Inflation Protection or Bigger Daily Benefit

[Frank Stastny]

I am not a strong supporter of custodial care in the home. When I was selling LTC I use to hear "My children love me, they would never let me go to a nursing home".

That is a tough objection to deal with. You don't want to tell them "not that much" but more often than not the situation ends up being what you described. One person will do all the work and the others just stand by.

I came up with a response to that objection that seemed to work quite well for me. When a prospect said, "My children love me..." I would respond with, "I'm sure they do, but I love my children, I would never put them in a position of having to destroy their quality of life tending to me and having to change my dirty diapers."

I firmly believe that. If I ever get to the point where I can't take care of myself I want to be in a place where they pay people to do that. I would never expect a family member to have to do that.

The first time I said that to a prospect, she looked at me and said, "I never thought of it like that". I walked out with a signed app and a check.

When I was selling LTC I had the option of adding home health care, adult day care, assisted living but very rarely recommended those things be added to the policy. The requirement for receiving benefits were the same ADL's that were required to qualify for a nursing home. If someone can't transfer, feed or dress themselves etc then I am of the opinion that they need to be in a nursing home or be in a place where they receive 24 hour care if it is going to destroy a family members quality of life.

At that point the "quality of life" in my life has pretty much ended. Why drag other family members lives down with me?

Any one of us, at any time could get in a wreck and end up being a cucumber. How many of you would want your spouse or children to have to take care of you for the next x number of years even if a "professional" came in a few hours of the day? Not me.

I encouraged prospects to save their money, not spend it on the "bells and whistles" portion and purchase a nursing home policy with a high enough benefit that, if they ever had to go, would pay for a place that was like a five star hotel.

I know all the agruments as to why the "bells and whistles" "should" be added, however, most of them boil down to a higher premium that results in a larger commission.

I strongly advocate nursing home coverage for everyone. We are all living longer but not necessarily healthy. Because of advances in medicine, a lot of people who would have died fifty years ago are living longer now but are they really living, or just existing.

 

[James]

Understand this, as Frank has suggested about his personal feelings on LTC, (not LTCi) you'll find that people run all sort of ideas and personal feelings about this. Some say, stick me in a NH others say "I expect to stay at home". There is no right or wrong about that, it is how the client wishes to handle the ending of life or any long term need of custodial care, may that last one month or linger on for 5,7,10 or more years. As an agent, you can only offer a policy to best handle what the client wishes, base on their ideas and financial ability.

How one goes about doing that is where the difference lies. When I hear Agents say, home care is cheaper than NH care I cringe! Learn the business, I view DI and LTCi as very important and these contracts will carry a lot of fall out if set up wrongly. Yet though the attitude I see, while one does have to read between the lines is this, "I can sell LTCi today and it'll likely be years, 20 or more before a claim is likely to happen so I'm covered, I'll be long gone, so why should I spend the time learning the real issues?".

Personally I think that most Life and Health sales are straight forward. Yet the sale of LTCi (much like DI) tends to be more complicated base on issues the others don't take into account. Life pays out XX and Health will cover XX but DI and LTCi has to be able to perform at various levels and often have to work with other products such as Health Insurance, Life Insurance and Retirement Funding. Such as the choice of NH or Home Care, these issues change over time, the person that says today "just send me to a NH" may change their mind when the time comes or have it change for them, and of course the opposite might happen. As an agent we can only offer a contract that can "Cover the Risk" of financial ruin but yet we have to sell a product that will serve the client personal wishes when we will likely be long out of the picture.

Ps, from expierence I understand that when LTCi runs out it is really hard to go from a upscale NH to a Medicaid bed in a average or below average NH.

 

[Newby]

I have a 68 year old in great health that wants LTC for peace of mind.

Likes the idea of a lifetime benefit versus 4 or 5 years.
Financially stable enough to handle a 90 day elimination period.

But what's better?

A lower daily benefit with inflation protection or a higher daily benefit with no inflation protection?

Cost wise I can get her a higher daily benefit up front for less than lower benefit with inflation protection.

According to much of the stats online...

The average age for a female in a nursing home is 83. The current average cost of nursing home in Texas is about $150 per day, maybe less. In 15 years if inflation is perfect it should cost about $215 or more per day. $150/day with 5% simple would give her right at $215 in 15 years, but my quote is $4500 annually.

$220/day with GPO would be $3800.

Opinions? Recommendations?

I would always sell the policy with COMPOUNDING inflation protection not simple if they can afford it.

Selling higher levels of coverage (with no inflation protection) will help if they go in a nursing home at a young age but they will likely outlive that.

Inflation protection figured as simple interest (increases on the principle only/does not compound) is better than nothing but will also fall short if they live long enough.

