Why A Standalone Long Term Care Insurance Policy?
Plenty of “hybrid” options are available that combine LTC with life insurance or other financial instruments, but when the time comes to use the LTC feature, accessing those benefits can necessitate deconstructing your client’s entire financial plan, during a very stressful time. They appear to offer two solutions for the price of one, but in most cases, their compromises water down what they actually accomplish. Having a separate LTC policy can completely eliminate this situation.
If your client purchased life insurance, they of course did so with the intent that a certain amount be paid to their beneficiary. What happens, though, when their life and long term care insurance are being funded by the same policy? Using the LTYC feature will lower their life insurance’s death benefit, or even deplete it entirely if they are in care long enough, leaving nothing to their beneficiary. For this reason, it’s best to keep these policies separate.
Similarly, while LTC riders do exist for certain types of annuities, they do not offer the full amount of coverage you could obtain with a true LTC policy. Additionally, by tying up their planned income stream and LTC fallback in the same policy, they could lower their overall income in retirement, and possibly lose funds that could have been left to beneficiaries.
A standalone LTCI policy has other benefits that most hybrids do not. Tax-qualified LTCI policy premiums may be tax deductible. A standalone LTCI policy offers customization, with benefit options which can fit you client’s particular needs. It does not require a large upfront cost and can normally cost less after many years than a single premium product. And the leverage is often twice the leverage of a life insurance or annuity product and can more easily cover the high risk of a complex long term care scenario.
Therefore, in many cases, keeping LTCI separate from other financial products can allow your clients to better meet their wants and needs.
I believe that a focused approach to selling will always be the most successful. What does this mean for the long term care insurance specialist? The first part of the selling process should always be a comprehensive discovery of the prospect’s needs. During this discovery, the prospect should be urged to consider the advantages of traditional long term care insurance about 90% of the time. This should be done in a generic way, so as not to compare the features of specific products.
A hybrid or linked product will be the correct solution to the prospect’s needs about 10 % of the time. If this is the case, complete your fact finder and set a second appointment, so that you can investigate alternatives and create one or two illustrations of the one product you are going to recommend.
Traditional long term care insurance will be the correct solution the other 90 % or so of the time. You should present the one product of your choice about 80 % of the time you present a traditional long term care insurance product. Show no more than two options, and be prepared to recommend either one of them. Keep your presentation simple…no more than eight to ten minutes. Repeat the prospect’s needs back to him and/or her. Be convincing. Ask for the sale and close.
You will need to present a different traditional long term care insurance product about 20 % of the time. This will occur when your favorite product is not the appropriate solution. You need to be able to pivot to this alternative at a moment’s notice, but never after you have already presented one product as your preferred solution. Don’t give choices between products…only give choices between structures of a particular product. Keep it simple. You’ll sell more and be more gratified. And you’ll be doing more good for more people.