long term care or chronic benefits.
  • Agents/advisors value the training they receive from their wholesalers and insurance companies. They want more.

Kudos for making this survey possible goes to Oliver Wyman and in particular Vince Bodnar, Carter Khalequzzaman, Elizabeth Hoch and Angela Cobble.

For complete survey results please go to the Oliver Wyman website www.oliverwyman.com/our-expertise/insights/2020/aug/long-term-care-planning-survey.html or the Ice Floe Consulting website www.ltcauthority.com.

It Is About The Problem, Not The Product!

For many of us, the purchase of our homes and the financing of our children’s college education will constitute the largest expenditures of our lives. In both of these cases, we typically use financial leverage, i.e., debt, to attain these objectives. Why? Because it is largely financially impossible to save enough to purchase our homes outright, we will leverage our assets, earning power, and equity by obtaining a mortgage and use outside assets to achieve immediate needs. Similarly, many parents and students will use financial leverage to achieve the requisite college education in the form of student loans—an investment in their future earnings.

Another available form of leverage is insurance. Whether it is to protect against the untimely death of the principal breadwinner or to guard against the loss of a home or a business, we will resort to paying an insurance premium to guard against an undesired outcome.

For our parents and grandparents, the old 40-40-40-40 Rule was very applicable. It was quite common for members of their generations to work 40 hours a week, at the same company for 40 years, to receive a $40 gold watch upon retirement, and to then live in retirement on 40 percent of what they had previously earned. Those days are long gone, as today’s worker will often have employment at eight different companies, and the best that one can hope for today is some form of defined contribution plan with a level of matching funds from the employer as the employee largely funds their own retirement.

Today we are being bombarded with bad news about most American’s retirement savings situation. Some focus on how ill-prepared we all are, while others focus on the level of anxiety many experience in the face of rising costs and diminished retirement assets. Others will put forth discouraging reports about how retirement for many in the future is either a fantasy or distortion of reality. For most of us, retirement security comes down to two major needs: Having enough money to cover our living expenses and post-retirement healthcare costs inclusive of long term care expenses.

Fortunately, the federal government assists with some of the medical costs through Medicare, VA and ancillary programs for eligible recipients. Unfortunately, there is limited to no assistance with long term care (LTC) expenses and this situation will only worsen as the red ink of Medicaid strains every state’s budget.

Trying to save enough to cover living expenses and post-retirement healthcare expenses is an extremely challenging and daunting goal for most of us. For this reason, insurance leverage on the future health and long term care expenses is something most should explore while healthy enough to qualify for coverage and young enough to garner overall lower and discounted premiums.

That being said, please do not misconstrue the message of this piece; this is not a call to action directing people that they must purchase LTCI. Rather, it is intended as encouragement to start the conversation about how to cover these potentially overwhelming costs before they happen.

Many employers educated their workforce about LTCI in the past, but, since it has become more expensive and guaranteed issue is gone, it seems the conversation has stopped right when the baby-boomers, Gen-Xers and millennials need more than ever to understand the situation!

Most employers freely admit that financial wellness and retirement security is an issue and/or even a priority for them as they experience declining employee attendance and productivity due to the burdens associated with employees being forced into the role of caregiver for spouses, parents, or other family members. For this reason alone, now is not the time to ignore the conversation on how to handle what some say is the largest “unfunded” risk facing the baby-boomers—namely long term care expenses.

Today’s COVID-19 environment with its ancillary employment and insurance issues makes it the perfect time to conduct the broader retirement financial wellness discussion. The topic is not, and should not be, about, “We are offering a new product and you should buy it to solve this issue.” This is not a single product discussion like LTCI was in the past. Rather, the financial advisor/benefits broker and human resource executive should be conversant with the broad spectrum of products that are available to meet the wants, needs, and desires of their client or employee. There are multiple new products that can assist the professional in identifying the proper solution for the client and in meeting their different needs.

Employers should help facilitate this discussion because their workforce will not start it on their own. In most cases, the employer can today have an array of products that could be put forth to help address this massive unfunded liability. This would be similar to how high deductible plans helped many employers see much more value in critical illness and accident plans to supplement those high deductible costs that are being shifted onto the workforce. Today’s long term care financing crisis can help make a variety of old and new funding options more valuable and necessary.

In 1935, when President Roosevelt introduced Social Security benefits to retiring workers at age 65 as a supplement to their employer funded pensions, the average life expectancy was only 63! Social Security was never intended as the be-all-end-all retirement vehicle for citizens of this country.

Fifty years ago we only needed one good pension plan for our retirement, as people retired largely debt free, with mortgage-free homes. That is clearly no longer the case. Twenty years ago we only needed one good health plan for our healthcare. With the advances of pharmaceuticals, general medical treatment, and changes in lifestyle, life expectancy has continued to rise. Currently those who have reached the age of 65 can expect to live to age 86. As a result of this extended longevity, it is more likely that we will utilize multiple programs to solve for our retirement and for our healthcare. To cover high deductible costs we layer in CI, accident, cancer and HSA plans along with our own savings. For our retirement, we layer in 401k/403b, pensions, SSI, annuities, and savings. These multiple tools combine to create solutions for today’s reality and our own unique individual needs. Why would long term care be any different?

Twenty years ago we could largely get by with only one good long term care plan to solve for future expenses. Because of the same list of overarching changes, today solving for our future long term care expenses will often require multiple tools and certainly different alternatives within a broad population.

Today, expecting individuals or couples to purchase $8,000/month, five percent compound inflation with 10 years of benefit may or may not be any more realistic for most of us as is expecting a health plan with a $100 deductible and $300 out of pocket maximum or expecting an 80 percent defined benefit plan with four percent cost of living adjustments. Making sure we can be cared for in the setting and manner of our choosing, while not outliving our money or impoverishing our spouse, will likely require multiple solutions that come into play at different points on our journey.