If your figure of $150 per day is assumed correct and annual inflation averaged at 3.5% each year, here is what their costs would be.
age 68 = $150 per day
age 78 = $211 per day
age 88 = $298 per day
age 98 = $421 per day

Your client would not be in the Guinness Book of World records if they lived to age 100. And keep in mind, inflation can go much higher than 3.5% annually. In fact if you look at 25 year blocks of time over the last 50-years, the LOWEST it has been was 3.5% (1981-2005) and the highest was 5.9% (1966-1990)
At 5.9% your client would need:
Age 68 = $150 per day
Age 78 = $266 per day
Age 88 = $472 per day
Age 98 = $837 per day

 

[policy doctor]

Well if they buy a loaded policy, and then after

 

[policy doctor]

Sorry for the inerrant post.

If you sell a "loaded policy" and then the client comes out from "under your ether" you have enough fat to trim that policy.

 

[Mr. Bill]

It's really hard to say, as Newby's numbers are horrifically correct. That said, imagine what the "typical" Social Security benefit will be. Social Security will go up with the "cost of inflation" at whatever the government deems to be the "cost of inflation" and we are now looking into a future of fabulously bloated dollars, in other words, working toward worthless....The "real" cost of providing the care is more likely to go up astronomically, don't you think?

In that respect, by selling a higher daily benefit amount (as opposed to inflation-protected) you will be doing your client a big disservice, especially if the dollar halves again against foreign currencies.

There may come a time when we really need policies that will pay for care provided overseas (because that will be where the "cheap labor" is!)

 

[James]

I see nothing wrong with promoting the idea that seniors should move to foriegn nations with cheaper living expenses. In fact, many countries have economies that they can live like Kings and Queens on Social Security and meager savings. Now that is a great idea! Just ship our seniors overseas or South of the Border where they can live better and tell the foriegnors all about "I'm on a fix income!".

 

[Newby]

having just returned from an Alaskan cruise, my LTC plans will be to just go on a permenant cruise when I need assisted living.

Those cruise people wait on you hand and foot! Room service any time you need a grape or your pillow fluffed. Great food. Lots of entertainment, Black Jack every evening and a new scenic view every day!

That's assisted living at it's best.

 

[Bob_The_Insurance_Guy]

What seems to be missing in all of these posts (unless I've missed one) is the fact that this should be a family discussion (if there are family members stil alive), even if the family members live 4 states away.

I only have 5 LTC plans in force. All 5 prospects included their adult children in our meetings, either by teleconference or in person. All 5 completed a detailed fact finder, including financial information, in front of the adult children. All 5 completed the application in front of the adult children. All 5 have given a copy of their application and policy to an adult child.

It is not for me, an outsider, to speak to how much time each adult child, can or cannot spend, taking care of Mom or Dad. It's not up to me to tell them where they can and cannot receive care. This means that, if their adult child lives in another state, chances are that the care, beyond home health care, MIGHT be done in that state. So, therefore, you need to research numbers in that state, as well as the home state of the prospect.

If a prospect does not want their children involved in our talks, I send them to somewhere else. I also make them sign a "release" form, stating that I won't work with them, and for that reason. It prevents a future E&O claim from the kids.

You will find that, if you include the family in every step, these questions will be answered.

YMMV

 

[James]

What seems to be missing in all of these posts (unless I've missed one) is the fact that this should be a family discussion (if there are family members stil alive), even if the family members live 4 states away.

I only have 5 LTC plans in force. All 5 prospects included their adult children in our meetings, either by teleconference or in person. All 5 completed a detailed fact finder, including financial information, in front of the adult children. All 5 completed the application in front of the adult children. All 5 have given a copy of their application and policy to an adult child.

It is not for me, an outsider, to speak to how much time each adult child, can or cannot spend, taking care of Mom or Dad. It's not up to me to tell them where they can and cannot receive care. This means that, if their adult child lives in another state, chances are that the care, beyond home health care, MIGHT be done in that state. So, therefore, you need to research numbers in that state, as well as the home state of the prospect.

If a prospect does not want their children involved in our talks, I send them to somewhere else. I also make them sign a "release" form, stating that I won't work with them, and for that reason. It prevents a future E&O claim from the kids.

You will find that, if you include the family in every step, these questions will be answered.

YMMV

I would say it depends upon the age of the client. I can not really comprehend telling a 55 yr old that they must have all adult children present before we can procede. In fact, IMHO it would be them telling you too leave instead of you telling them you can not help them. I'm not even going into making them sign something because they didn't buy, I understand your reasoning (even though I would suggest it is a tad on the paranoid side unless these are existing clients) but think depending upon who you are talking too how receptive they would be to sign anything.