- Are You Certified To Sell LTC Insurance?
- Types of LTC Planning Solutions
- How To Design A Policy
Effective 2007, there is a mandatory LTC insurance training (certification) that is required per the Deficit Reduction Act of 2005 and the 2006 NAIC Model Act. (There are a few states yet to implement the requirement.) The insurance carriers are responsible for ensuring producers are compliant prior to selling or soliciting LTC insurance.
The certification courses are offered by Continuing Education companies. The certification is also required for most life insurance and annuity products that have LTC benefits. This is different training than the training required in the original 4 Partnership states of CA, CT, IN and NY.
You must be compliant before taking a LTC application and many of the Linked Benefit Product’s application. If you are not compliant, the insurance carrier will return the application.
Please note, even if you are grandfathered from having to complete Continued Education for your license, you are still required to take this course. Since it is a product certification, it is never grandfathered.
Click HERE to access the training requirements.
At least 70% of people over age 65 will need some form of long term care services and support at some point.++
Whatever your client’s vision of their future, it probably does not include a situation that requires long term care. It is also unlikely that they could foresee how such a situation might affect their finances and, perhaps more importantly, their quality of life and relationships with those they care most about. A little planning now can deliver a sense of security for your client’s future.+
Long Term Care is a family event – it affects everyone. In fact, “46% of family caregivers say that providing care affected their personal health and well-being.” Moreover, “53% of caregivers and care recipients had lost income due to the demands of providing care.” +++
Two questions to ask each and every one of your clients:
1. Do you have a written plan for how you are going to pay for care if you need it for an extended period of time?
2. How is this going to affect your family?
IPG offers the solutions and can help your clients pay for long term care expenses.
CLICK HERE to use the age simulation tool designed to help understand the physical effects of aging.
+Genworth “Living Long Term” client brochure
++2015 Medicare & You, National Medicare Handbook, Centers for Medicare and Medicaid Services, September 2014
+++A Way Forward: Highlights from Beyond Dollars 2013
1) LTCi (Long-Term Care Insurance)
Unlike traditional health insurance, long-term care insurance is designed to cover long-term services and supports, including personal and custodial care in a variety of settings such as the client’s home, a community organization, or other facility.
These products are underwritten for morbidity, tend to have the least amount of cash outlay, the most risk for clients, and like health insurance, the premiums are not guaranteed.
In addition, there are possible tax benefits allowed for Long Term Care Insurance and they may qualify as a Partnership Plan.
2) Linked Benefit Products
A Linked Benefits policy is a unique insurance product that allows your clients to protect their assets from a potential long term care (LTC) event and leave a legacy to their loved ones without having to purchase two separate policies.
These products tend to be a life insurance or annuity with a long term care rider that will allow the benefits to be pre-paid tax-free if the insured needs long term care.
The products are underwritten for mortality and morbidly, have a higher cash outlay, little risk to the clients and the premiums are often more stable.
3) Hybrid Products
A hybrid product is a combination of two or more types of financial products. By paying an initial lump sum premium, you immediately create a death benefit for your clients’ beneficiaries and a pool of money to pay for covered long term care needs.
Similar in concept to Linked-Benefit products, these products are underwritten for mortality and morbidity. However, they tend to offer more long term care benefits than death benefit or annuity values.
3 Main Components:
1. How Much -The benefit amount is the amount the policyholder will be paid for their long-term care expenses. The amount the policyholder will be paid is determined by the daily or monthly benefit amount and the chosen benefit period. Most carriers offer benefit amounts ranging from $50 to $500.
A good starting point is to find the average cost of care in your area by visiting Genworth’s Cost of Care Map. Most policies are written to cover a portion of their long term care expenses rather than trying to insure the entire cost. Many clients can afford to co-insurance $50 or more a day out of pocket and this can help keep the policy affordable.
This component of a LTCi policy affects the premiums the most.
2. How Long – Carriers no longer offer lifetime benefits. The longest benefit period most carriers offer is 5 years and a few will offer 6 years.
The benefit or lifetime maximum is calculated by multiplying the benefit amount with the benefit period. This results in the amount called the “pool of money.” There are no time restraints on how long a policyholder can receive benefits as long as there is money remaining in the “pool of money.”
Daily Benefit – $150 3 Year Benefit (1095 days) Pool of Money $164,250
3. How Soon – This is the elimination period. Most carriers offer the ability to add at an additional cost, a 0 day home health care elimination period. Therefore, if your clients chose a 90-day elimination period, it would only apply when they enter a facility.
There are two types of elimination days – Service or Calendar. A service elimination period is satisfied by days of actual home care services. Therefore, if a client has 3 days of home care services in one week, only 3 days of the elimination period are satisfied.
If home care is received first, some policies will waive the elimination period so that the policyholder is eligible for benefits right away. Some policies automatically include this feature and others offer it as a rider.
Additional riders to consider:
Inflation – Adding an inflation rider to a LTCi policy can be beneficial as it can help the benefits keep up with the rising cost of care. Common inflation riders offered are:
3% Compound Inflation Rider
5% Simple Inflation Rider
5% Compound Inflation Rider
Guaranteed Purchase Option
In most cases, the 5% compound inflation has become unaffordable for a majority of clients. The most commonly sold inflation rider is the 3% compound. However, carriers are beginning to offer unique inflation riders that should also be consider such as Transamerica’s Tailored and Step Rated Inflation Options.
Shared Care – A great rider to have when working with couples. When this rider is purchased, it allows a “bridge” between the two policies. Should one insured use all of their benefits, they may use some or all of their spouses’ benefits. However, if one insured passes away, all remaining benefits will be passed to the surviving spouse. This rider can also help overcome the objection, “What if I never use it”?
Underwriting for Long Term Care Insurance is based on morbidity rather than mortality (think of what puts your clients on claim) and has become more thorough over their years. Rather than the Advisor, clients are asking about LTCi and unfortunately, there often is a reason. Therefore, the industry has seen a dramatic increase in declines.
Always let your clients know we must find out if LTCi is even an “option” before you continue the conversation. Some of the questions you can ask are:
1. What medications do your currently take and why? (Please make sure to ask why as many medications are taken for multiple reasons).
2. Are there any medications that have been prescribed by your physician that you currently do not take.
3. When did you last see your personal physical and had a full physical and lab work done? (Some carriers require the applicant have seen their physical within the past 2 years)
4. What was your height and weight when you last visited your physician?
5. Do you have any outstanding tests or medical procedures? (Insurance will not move forward with an application if the applicant has anything outstanding.
6. Do you have any medical diagnosis and when where they diagnosed? (Carriers often have waiting periods for certain diagnosis)
7. Do you see any Specialists?
By obtaining this information up-front and submitting to IPG, we can help guide you on whether or not traditional LTCI is an option for this client and what carrier we should lead with.