There are many solutions that we might acquire over our life’s journey to help us achieve a lifetime of financial security and peace of mind. When we were younger and starting a family, we would will likely have purchased life insurance for the protections it afforded our families, but today it would make sense for it to contain a long term care rider. One might purchase $200,000 of life insurance that would provide $100,000 for long term care expenses. Clearly $100,000 will not be enough for expenses 30 years from now, but it begins to fill the bucket. Later, layering on a manageable LTCI policy for $200,000 to $300,000 of coverage can make sense. Then later, as we retire, we earmark part of an annuity payment or a fraction of our retirement savings to help with long term care. This type of layering can create an aggregate bucket that solves the majority of the challenge while simultaneously helping to solve for other needs along the way. Additionally, one product rarely works as the sole solution for the diverse populations in our workforces.

The general populace has undergone another paradigm shift in terms of where they now seek out their benefits, to include long term care planning, and that clearly has become the workplace.

Consultants and employers need to help us start the conversation in the workplace because starting to solve for this problem during our working years is when it can be solved far more practically and economically. One reason for this is that working age people are younger, more insurable, and the solutions are more affordable.

Even today, at the start of 2021, unfortunately, there remain nationally recognized radio talk show personalities recommending people do not explore long term care plans until age 60. They are wrong! You should not start to deal with the long term care problem at 60 if you can deal with it at 50. Obviously, they have never seen a Milliman report on LTCI medical declination rates at 60 or 65 vs. 45 or 50. They also have never tried to talk to a 65 year old that wants to solve this problem but now, because they followed their advice, cannot afford the solution. The cost of waiting to solve this problem is just like starting to solve for retirement at 60—most of us will not be able to pull it off. However, 45 and 50-year-old individuals can solve this long term care issue and, at those younger ages, it is not just the executives and “monied” few. Working age people are younger, more insurable and the solutions are more affordable. While life expectancy has continued to rise, and we are decidedly living longer, we are also dying slower! Retirement can stretch to 30-40 years rather than an historically much shorter period. Lifestyle choices, diabetes, obesity, as well as chronic and genetic pre-dispositions often render these products as unavailable and the single largest [often disastrous] cost in waiting becomes lack of insurability.

Many employers are newly offering extensive voluntary benefits portfolios but few of those products will be in place 20-30 years from now to help with retirement healthcare needs. Most of us are self-funding our future long term care expenses and we will be using the dollars we saved for retirement living expenses which are the exact dollars all the pundits are telling us we do not have enough of and from where all the ancillary anxiety is stemming. “Save more, save more” is the mantra across the country on this topic and very few would disagree with this. However, skipping the topic of long term care in what should be a holistic discussion for the different stages of what life should be is unconscionable. Let us start the conversation about Long Term Living in our workplaces now, because it is going to take some time to develop traction on this very tough topic and help today’s workers plan for a safe and secure retirement.

Just as we have been encouraged to save for retirement from our very first paychecks, so too must we be prepared to plan for our future long term care needs in retirement.

Gaps In Long Term Care Insurance

It’s time to face the facts. The insurance industry understands the long term care problem but has not provided an acceptable solution for millions of Americans.

Long term care is becoming an even larger elephant in the room. First, the numbers of Americans needing this care are increasing as their average age increases. Second, the high costs of care continue to rise faster than the rate of inflation. How can insurance protect Americans from these huge costs?

The insurance solutions have become inadequate. Traditional long term care insurance products are becoming more and more expensive in order to cover, or partially cover, the increases in the costs of care. Furthermore, the rates are not guaranteed. Hybrid life/long term care and annuity/long term care products are becoming more popular than traditional long term care products, but they are even more expensive.

These are solutions that only Americans in the top ten percentile of income and assets can afford to buy. What about the other ninety percent? What are the solutions for them? They must use up their limited assets and become dependent on family members, Medicaid and other government programs to receive the care they need.

As costs of care and long term care insurance premiums have risen, agents and brokers have had to make significant compromises in benefits. These compromises used to be relatively small, making partial coverage adequate in most cases. But today, most policies now being sold leave increasingly broader coverage gaps. Let’s examine these gaps.

Daily Benefit: With nursing home costs at $300 per day and more, many brokers and agents are not even trying to fully cover nursing home costs. They know that people will prefer to stay at home, especially when COVID-19 illnesses and deaths permeate nursing homes. The compromise is to design policies with daily benefits of $150 to $200 per day which can cover or almost cover eight hour per day home care costs and all assisted living facility costs. This type of plan cannot fully cover twenty-four hour per day home care. It assumes that people will enter nursing homes only as a last resort and only for a short period of time. Because of the increase in home care usage, brokers and agents are tending not to utilize a reduced percentage benefit for home care and assisted living care.

Benefit Limit: Most people would prefer lifetime coverage, but it is too expensive and is virtually unavailable as an option. Even four to six-year benefit limit options are rarely utilized. The compromise is to design policies with two and three-year benefit limits. Shared care is often utilized for couples in order to potentially double the benefit limit if only one of the spouses needs benefits.

Inflation Rider: Insurance carriers have priced five percent compound inflation, the original standard rider, out of the market. The current rate of increase in long term care costs is about four percent, and this rate could go up a bit with future increases in the minimum wage. The compromise is to propose three percent compound inflation or five percent simple inflation. Another compromise is to shorten the inflation period to a defined period of ten to twenty years. Another alternative is to create a large daily benefit with no inflation rider.

Elimination Period: Brokers and agents are almost always proposing a ninety-day elimination period. They may also include a zero-day home care rider, but with a fair-sized increase in premium. Days utilizing the zero-day home care rider often do not count against the facility elimination period. The ninety-day compromise helps lower the cost, but policyholders are often quite upset when they have to wait ninety days in order for their policy to pay a full benefit.

As an example, (see Table 1) let’s examine the annual premiums in most states today for a major carrier’s traditional long term care insurance product with these compromised benefits: A monthly benefit of $4,500, a benefit limit of $160,000, three percent compound inflation and a ninety-day elimination period:

It has been said by many marketing experts that an annual long term care insurance premium needs to be under $2,000 per year in order to appeal to many Americans and encourage them to purchase long term care insurance. In this example, one has to be in their forties to get the annual premium under $2,000, and, at age 45, that only applies to a single male.

The average age of the traditional long term care insurance purchaser has been about age 57 for years. No wonder that sales have decreased so dramatically over the years. People in their fifties and sixties are not motivated to invest in these high premiums. People in their forties have many competing demands on their finances.

