Strategies for selling LTC insurance

It’s a product that needs to be discussed as part of a holistic financial planning process, experts say.

“Financial planning doesn’t end at 75 or 80,” says Marg Manias, insurance manager and living benefits specialist with Investors Group Inc. in Halifax. “Financial planning encompasses, and should look at, what happens if [you or your spouse or companion] require care, and how much money is that going to take from your existing retirement fund.”

The first step in selling the product is to make clients aware of the risk they face with respect to the possibility of needing care, says Stephen Frank, vice president of policy development and health at the Canadian Life and Health Insurance Association Inc. (CLHIA).

“There’s a lack of understanding of what the true cost of long-term care is,” he says. “People need to understand that there is a risk there — a financial risk, and they need to understand that there are options to help them mitigate that risk.”

Talk to clients about the potentially steep costs associated with care, and show them the effect that these costs may have on their retirement savings, suggests Laurel Pederson, assistant vice president of health insurance products at Toronto-based Sun Life Financial Inc. Consider demonstrating the impacts of different scenarios, such as $3,000 per month in care costs for a period of five years, or $5,000 per month for a period of 10 years.

“This quickly demonstrates to clients how their retirement income plan can be at risk,” Pederson says. “Then, move into discussing how to adjust the income plan and the deployment of assets, and then also about how to add the insurance solution as well.”

From a cost perspective, it’s ideal to sell LTC insurance to clients when they’re in their 30s or early 40s, as the premiums are much more affordable.

“The best time to get it is when you’re younger,” says Mark Halpern, certified financial planner and president of illnessPROTECTION.com Inc. in Markham, Ont. “It’s less expensive, and you can qualify for it.”

However, it can be a challenge to convince individuals who are young and healthy of the need to plan for LTC, as they likely have many more immediate financial priorities on their minds.

In many cases, clients don’t recognize the need to plan for care until their parents start to require it, as that’s when they see first-hand the hefty costs associated with it. By that time, clients are often in their 50s, and the premiums can be considerably more expensive.

“At that stage, it is quite an expensive product,” says Frank. “So there is a bit of a sticker-shock there if people are looking to insure themselves into their 50s.”

Although premiums are higher for older clients, Manias finds that for many clients, the product is still affordable up to age 67. She recommends presenting the product to every client between the ages of 50 and 67, to ensure they’re at least aware that the option is available to them.

“That’s where the premiums are doable, and that’s where we’re still healthy,” she says. “Whether or not they buy it is secondary…but we have an obligation to bring it up with them.”

Even though some clients may consider the premiums pricey, she says advisors can demonstrate the value of the product by comparing them with the hefty cost of care.

In addition, advisors can find ways of keeping premiums down. For example, policies in which the benefits kick in after a certain predetermined period – rather than immediately – can be cheaper for clients, Halpern says.

“Generally, we look for longer waiting periods, because we hope that the clients can manage for 90 or 180 days on their own income, before they need this policy,” he says.

Clients can also keep premiums down by choosing not to add such riders as the cost of living adjustment benefit, which adjusts the amount of the benefit in line with inflation; and the return of premium rider, which returns the premiums paid to a beneficiary in the event that the insured dies while the policy is in effect.

Group seminars can be a very effective way of selling LTC insurance, according to Manias. By presenting the facts to a group of clients who are around the same age, she says it becomes a social event where clients talk to each other about the experiences they’ve had with ill parents, reinforcing the need for planning.

“I think the secret to long-term care is the group dynamic,” she says. “It’s far more powerful, because it’s done in such an upbeat and enjoyable manner.”

This is the final article in a three-part series on long-term care insurance.