We all know that you need three key ingredients to have a successful interview that leads to a client purchasing some form of long term care insurance to safeguard the future for themselves—trust, need, and urgency. I’d like to share a few comments on how to really make urgency come alive while discussing the inherent risks associated with long term care. Many agents struggle with how to keep this key module interactive, especially with the knowledge that the talk/listen ratio should be 2:1, with the client doing more of the talking. How is it possible to both educate the prospects yet at the same time keep them actively engaged? Simple; end every statement with a question mark.
So, let’s talk about a natural flow with the client through the risk module of the interview. First and foremost, you need to do a complete balance sheet, laying out all the client’s assets to include the home (net of debt), investments (breakout tax deferred such as 401k, Keogh as you can’t use IOS on them with younger clients), other properties such as cabins, vacation properties, and heirlooms to name a few. Why is it so important to secure all the prospect’s assets? So, you can appropriately do the takeaway with real numbers and not made-up hypothetical numbers when you ask them to prioritize the order in which they would potentially liquidate (sometimes at fire sale prices) these assets to meet the costs of long term care.
I generally like to start with this simple line of questioning regarding homeowners’ insurance which so many people take for granted. Everyone agrees that it is a “necessity to protect our single largest asset,” yet they put little or no thought into whether from a risk perspective it is necessary.
A discussion of risk requires the producer to set the stage by demonstrating the degree of risk associated with the various and sundry risks we all face on a day-to-day basis.
“Do you have homeowner’s insurance? How come? Have you ever needed your homeowner’s insurance for anything significant? Where would you be today if you hadn’t had your homeowner’s insurance? If five minutes before I got here today you opened a letter from your homeowners insurance company telling you, effective today, they were canceling your policy, how would that make you feel? Five minutes later I came knocking on the door to talk about LTCI coverage. What would you tell me? Would you say, ‘Something more important has come up…’ or perhaps ‘Do you sell homeowners insurance?’ How long would you take to make sure one of your largest assets is protected? How well would you sleep tonight if you weren’t able to secure coverage today? Would you light a fire in the fireplace, light candles around the house, fire up the barbie, invite a few friends over for a kegger? Don’t you find it ironic (use their words) that you wouldn’t go a second without homeowners’ insurance even though you’ve never really needed it?”
“What are the odds of you ever utilizing your homeowner’s insurance policy? How many people do you know have lost their home?” Most will say zero or one. This is because the odds of a carrier paying off on one of these policies is literally one in 1200. Pretty remote, and low risk to the carrier.
After discussing homeowners’ coverage, we move on to their cars. “Have you ever totaled a car? Anyone in your family? Do you know anyone that has had to replace a car that was a total loss?”
“Which coverage is more expensive for you—your car insurance or homeowners?” Unless they are in a high-risk area (New Orleans, Florida, etc.) the answer should be that their car insurance costs more. Why is car insurance more expensive than your basic homeowners? Risk. Risk to the insurance company. With five times the odds of paying out on a policy, they must charge more to mitigate their risk which is literally in the one in 240 odds range.
Health insurance companies charge more than their property and casualty peers because why? Because of the risk of paying out claims. The odds of one needing a major procedure, heart surgery, hip replacement, cancer treatment after age 65, is literally one in 15. For everyone else, it is rare that we do not see our doctors at least annually for wellness checkups or minor illnesses, aches and pains, and routine procedures. The risk to these carriers is tremendous and is reflected in the premiums that they collect from policyholders.
Why is permanent life insurance more expensive to purchase than term insurance? Risk. If a permanent insurance policy is in force at the time of death, the certainty of paying out the claim is 100 percent to the carrier. On term insurance, the risk to the carrier is less than two percent that a claim will be filed.
With those common insurances as a baseline, it is now the time to address the risk of long term care in their lives.
- 42 percent of people under the age of 65 are in long term care.
- 90 percent chance of the likelihood of one of a couple needing care.
- 79 percent of women who are age 65 will need long term care.
- Seven out of 10 people over 65 will require long term care.
- Three years is the average number of years people use long term care benefits.
- Eight to 10 years is the average life expectancy after an Alzheimer’s diagnosis.
Recent cost of care surveys published by several carriers place the (average, national) cost of assisted living facilities at $54,000 per annum, home health aides at $62,000, and skilled nursing facilities (semi-private room) at a staggering $108,000 per annum. Again, these are national averages and there are many areas of the country where these costs are significantly higher.
You’d be surprised how this line of questioning and tact really helps set up the client to have an emotional discussion regarding long term care protection. When talking about LTCI I like to share the statistics from the New England Journal of Medicine which cites that once you reach the age of 65, one in four Americans will spend one year in a nursing home. Perhaps more significantly, one in 10 Americans will spend five years in a nursing home. “Which assets, Mr. Smith, would you liquidate first to pay for your care? Don’t you find it ironic that you’ve covered all the risks that are not likely to happen, but the one that is most likely to occur, with the biggest costs, you’ve left unprotected?”
“Can you think of a bigger risk than the cost of long term care which can involuntarily wipe out your life savings, cause you to be a burden on your kids, lose your independence? Bigger than the risk of long term care? Do you see this as a real problem for you? Is this a problem you’d like to solve today? If I can show you a way to solve your long term care problem without compromising your lifestyle or depleting your life savings, wouldn’t you want to take action today to secure protection while your health still gives you a reasonable chance to do so?”
What to do if you are talking to Superman, who refuses to buy into the entire risk argument? It is at this point that you stop using the term risk and pivot to the term consequence. “Okay, Joe, I hear what you are saying. Your family history, as well as your current health, may very well allow you to fall into that ten percent that drops dead of a heart attack, gets hit by a car, or simply allows you to die without the need for long term care. But what if you are wrong? What are the consequences to your spouse, your children, and your financial legacy? How damaging would it be to the very people you have so diligently served as the breadwinner all these years if you suffered an accident or contracted some acute or chronic disease that required care, and depleted your assets?” I do not know why it took me so many years to have this epiphany, but once I discovered the word consequences, I found that I could overcome nearly any objection thrown at me by the client.
Finally, the questions that should spark the desired urgency: “If you needed care tomorrow…where would you want to receive your care? Who could care for you? Where would the money come from to pay for your care? How long could you afford to do this monthly?”
The long term care advocate’s role is to help the client understand the concept of long term care insurance and the options available in the industry. He or she assists the client with research, insurance companies and policies, and represents multiple carriers to offer coverage that best fits their individual needs.
As much as I’ve always preached the power of emotional need, I truly believe that a great risk module comes in a close second and keeping it fully interactive is crucial. By using powerful takeaways, we can help clients feel what it would be like to not have peace of mind having the insurance they absolutely take for granted. Failure to do a great risk module absolutely jeopardizes your ability to sell today. The failure to address consequences may jeopardize your clients’ future. Good selling to you all.