Now let’s discuss the hybrids. The hybrid advantages over traditional long term care insurance are twofold: 1) one always receives a benefit; and, 2) the rates are guaranteed. Hybrids are more expensive than traditional long term care insurance, but you are buying two desirable products which can interact with each other.

However, as with traditional long term care insurance, agents and brokers have had to make significant compromises in benefits so that policies now being sold only partially cover the costs of care and leave increasingly broader coverage gaps. The main compromise is to exclude an inflation rider. Other compromises are to provide a relatively small death benefit and exclude a lifetime extension of benefits rider.

Let’s compare by examining the annual premiums in most states today for a leading hybrid life/long term care insurance product. I am using this particular company because I can structure three percent compound inflation on both the death benefit and the rider, so that the benefit increases over time at the same rate as the example for traditional long term care insurance. This will still not be an apples-to-apples comparison to the traditional example above, but it brings the hybrid example closer to that example.

Let’s use an $80,000 death benefit, an $80,000 continuation of benefits rider with three percent compound inflation lifetime on both. (See Table 2)

Here, there is no annual premium under $3,000. You have a product which again is too expensive for the 90 percent of Americans.

If both traditional long term care insurance and hybrids now in the market are too expensive for 90 percent of Americans, what is the solution for them? I envision three possibilities.

First, Partnership plans can be a great solution if they are utilized properly. They were originally intended to be sold to people with moderate income and assets. Unfortunately, they have not worked well recently because many of the original restrictions on the policies have made them unaffordable and uncompetitive.

Recent changes in these restrictions have made Partnership plans more affordable and again appropriate for their target audience. These changes have included lower inflation rates, smaller monthly benefits and smaller benefit limits. People can purchase a Partnership plan with these smaller benefits, use up these benefits, wind up on Medicaid, and protect some or all of their assets. Partnership policies are a fine example of a private/public partnership which can work for millions of Americans.

Second, the State of Washington Long-Term Care Trust Act may be the first potentially successful attempt at a public plan. Passed in May, 2019, it provides for a benefit of $36,500 which will be indexed for inflation. It will be funded by a .58 percent payroll deduction. This small benefit will provide very partial coverage, but the State will encourage members to purchase private long term care insurance as a wrap-around. The wrap-around will cost relatively little because the Trust members will be relatively young and the first months of benefits have been provided by this Trust Act. Other states are aware of what Washington is doing and may follow suit.

Third, a revision of the structure of traditional long term care insurance may create lower initial premiums and encourage Americans to purchase a plan. Here premiums could be set a low base and rise slowly every year, similar to health insurance.

The rate of increase should be variable based on actuarial experience. We now have sufficient experience so that these increases should be in the low single digits. This plan would reduce the original cost significantly and create a broader market. One current example provides for an automatic percentage annual increase in premium, but lacks an increase based on actuarial experience. Actuaries would probably be more comfortable with a variable rate of increase, but may also have to factor in an inflation factor.

These three potential solutions show that the industry is not satisfied with the current models and is searching for a new solution. I believe that this process will take ten years, and that the industry solutions will be far different by 2030 than they are now. The need will be far larger by 2030. We had better solve this problem.

SBLI Supports National Breast Cancer Foundation’s HOPE Kit Program

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To honor Breast Cancer Awareness Month in October, SBLI (The Savings Bank Mutual Life Insurance Company of Massachusetts) supported National Breast Cancer Foundation (NBCF) by underwriting the cost of 100 NBCF HOPE Kits for breast cancer patients. The company also donated $20,000 to NBCF to support their mission of helping women affected by breast cancer through early detection, education and support services.

Each HOPE Kit is filled with items that patients find comforting and encouraging while undergoing breast cancer treatment, including fuzzy socks, tea, unscented lotion and more. With their additional $5,000 HOPE Kit donation, SBLI invited 100 of their employees to designate a recipient of a HOPE Kit, either a loved one who has been diagnosed with breast cancer or one of the more than 4,000 women on the NBCF HOPE Kit waitlist.

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“SBLI is proud to support National Breast Cancer Foundation and their HOPE Kit program,” said SBLI President and CEO James Morgan. “Most of us know someone who has been or will be affected directly by breast cancer. One in eight women will be diagnosed with the disease in her lifetime, and we need to support this important work.”

In recognition of SBLI’s contributions, NBCF presented the company with their Silver Partner Award “For supporting women at every step of the breast cancer journey.”

“The SBLI team is a powerful example of an organization committed to making a difference. In the midst of a pandemic they tapped their creativity to find a way to engage everyone on the SBLI team and Help Women Now® by delivering HOPE Kits to employees’ loved ones or those on our HOPE Kit waitlist,” said NBCF Senior Vice President, Strategic Partnerships and Charitable Giving, Ken Ramirez. “National Breast Cancer Foundation is extremely grateful for Team SBLI’s creative thinking to empower hope through the distribution of these valued HOPE Kit care packages, as well as for their incredibly generous gift of $20,000 which will make a significant impact on those affected by breast cancer.”

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Recognized as one of the leading breast cancer organizations in the world, National Breast Cancer Foundation (www.nationalbreastcancer.org) is Helping Women Now® by providing early detection, education and support services to those affected by breast cancer. A recipient of Charity Navigator’s highest four-star rating for 14 years, NBCF provides support through their National Mammography Program, Patient Navigation, breast health education, and patient support programs.

Headquartered in Woburn, MA, SBLI is committed to helping further the well-being of families by investing in the communities in which they live and work. Through its charitable foundation, SBLI supports numerous non-profit organizations across the country, including the American Diabetes Association, American Heart Association, National Multiple Sclerosis Society, American Red Cross and National Brain Tumor Society.

  1. National Breast Cancer Foundation staff assemble the 100 HOPE Kits sponsored by SBLI.
  2. Each HOPE Kit contained a personal note of encouragement from an SBLI employee.
  3. SBLI Senior Vice President and Chief Distribution Officer Denis Clifford holds the Silver Partner Award presented to SBLI by National Breast Cancer Foundation.

Who Is Selling What? To Whom? How And Why?

