Until someone discovers the fountain of youth, one fact of life is unavoidable: We will all get older. And along the way, its inevitable that many of us will need health care to help us rehabilitate, recover, or just have a good quality of life. In fact, experts say 70% of everyone who reaches 65 will need some type of long-term care during their lifetimes.
If so many peopleincluding bank customersneed this service, why is it estimated that the bank channel currently accounts for only 5% of all LTC sales? The biggest obstacles are the misconceptions or just a lack of good information. Here are the biggest myths standing in the way of LTC sales and consumer acceptance.
1. All LTC Products are alike
There are many consumers and advisors who are just plain wrong on exactly what LTC is, how it works, what the product options are and the significant protections it can provide, said Steve Gregory, President and CEO of Associates of Clifton Park (NY) that specializes in LTC solutions for bank programs. I think its because years ago, there was one standard type of LTC, but now there are also hybrid asset-based products and life insurance with LTC and chronic care riders. Each of these products has different cost structures and benefits so they can deliver exactly what consumers want. Its no longer one-size-fits-all.
2. LTC is too expensive
Without question, the number one objection I get when I mention LTC is its too expensive, said Linda Hill an FA with Waddell & Reed for almost 17 years (and a nurse for 29 years) in Lake Oswego, Ore. I typically respond with, Yes, its a lot of money, but see what happens to the assets you worked so hard to accumulate if you arent covered. Hill believes its more a matter of showing her clients that they cant afford not to have LTC. This cant afford not to have it approach was also mentioned by Eileen Dunn, a geriatric care manager at Trinity ElderCare Consulting & Management. I work with families every day and I know that people really dont understand the magnitude of the costs of care. When an event actually happens and they need care, it can cost $7,000 to $9,000 a month out of pocket.
And the product manufactures havent ignored the too expensive issue. Brad Buecher Sr., VP at Mutual of Omaha believes that insurance companies now have products that are not only affordable, but are also more in-line with the protections consumers will actually use. Affordability can be addressed with new products that have price points and options that meet real-world needs, he said.
3. LTC is too Complex
While its true that there are more products and features available than in the past, this has actually had the effect of making selling (and buying) LTC simpler. Unlike years ago, today theres a wider range of product options for LTC that better meets the needs of clients, said Neal Kerins, AVP Insurance Product Marketing at John Hancock Life in Boston. However, more product choice doesnt necessarily mean more complexity. For example, for some clients the solution may be as simple as adding a LTC rider to a life insurance policy.
Trinitys Dunn adds: There are three elements to a LTC plan for a client. Theres a financial, a legal and a human aspect. Many FAs are ok on the first two, but they dont understand the last. Its pretty complicated and intimidating dealing with the health care system in America. Thats why most LTC policies provide for a care coordinator along with a case manager to make sure the policy holder gets the care they need.
4. LTC is only for Old People
While LTC is generally for nursing home care late in life, it can also help with assisted living costs during a rehab, and in-home care for arthritis, stroke, Alzheimers, cancer and more. Most people want to avoid the hospital and get care at home if they can, said Andrew J. Bucklee, CFP and Head of Insurance Solutions Distribution at Lincoln Financial. If you have a stroke, or fall and need physical therapy, or help just getting around, thats covered by LTC. Buchler added that LTC is really an asset protection and empowerment tool. Rather then depleting assets that may have taken a lifetime to build, this will protect your assets.
5. Clients believe they can self-insure
According to a Genworth study, assisted living care now costs an average of $42,000 nationally. Education for both advisors and consumers is the answer to this myth, says Lincolns Bucklee. I think theres a lack of education that leads to inaction, he said. Clients need to better understand their options for protecting their assets so they can ensure a proper strategy is in place to address an unexpected long-term care event and reduce the impact of asset depletion.
Theres also an element of denial. Hill spoke about clients who think theyll never need the coverage, and will always be able to pay for whatever health care needs arise. The reality is, I tell my clients, you will get old, and its very likely you will need it. Even if they have substantial assets, I ask them to think about how a significant health event will drain those assets and the effect that could have on their families.
6. Advisors can do their Job fine Without Mentioning LTC
Because of the perceptions of cost and complexity, many advisors never even mention LTC to their clients. Its out of their comfort zone, Dunn says. Advisors are comfortable talking about stocks, mutual funds and interest rates, but not about incontinence. And it can be a long selling process too. But advisors need to think of LTC as a stage of life, not a product.
I wouldnt be doing my job if I didnt discuss my clients future and how getting older could affect their assets as well as their family, said Hill. The typical reaction is: Thats a lot of money for LTC. But I show them what will happen if they dont have it.
7. You have to be an Expert to sell LTC
A good advisor doesnt need to be an expert on LTC, but they do need to ask their clients the right questions, said Gregory. This will help determine what a client can afford, the benefits they really want, and the products that will best meet their needs, he says. Then they can work with the firm that has the expertise they need, whether its the insurance company directly, or a firm like ours that represents and supports products from several difference manufacturers.
And there are advantages to not being the expert. Advisors dont want to cause an embarrassing situation about a clients personal situation, so having an outside entity to handle that can be very appealing, Gregory said. And working with several firms or an intermediary that represents several firms also has advantages. One firm may not have the best product for that customers situation, Gregory said.
Paul Werlin is president of Human Capital Resources Inc.
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