In some respects, we are a “victim of our own success” in the LTC Insurance industry.
Especially in the earlier days of the industry (mainly the mid to late 1990’s and early 2000’s), we did a wonderful job of telling agents and advisors that the most appropriate plan design for LTCI was often something like:
- A daily benefit tied to the current daily cost of care in a nursing home
- The shortest elimination period possibly (preferably zero or 20/30 days)
- The longest benefit period possible (preferably lifetime, but 5-7 years if not)
- 5% compound inflation benefit
And, guess what? We wrote a LOT of those types of policy designs.
Why? Because we COULD! Premiums for such designs were at a reasonable level for a decent cross section of the LTCI buying public.
Do we see a lot of those types of policies written today? No.
Why not? Because the premiums today for those types of policy designs are out of reach for most of that same buying public.
Does that mean we abandon the LTCI market altogether for most of our clients and prospects? Absolutely not!
A policy design today, with a meaningful level of benefits – even if not necessarily enough to cover the entire cost of a nursing home stay – can still be a VERY valuable addition to most clients’ financial plans.
More and more today, agents and advisors – and consumers – are agreeing with the planning approach that says, “even if I can’t cover the entire potential LTC risk with insurance, some meaningful level of coverage is better than none.” It’s essentially the notion of “co-insuring” the risk (with their income and other assets used to cover the difference, if necessary).
In other words, there is broad recognition that by shifting some of the risk to an insurer (in some sort of LTCI product), clients are assured that at least some of that potential financial risk is covered and done so in a cost-effective manner.
Think of it this way: if I need LTC services at some point, say, at home (which, by the way, is where a majority of LTC is received in the U.S.), and I have a policy that will pay me or a provider up to $150 per day, is that not beneficial?
If I need, say, 8 hours of home health care services, at a rate of $25 per hour (for a total of $200 for that day’s care), yes, I would still have to pay something out of pocket for some of that care. However, how much would I rather pay out of pocket – the entire $200 per day (which translates to $6000 for a 30-day month of that care), or just $1500 (the difference between what the insurance pays and what I would then need to pay out of pocket)?
Most people would rather retain the extra $4500 per month as income for other uses. Wouldn’t you?
So, remember, LTC Insurance does NOT need to be an “all or nothing” proposition – show your clients why!