Actionable Intelligence in Long-Term Care Planning

When Oliver Wyman and Ice Floe Consulting embarked on our agent and advisor survey, called Who is Selling What? To Whom? How & Why? (WWWHW), we wanted to explore the salesperson’s view of:

  • Best practices in starting the long term care planning conversation.
  • Agent/advisor/consumer product perceptions and preferences.
  • Best ways to get prospects and clients to “yes.”
  • New product insights.
  • Types of training and education that will improve sales results.
  • Why many agents/advisors do not discuss long term care planning with consumers.

There is more to building a survey like this than meets the eye. Some of the issues we grappled with included:

  • Determining our audience; we needed to approach a large and varied swath of insurance agents, financial advisors and legal and accounting professionals who would share their views.
  • Identifying topics and crafting questions that would provide meaningful responses and actionable intelligence.
  • Deciding to “go long or short.” Surveys that want big numbers of responses are generally short. However, we wanted to get a complete picture of the topics involved. Therefore, we chose to “go long.”

To accomplish these goals, we contacted hundreds of thousands of licensed agents and financial advisors through various channels. With the help of Broker World Magazine, NAIFA, NAILBA, Center for Long-Term Care Reform, and independent life and long-term care insurance distribution, we “pounded the airways” with email outreach. Additionally, we purchased a list of 400,000 licensed life and health agents to ensure we had a representative sample.

As a result, we received tens of thousands of answers from over 600 agents/advisors who completed all or part of the survey. As of this writing, we are still analyzing responses and cross-referencing related questions to identify key takeaways. However, we can now share a high-level view of some data we have obtained.

Who is Selling?
There is a committed and well-trained group of agents/advisors that do take long term care planning seriously. While they may consider themselves “specialists,” do not confuse this term with “exclusivity.” The majority of survey respondents consider long term care planning part of a broader insurance or financial services practice, which may include life, health, Medicare, property/casualty, tax planning, legal, estate and business insurance, and employee benefits. These agents/advisors work with various distribution channels, with the majority in the “independent” category. Most respondents have been an agent or financial advisor for more than 16 years and are 51 years or older, with most being over 60. Interestingly, a significant number of survey respondents indicated they refer clients to a long term care planning specialist as opposed to handling it themselves.

Our initial takeaways from this high-level data are:

  • Interest in long term care planning cuts across many different areas of practice.
  • Numerous agents/advisors are aging out of the business.
  • Interest in including long term care planning in agent/advisor practice is wide but not deep.
  • Insurance companies and distributors have a major opportunity to focus younger agents/advisors on long term care planning.
  • Younger agents/advisors should consider this a “Blue Ocean” opening to expand their business practice.

What?
Let us start with a point of context. The sale of life insurance policies with long term care or chronic illness benefits have grown significantly over the past five years. It is important to note, however, that in 2019, 59 percent of all combo products sold included “zero-premium living benefit” riders.1 Life policies that utilize this form of chronic illness benefit provide indeterminate long term care planning value that isn’t generally apparent until time of claim. A majority of respondents expressed concerns over the professional liability issues inherent in selling “long term care planning solutions” without benefits that were clearly delineated. Additionally, they struggle with trying to explain “discounted” and “lien” methods of chronic illness benefit payment.

Our agent/advisor survey respondents clearly indicated a preference towards traditional stand-alone long term care insurance and combo plans that included long term care accelerated death benefits and/or extension of benefit riders. It does not appear that chronic illness accelerated death benefit riders with contractual language and benefit payment methods similar to long term care riders appeal to many agents/advisors. It is not clear from the LIMRA data which insurance companies are using updated best practices re the HIPAA claims qualifying definition. We believe this contractual language matters to agents/advisors and consumers. Agents/advisors also indicated the expansion of life combo policies offering recurring premium options have made these products more accessible to more consumers.

Our initial takeaways from this data are:

  • Utility and value of “zero-premium living benefit” riders are unclear to agents/advisors or consumers.
  • Agents/advisors prefer long term care benefits over chronic illness benefits.
  • Entry-level premium matters.

Who is the Customer?
Agents/advisors agree that the best client to have a long term care planning discussion with has had a family member who needed long term care and/or they have been a caregiver themselves. Cost of care, desire not to be dependent on family, and control over type and location of long term care services are key consumer motivators.

Considering that most of our respondents actively include long term care planning in their insurance and financial practices, it comes as no surprise that they proactively have the conversation with clients and have a high comfort level doing so. However, this comfort level may be exaggerated by our survey sample. A 2017 Consumer/Advisor survey by Lincoln Financial Group found that 28 percent of advisors found it difficult to discuss long term care with their clients, while only 12 percent of our respondents found it so. The Lincoln Financial Group2 survey reported that 76 percent of consumers would find it valuable if their advisor discussed long term care planning with them. Coincidentally, our survey respondents indicated that 75 percent of the time they raise the planning idea before their clients do.

Our initial takeaways from this data are:

  • Experiencing the hard truths of the long term care event continues to be a primary consumer motivator.
  • Proactive and systematic inclusion of the long term care planning discussion leads to sales success.
  • If the agent/advisor waits to be ”asked,” they either missed the sales opportunity or it is probably too late to help.

How–Best Practices–Is the Sale Made?
“Nothing happens until a sale is made.” These immortal words by Thomas J. Watson, Sr., speak directly to the proactive nature of sales success. With this in mind, we wished to determine if there are unifying practices successful agents/advisors use as they navigate consumers through the long term care planning discussion. Approximately 40 percent of those surveyed indicated the conversation began as a specific “dominant need” conversation. An almost equal number said long term care planning was part of their overall financial design process. Sixteen percent said the discussion was part of their life insurance review activity.

“Upgrading” an existing life insurance policy to include long term care or chronic illness benefits was a key talking point for agents/advisors. 1035 Exchange opportunities also came into play when appropriate. The top three client “screening” techniques continue to be health evaluation and insurability assessment, financial appraisal, and discussion of personal financial goals. Ultimately, however, the sale continues to be fueled by experience with long term caregiving.

Why?
As we have said in the corporate boardrooms of insurance companies, prior to a consumer purchasing a life or long term care insurance policy an agent/advisor must believe that risk is real and the product they are offering has value. It is clear from our survey that the respondents are passionate about long term care planning. Many own it themselves, have had long term caregiving experiences and believe it is the cornerstone of a complete financial plan. From our experience these are universal traits of most successful life/long term care insurance professionals. The big questions for insurance companies and distribution is: How do we imbue more producers with these attitudes and enthusiasm?

