Resistance to Long-term Planning a Looming Crisis

[scagnt83]

As an agent myself, I have to agree unfortunately, that this is a different sale than your typical "something beats nothing" pitch of life insurance or FE or even accident/CI in place of a traditional health policy.

I think you missed my point.

It IS the same type of sale. Or at least it should be.

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With LTC, if you cannot afford the proper amount if coverage, and you encounter an event that requires coverage, you'll burn through savings and assets, etc., until you arrive at Medicaid.

If you cannot afford enough coverage to protect from the vaporization of all your savings and assets, you might as well gamble that you dot need it. Either way, if you need LTC, you'll lose everything and rely on the state to care for you.
.

Even with LTCI something is better than nothing.

It doesnt matter what amount you need for LTC. It still is better to leverage whatever amount of money you can afford via LTCI.

Say you have $400k in assets. And can only afford $250k in LTCI benefits.
Over 15 or so years you will pay around $50k total (give or take)

Now lets say you need $400k in LTC.
With the $250k benefit pool you will have retained $250k out of your $400k.

It is about paying a small amount to save a large amount.

The ones who cant afford a Cadillac policy are the ones who need the "something" the most. Its that "something" that could mean the difference between financial ruin or survival. Not every LTC need is worst case scenario, most actually are not.

 

[Arthur Rudnick]

OK, I've got to stick my 2 cents in here. I'm one of the few who has never believed that "something is better than nothing".

I've seen too many policyholders with LTC policies who have $150/day in benefits, where the cost of nursing homes are $350 to $400/day. Spending $200-$250/day out of pocket will force them to spend down their assets in a short period of time.
In this case, is something better than nothing?

I've seen too many policyholders in their 50s with $200/day in benefits without an inflation rider. In 25 years, when the cost of care is $600/day, what good is their policy?
In this case, is something better than nothing?

I've seen too many agents sell minimum benefits just to make an affordable sale and if care were ever needed, the policyholder will go broke in a few short years.
In this case, is something better than nothing?

Yes, I undersatnd the debate that $3,000/month in benefits for home care would make one's life a little easier. But, nursing homes are a part of a LTC policy. Statistics from The American Association of LTCi states that claims fall about equally between home care, ALFs & nursing homes.

Therefore, selling a "something is better than nothing" policy will do a disservice to 66% of all claimants.

I know that I'm in the minority on this issue, but if a "something is better thn nothing" policy will eventually force the policyholder to spend down their assets and wind up on Medicaid, is that a good thing?

I usually recommend that benefits should cover 70%-80% of the costs of care and if current & future income can only buy a policy that covers a small fraction of those costs, I'm not sure if the purchase of a policy is appropriate.

 

[billberry12]

Arthur,

I think that's more than 2 cents worth. ;

Here is my 3 cents worth.

Quite simply, if the cost of care is $400 a day, and they have countable assets of $200,000, without any LTCI, they will run out of money in 500 days.

Same situation with a "something is better than nothing" LTCI policy of "only" $200 a day, at the end of 500 days, they will have kept from spending $100,000 of their countable assets because of this LTCI policy.

So, is it worth the premium to not have to spend $100,000 of your assets during 500 days of care?

At the end of a 500 day long term care event, do you think they are better off having $100,000 that they didn't have to spend on care, or are they better off at the end of 500 days being flat broke and having to go on Medicaid.

Personally, I would rather the former and not the latter be my situation. To each his own.

How about letting the customer decide?

 

[scagnt83]

OK, I've got to stick my 2 cents in here. I'm one of the few who has never believed that "something is better than nothing".

I've seen too many policyholders with LTC policies who have $150/day in benefits, where the cost of nursing homes are $350 to $400/day. Spending $200-$250/day out of pocket will force them to spend down their assets in a short period of time.
In this case, is something better than nothing?

I've seen too many agents sell minimum benefits just to make an affordable sale and if care were ever needed, the policyholder will go broke in a few short years.
In this case, is something better than nothing?

I know that I'm in the minority on this issue, but if a "something is better thn nothing" policy will eventually force the policyholder to spend down their assets and wind up on Medicaid, is that a good thing?

My response to this would be "how much more quickly would those assets be gone if they had nothing??".

Now obviously common sense dictates that there is a minimum level of coverage that it just doesnt make sense to go beneath.

But to have something means that the assets, even though being spent down, will last longer than they would have.