Takeaways for Another Day
As we analyze and correlate survey responses with the team at Oliver Wyman, a number of themes have percolated to the top of our list for continued consideration:

  • Confusion exists among agents/advisors about the nomenclature used to describe various combo products. What is the difference between combo, hybrid and linked? Is it time for the insurance industry to get together and create terminology accepted by all? Clarity should not be a rarity.
  • Even more confusion exists about the differences between IRC Section 7702b long term care vs. 101g chronic illness benefits. What type of training should we create to address the differences, advantages, and disadvantages of these two types of solutions for long term care planning?
  • Technology solutions offered by insurance companies get mixed reviews. Are we ready to examine what is working, and what is not, to make it easier for agents/advisors and consumers to access planning solutions?
  • No consistent “COVID-19 message” pertaining to long term care planning has surfaced. Maybe it is too early, but it seems there are several obvious ones that agents/advisors could be utilizing.
  • Agents/advisors continue to focus on the affluent market. However, the survey respondents indicated that expanding to the mid-market was of keen interest to them. What can carriers and distribution do to help create a larger playing field?

Stay tuned for more actionable intelligence from the WWWHW Survey. 

References:
1. LIMRA—U.S. Individual Life Combination Products Annual Review 2019.
2. 2017 Thought Leadership Research—Lincoln Financial Group Versta Research.

Dear Actuary,

I’m trying to grow my long term care practice. I find myself worrying that, as it grows, I’m going to drown in the amount of task-oriented work that insurance naturally presents. How can I expand my business without sacrificing every free second I have?

Sincerely,
Hectic in Houston

Dear Hectic,

I’ll start by saying that you’re certainly not alone. Insurance professionals have a lot to track throughout the client awareness, education, and sales process. Repeat the cycle over and over again for hundreds of clients and your book of business can start to look like an overflowing closet.

There are so many tools out there for process efficiency that it would be impossible to try to name them all. It seems like, nowadays, there’s a tool for any pain point you may encounter in your practice. For example, at BuddyIns we use over 25 different software tools that are integrated together to help our agent and agency partners with their long term care marketing and insurance sales.

So, while there’s no catch-all for managing your business, the first step is figuring out where your pain points and bottlenecks are. What tasks are most repetitive and take the most time? The answer to this question will help you find the tools that will be most beneficial to your bottom line.

In this article I’m going to outline three common pain points for insurance agents and recommend specific software programs that we’ve personally used to save us our most important asset—our time. These tools are leaders in their respective categories, but there are many great alternatives as well. The reason I’ve chosen to highlight these programs is because they are effective, easy to use, and they all have a free version. So what have you got to lose?

Meeting with your Team and Clients—Zoom
Chances are, if your practice wasn’t at least partly remote before this year, COVID-19 forced your hand. Though Zoom has been around for many years, the software certainly had its number called this year. Millions of people have become aware of its power to bring us together. Your kids may even be in class on Zoom right now as you read this!

It’s no stroke of luck that Zoom is having its moment in the spotlight. The ability to have virtual meetings with your team, clients, and prospects can save you time. Back in March of 2020, the biggest objection I would hear from agents about using Zoom was that being on camera might make their clients uncomfortable. A few weeks later Zoom entered the mainstream and hasn’t looked back. You can see your clients, host group meetings via teleconference, and share illustrations on your screen. It’s the closest thing to a face-to-face meeting without being in the same room.

There are many similar software programs out there. One of the reasons that Zoom is popular is reliability and pricing. Zoom is currently free for one-on-one meetings with clients or team members. For group meetings, Zoom currently limits meetings to 40 minutes with an upgrade that costs about $15 per month.

Even beyond COVID-19, having a tool like Zoom in your back pocket is just one of many ways that you can give your clients and prospects more options to interface and do business with you.

Zoom’s Use Case: It’s hard to imagine my team having as much success without Zoom. We work with partners all over the country, so what we do would be quite difficult without it.

We also host a lot of educational webinars and video interviews. We can put on a Zoom webinar, record it, edit it, and use it for content on multiple platforms. In a world that’s becoming more virtual by the minute, we’re glad to have Zoom as a sidekick.

Appointment Booking—Calendly
Calendly is a tool that allows clients and prospects to self-schedule a meeting with you. Think of it as your virtual scheduling assistant. You can send people a link to your Calendly page or embed Calendly into your website.

One strength of Calendly is in its integrations. Calendly syncs with the major email calendar providers such as Gmail, Outlook, and iCloud to make sure your availability is viewable to clients and you don’t get double booked. It can also integrate automatically with Zoom to set up your meeting room ahead of the appointment.

One of the key differentiators of Calendly is that once a client books, we have found no-show rates come down close to zero. Calendly automatically adds the meeting to your guests’ calendars and sends out reminders for you. You can also set buffers to make sure meetings aren’t scheduled too close together for your comfort.

Calendly is free for a basic version and currently about $10 per month for an upgrade to include integrations and reminders.

Calendly doesn’t entirely replace the important touch point of calling clients to schedule. It just makes it easier to book appointments by giving your clients options and allowing them to reschedule without the back-and-forth usually needed to negotiate a time and date.

Calendly’s Use Case: If your team is still calling every prospect and negotiating a meeting time manually, you can stand to free up a lot of time using this tool. I use Calendly to schedule meetings not only with partners and prospects, but also with my team. I fill up my schedule easily with almost no sweat.

Forms and Information Gathering—Jotform
One of the most common complaints I get about working in insurance from industry professionals is that gathering information from clients can be an unpleasant experience.

Scanning or sending pdf fact-finders to clients who you hope have the capability to fill out, scan, email, fax, or hand-deliver them back to you can be frustrating. Clients are busy and can easily get bogged down by the simple process of sharing information that you need to do your job. It doesn’t need to be that way.

Jotform allows you to create shareable web-based forms that clients can fill out quickly and easily. The information comes back to you in a format that is satisfying and immediately usable.

Beyond that, you can also create a form on your website that works as a funnel. If prospects are interested, they can fill out the form with their contact information. Once submitted, Jotform can then trigger all sorts of events, such as saving their information into your contact management system, sending the prospect a welcome email, and offering them access to your Calendly to book a meeting. In this scenario, you can see where Jotform begins to nurture the relationship with your prospect!

If gathering health information for pre-underwriting is cumbersome, Jotform also has a HIPAA-compliant version for an added cost.

Jotform’s Use Case: Jotform will be most valuable to those who don’t already have a good system in place for gathering information from clients and prospects.

If you’ve read this far, you’ve probably noticed a few commonalities about the tools I’ve shared:

  • They’re intuitive and easy to use.
  • They’re free to start using and advanced features are inexpensive as well.
  • They contain automations and integrations that take laborious tasks off of your plate.
  • They reduce the friction involved in working with your clients and work hand-in-hand with your personal touch and branding.
  • As a result, they’re low risk and high impact, which means a big boost to your business.

I hope these recommendations have helped you discover a few new tools as you continue to grow and manage your business. The more you’re able to integrate technology into your practice while still maintaining a personal touch, the more you’ll be able to spend time with clients. All the while, things you used to stress about will just hum along in the background.

The Art Of Achieving Balance

While we all know there is no such thing as a unicorn, that does not stop us from writing stories, creating cartoons, and other fairy tales about them. Nor is there concrete evidence that the Loch Ness Monster exists, and yet that tale persists. I have a friend who believes that he has seen Sasquatch. I would also add the concept of Time Management to this list of things that do not exist, yet people continue to dwell on it.

I firmly believe that time management is an illusion that a great many people pursue, but like a cloud in the sky, can be seen but never touched. I state this as an affirmation because I know that time simply cannot be managed. We can prioritize and micro-schedule, but we all receive the same 24 hours each day, the same 168 hours each week. Sixty seconds to each minute, sixty minutes to each hour. It is a law, and like all laws of nature and man, needs to be respected. Success follows when we are obedient to laws over which we have no control.

I recently had a conversation with a producer who spent 25 minutes lamenting at how poor he is at time management. After listening to him ramble (his choice of words) for those 25 minutes, he ceased and it was my turn. I immediately pointed out to him that he had referenced “time management” some seven times in those 25 minutes, and that he should not be so self-deprecating because of an inability to manage something as illusory as time. I shared with him that we have as much chance of managing time as we do of touching a cloud. “Once upon a time” I sat on the modern miracle of a jet plane, looked out the window at approaching cloud banks, and realized that, as we were flying into them and through them, there is never any tangible contact. Yes there is condensation on the outer surface of the plane, but for the passengers it is largely an illusion.

At the conclusion of my agent session I made that suggestion to him that, rather than attempting to manage something that is simply unmanageable, he would be better served if he focused his efforts to achieve happiness and success by attaining balance in his life and being proactive rather than unbalanced and reactive.

A series of conversations with this same producer, as well as several others, led me to share that achieving balance in one’s life is really a series of choices that we must make every day, to wit:

  • It is about organization, not about making excuses.
  • It is about exercising discipline and being diligent.
  • It is about avoiding a state of inertia and rising above it.
  • It is about prioritizing our activities, not managing the time.
  • It is about never uttering “I’m sorry” when it comes to owning your business.

A long term care advocate can be successful by working an honest 40 hours per week. Yes, you heard it right. Not 60 or 80 hours, but only 40. An honest, yes, there is that word again, 40 hours will make an advocate successful at the Leading Producer level if he or she employs the above tools.

  • It is about working smarter not harder.
  • It is about creating and maintaining balance in the various spheres that comprise our lives—family, professional, personal, spiritual, physical, recreational.
  • It is about maximizing—not managing—the 168 hours that we are granted each week.
  • It is about focus.

Some life lessons gleaned over the years
More than a few years ago I learned, “Focus on everything is focus on nothing.” You simply cannot spread yourself so thin and expect to remain focused enough to accomplish anything at a level equating to success. That is a formula for mediocrity.

Second, what is your time worth? Only you can assess this and assign a value. It is important to remember and to discipline yourself so as not to chase meaningless opportunities.

Third, it is about answering the question: “Am I investing my time, or merely spending it?” Time invested in an activity such as reading to your grandchildren or family history and genealogy would surely trump the time spent playing Fortnight or spending hours on Facebook or Pinterest. Sorry, I am neither a gamer nor a social media junkie.

Simple math:

  • 40 hours of work (five eight-hour days or four 10-hour days—it does not matter) broken down as follows:
    • Four hours education (workshops, webinars, conference calls, self-study).
    • Five hours marketing.
    • Eight hours scheduling appoints.
    • 20 hours of appointments.
    • Three hours of administration.
  • 49 hours of sleep (achieving the optimal seven hours per night).
  • Six hours of physical exercise (six one-hour sessions Monday-Saturday).
  • Seven hours of personal spiritual time (one hour daily—scriptures, prayers).
  • Three hours of church worship.
  • Seven hours of service (extended family, neighbors, friends).
  • 14 hours of recreation (two hours daily).
  • Eight hours date night with significant other (Friday and Saturday).
  • 21 hours of family time (for those who do not have immediate family, this could be phone, Skype, FaceTime, letter writing, etc.).
  • Four hours of maintenance and housekeeping.

Leaves a reserve reservoir of nine hours, and we were generous with some of the above allocations.

These categories can be combined: A family activity that involves hiking or skiing would encompass family time, recreation, physical exercise, etc.

You work for yourself, which means that you are primarily accountable to yourself. To this end, the first question that you must ask, and answer, is: “Would you have hired you in the first place?” Follow up questions should then include, “Are you measuring up?” “Would you not fire you based on your current performance if it was coming from someone else?”

Remember that when performance is measured it improves. When it is measured consistently, it improves exponentially. So, stop managing something that is not manageable and focus on the greatest resource you have in your possession: You.

“All good performance starts with clear goals.” —Ken Blanchard.

Americans Are Demanding Annuities

I have seen the demand for annuities grow stronger and stronger over the past couple of decades. When I talk about this with colleagues in the annuity industry, they think I am being facetious. What? You haven’t seen the same? Well, let me show you about the demand for annuities from my own perspective.

The United States is in a retirement crisis. For the next 10 years there will be an average of 10,000 people turning 65 each day.1 It turns out those baby boomers are really earning their title as “the greatest generation!” Look forward to more retirement communities and nursing homes in a neighborhood near you!

In a recent survey, 57 percent of respondents had less than $1,000 in savings.2 And I thought I was running behind on my saving for retirement! Someone wise once told me that you should always have at least three months’ salary saved in your savings account. And that sage advice puts me ahead of nearly three-fifths of Americans? That’s plain crazy.

Approximately one in four Americans aged 65 and older relies on Social Security for 90 percent of their family income.3 I am certain a career in financial services has swayed my knowledge of this topic. If I am not working with someone asking about annuities, it is someone talking to me about using life insurance to subsidize their retirement income. Yet, I know that early in my career someone told me that Social Security is only intended to provide for 40 percent of your retirement income. That said, it appears that most Americans have never heard that (and therefore, are not prepared for it), or they haven’t the ability to prepare for this despite having this knowledge.

The 2014 report from the Social Security program trustees indicates that the trust fund reserves will fall to a point that Social Security will not be able to pay full retirement benefits starting in just 13 more years.3 This is what everyone is bellyaching about—“I’ve paid in for [X] years, and they aren’t going to give it back to me?” I don’t know about you but, as a woman in her mid-40s, I feel a little lied to in respect to this. I’ve been paying into Social Security for more than 30 years. I get those statements from the Social Security Administration each year telling me what my estimated Social Security check is supposed to be. So, I’m potentially going from about $2,000 per month for the rest of my life (as of today) to absolutely nothing in retirement? That is certainly going to put a dent in my plans to run off to Sweden in 15 years.

The top fear of Americans is running out of money in retirement.4 In fact, this phobia is greater than the fear of death or public speaking! While this made me laugh (because I love the attention of speaking in front of a crowd!), it makes perfect sense. For those who are 65 today, a man has a three percent chance of living to 100, a woman a 5.9 percent chance, and at least one member of a couple an 8.7 percent chance. These percentages rise over time, so the comparable numbers for someone age 25 today are 6.1 percent, 10.2 percent, and 15.7 percent, respectively.5 Now, those statistics may seem relatively insignificant, but if you are part of the three percent that is scary as all get out.

And while most consumers do not know that annuities are the only financial services product that can guarantee a minimum income amount for the rest of the purchaser’s life, they do know that they need some kind of help navigating retirement. In fact, 90 percent of boomers believe an important function of their financial professional was to “ensure the safety of a significant part of my nest egg.”6 Another 84 percent said their financial professional should “make sure I have adequate and guaranteed income for life.”6

So, like I said, the wares in your toolbox are highly sought after by your prospects. Americans are demanding annuities! There is just one problem—they hate the word “annuity.” In a recent survey, 35 percent of respondents would be less interested in an annuity that offers guaranteed lifetime income, as compared to an unnamed product that offers guaranteed lifetime income.7 So really the objection isn’t the product, it is how you frame it. If you describe what the annuity does, rather than what it is, you are likely to receive a much warmer response. If you can listen to your prospects’ concerns, and provide feedback indicating that you have an instrument that can offer them a lifetime of guaranteed income, you are meeting the demands of the masses. Go forth, educate, and the sales will come.

References:

  1. Pew Research Center.
  2. 2017 GOBankingRates survey.
  3. Social Security Administration.
  4. New Generation Ahead Study, Allianz Life 2017.
  5. U.S. Social Security Administration, Office of the Chief Actuary.
  6. Reclaiming the Future Study, Allianz Life 2016.
  7. Fifth annual Guaranteed Lifetime Income Study, Greenwald & Associates.

Professional Development As A Tool To Stay Connected

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The marketplace is not the only thing in constant movement: Current events evolve, laws change and technology advances. A good financial professional is both a steady and trusted resource for clients, and one who keeps developing and honing their skills and market know-how along with the times.

The social distancing guidelines designed to keep us safe are also affecting how we conduct business. While they have challenged how we build a personal feel into our business relationships, the guidelines have also gifted us with a valuable resource: Time. Conducting business from home offers us a chance to restructure and rethink our work schedules. It makes allowances for the educational investment that can prove profitable in the short and long term, enriching our industry knowledge.

No matter where your business is located, if you are a licensed financial professional, you are likely expected to fulfill a continuing education (CE) requirement to maintain licensures in the states in which you sell. But it is more than just a requirement. For those of us learning to navigate a global pandemic, it presents an opportunity to stay connected.

Rather than shying away from the challenges that the virtual world poses in 2020, OneAmerica is doubling down on its commitment to provide industry-leading external and internal training during this time. We are doing this by redirecting our attention to three key goals: Increasing the amount of CE opportunities we offer, upping the number of sales representatives who can facilitate such courses and maximizing opportunities for professionals to connect with one another through other professional development events and resources.

Turning Requirements into Opportunities
In response to the pandemic, we conducted a broker survey earlier this year. About one-third of surveyed brokers identified regular check-ins with sales representatives as the most helpful support during this time. Providing virtual training and learning opportunities about industry topics was also suggested by brokers as one of the most effective ways we could support them to attract new business.

As a result of that survey, we significantly—and intentionally—increased the number of CE courses held by 88 percent this year. We also ensured that all our sales representatives became approved CE facilitators in 2020, which allowed us to host CE sessions in the third quarter with 100 percent of the facilitators being internally sourced. The big victory here is that we are now able to host virtual CE options for brokers in every area of the country in which we sell. This is huge.

Expanded virtual offerings now replace typical in-person education that was made difficult to conduct due to the pandemic and the resulting social-distancing mandates in many cities. Our focus on staying connected has turned out to be key for our business during this time.

Expanding our CE offerings encourages agencies to make time to reach out to their brokers and be intentional about their growth together. Professionals who have not sold our brand before are now benefiting from our virtual classes and building relationships with our sales representatives. At a time when there are plenty of things out of our control, enabling you to hone your skills from the comfort of your couch or kitchen table gives us something we can control, while we empower you to own your career path and stay sharp in your industry knowledge.

Our new reality may feel daunting; however, those interested can ask their local representative for more available CE courses, to schedule their next instruction session or simply to catch up. We are embracing our ability to meet brokers wherever they are. The feedback has been wonderful so far.

New Resources and Events to Grow and Connect
In addition to the CE courses, OneAmerica also offers training webinars on product and service topics focused on thought leadership, including leaves of absence, auto-enrollment and premium allocation. Whether professionals sell with OneAmerica or not, they can sign up for upcoming webinars or watch recordings of past webinars on-demand and review supporting resources 24/7 at oneamerica.com/BrokerTraining.

We are also in the middle of a new and exclusive speaker series called Leading Tomorrow. It offers financial professionals several opportunities to learn from, be inspired by, and connect with, carefully selected thought leaders such as America’s IRA Expert, Ed Slott, and the president of The American College, George Nichols III. You can also sign up for this series at oneamerica.com/BrokerTraining.

Associates are educated on the most current industry changes so they are equipped to address questions from financial professionals or clients regarding coverage or eligibility during this pandemic. We are also constantly updating our COVID-19 Business Response Page, which includes our position on several pandemic-related topics and short-term disability guidelines.

Helping brokers reach their best potential is one of our goals at the sales level, but also a responsibility as insurers. This new environment is forcing us to stay on our toes as situations out of our hands continue to develop. But it also motivates us to stay on top of the things we can control. We believe focusing on your professional growth and becoming top industry leaders in your area is not only a worthy pursuit, but also a wise investment in this pandemic era. Do not hesitate to reach out via email or LinkedIn to have a conversation on this topic, or simply to connect. Let’s talk.

OneAmerica® is the marketing name for the companies of OneAmerica. Products issued and underwritten by American United Life Insurance Company® (AUL), a OneAmerica company. Not available in all states or may vary by state.

Legacy Planning Is Always About Love

Except that sometimes, maybe, it’s not. Sometimes it gets more complicated.

Generally, parents and grandparents who have managed to accumulate some security and wealth, and who are close to family members, have a plan for those hard-earned assets that includes their kids and grandkids—sometimes charities, too. And nearly always the family traditions, the stories, and the heritage are even more important than the material assets left behind. Especially in the last 140 years, families still have lingering memories of living through hard times—like for German families in Serbia in WWII, like in the South after the Civil War, or for families struggling during the 1930s depression. Some family members will be more empathetic and interested than others when it comes to family heritage of course. And this is doubly true when it comes to the grandkids who may really not care that much.

Most folks do want their kids to share equally in their estate at their deaths—even with all the blended families we now have. And, while many are very close to their grandkids, some grandparents are actually estranged from theirs. And for some grandkids, the feeling is mutual. All grandkids aren’t necessarily always chips off the old family block—and sometimes not really stellar citizens either. Maybe they’re really not bad kids but their whole life’s focus is on supporting the rebels in Balookistan (where, they think, your money could really come in handy).

So, in planning for asset distribution, the goal is to make enjoyment of your assets possible for all of your children, but perhaps it’s also to prevent the enjoyment of those hard-earned assets by some of the kids or grandkids that you really don’t even know that well or care about. How to do that is the question.

One way could be to use life insurance and annuity products—sometimes in conjunction with a trust. It often will depend on what the assets look like. Some things haven’t changed. Where a particular asset like your family home or the lake place could be prized by one or two kids, those assets and the expenses that come with them are not desired at all by the others. So, assets can be distributed considering family traditions in addition to division along the lines of “equitable” economic value.

Often most or all of your assets like real estate would be sold off and the money distributed in cash. Or sometimes investment assets or income property with large capital gains might be appropriate for particular kids and not for others.

Of course we all know that families can often easily use life insurance as a compensating asset for some family members who weren’t ideal choices to leave the family business or the lake place to. Last survivor life insurance can be great for this since the cost for leaving one guaranteed income tax free dollar is very inexpensive. For a fairly healthy male and female grandparent couple, they could do it for about one percent of the policy face amount per year. They’d have to live a hundred years to break even on that deal.

In any event, once decisions have been made as far as your children’s inheritances are concerned, what are the consequences if a particular child were to then later die? The answer is that their family is going to get your assets. Is that OK? Or not?

In many cases, once your estate is liquid you might create and fund a trust for that child you love. Since you really don’t know or communicate much with their spouse or their kids at all, the trust could provide a monthly income to that child for his or her lifetime or for period certain—like ten years. (That configuration would, of course, depend on your child’s current age and his or her health—and how old he or she is likely to be at your death. It’s a guess but you have to start somewhere.)

The income from the trust would ensure that your son or daughter is going to have a more enjoyable and secure life—along with some memories of dad and mom each month for years to come. But, you also have the ability to direct the inheritance in a new direction should that child not live to the end of the term period you set up. So if your son or daughter had a 10 year guaranteed payout but died in six years, the trust could then redirect money for the remaining years to your church or the Humane Society instead of to his or her family. The grandkids can go to work and maybe then appreciate you more… And, again, a (last survivor) life policy or an annuity could be an ideal funding tool to guarantee money to the trust for your payout plan.

With advice from your own estate planning attorney, you might arrange the same result with an immediate (income) annuity without using a trust—with some special attention to the contingent beneficiaries.

Existing annuities could have endorsements for the contingent beneficiaries—and if assets were turned into cash your executors could be instructed that one child’s distribution share would only be available if he agreed to do it through the new SPIA in which he would be annuitant and annuitize immediately with the restrictive endorsement (no surrender or changes)—and he’d have to agree to the terms of it or he just wouldn’t get any of it. He’d have to agree that, at his death, any remaining payout would go to your local Humane Society. Irrevocable. Period. Or else.

Sounds draconian, and again, a trust set up after your death to spell it out might be better, especially if your insurance company couldn’t provide the documents and administration. Your executors would just need the instructions. As to an arrangement where your child would not own the annuity, it would require a trust to hold the annuity for them where you would direct the terms of the trust.

If you re-directed the remainder of the income years (should the child not live to receive all the money) it might be preferable not to redistribute it to the other children or grandchildren since it could cause additional family discord. A charity might be preferable.

You really aren’t heartless in doing this type of planning. After all, it’s your money and you want it to always do good things.

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