My question back to you would be "Would you rather burn through all your money in 2 years or 5 years?"

I think most people would choose to hang on to whatever they can for as long as they can. It makes sense on multiple levels. Especially since no one knows how much or how little they will need.

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Yes, I undersatnd the debate that $3,000/month in benefits for home care would make one's life a little easier. But, nursing homes are a part of a LTC policy. Statistics from The American Association of LTCi states that claims fall about equally between home care, ALFs & nursing homes.

Therefore, selling a "something is better than nothing" policy will do a disservice to 66% of all claimants.

Its not about being able to pay for home care and not nursing home care.

Its about leveraging what money you can to pay for whatever portion you can.

HomeCare has nothing to do with it. No one said to sell a lower benefit policy because at least they have home care covered... it is about extending and protecting assets to the extent you are able to.

100% will need one of those three levels of care. And they will need money (some amount) to pay for that care.
It makes sense to pay whatever portion you can with discounted insurance dollars.

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I've seen too many agents sell minimum benefits just to make an affordable sale and if care were ever needed, the policyholder will go broke in a few short years.
In this case, is something better than nothing?

Ok. We are not talking about greedy or lazy agents trying to make an easy sale or an "anything" sale.


Lets say the client goes with no coverage at all.
Then in 2 years they are destitute.

But if they chose a small LTCI policy, it might take 4 or 5 years to spend down all of their money.

Either way they are going to spend down what they have.
How does it not make sense to preserve their assets for as long as possible??

In what way is that a disservice? To me, telling them to get all or nothing is the real disservice!

 

[yankee466]

I think that too many prospects are shown policies that they determine is too expensive.....so they say they will self fund and wind up doing nothing. I have helped people who said they looked at LTC policies years before, but that I was able to show them something that they could be comfortable with. Now I can only assume that they had either looked at worst case scenario policies with unlimited benefits and 5% inflation and $200/day, and/or met with a NY/MM/NML agent. Of course it could be my good looks and charm that convinced them to buy too!!!

Either way, they told that person "thanks, but no thanks", did nothing, and only proceeded to get older. So yes, if my 97 year old mom with severe dementia had only a $50/day plan right now, since I live in Georgia where $150/day buys you a LOT of care, I would be a very happy camper every month as I write a check out of my inheritance fund. Geography is everything.

You can argue that anything that gives you the 5 years to have the elder care attorney figure out how to hide the rest of the money would be helpful.

How anyone can sell LTCi in places like NY is beyond me!!!! Arthur must be either very good or know a lot of very wealthy people.

 

[Arthur Rudnick]

I hear you, BUT.........

As has been discussed many times, this product is not for the middle class consumer. It's for the upper, middle class. Agreed, protecting one's assets is one of the prime features of a policy.

I'm not sure if someone with $200,000 is a target for LTCi. If a couple has that level of assets, they most likely will not have enough in the way of income to afford a decent policy.

In the NY metro area (and maybe it's a NY thing) nursing homes are running $120,000-$150,000/year (and in some cases more)

Unlike many agents, I'm not a big "fact-finder" when discussing the merits of purchasing a policy. My fact-finding consists of only 2 questions:
1) Do you have enough in the way of assets to protect? and
2) Do you have enough in the way of income to comfortably afford a policy?

The answer has to be "yes" to both questions in order for me to proceed. I find that in many cases, someone with only $200,000 in assets does not have enough in the way of income to purchase a policy.

I understand that I'm in the minority on this issue and I'm a little jaded because the prospects that I work with usually have assets (not counting the equity in their home) in excess of $500,000 and household income in excess of $75,000.

 

[billberry12]

1) Do you have enough in the way of assets to protect? and
2) Do you have enough in the way of income to comfortably afford a policy?


How much is enough?

Who determines that answer, you or the prospect?

 

[Arthur Rudnick]

previously posted by billberry12

1) Do you have enough in the way of assets to protect? and
2) Do you have enough in the way of income to comfortably afford a policy?
How much is enough?
Who determines that answer, you or the prospect?

Those are questions determined by the prospect. If I quote $4,000, $5,000 or $6,000/yr in premium and I'm told it's unaffordable, the game is over!

 

[billberry12]

Seems like a NY thing. Your average AP must be what, $5000 per policy.

Mine is more like $2000 AP. Of course down south, the costs of care are less than half what yours are, so that makes a huge difference doesn't it?

 

[Arthur Rudnick]

Seems like a NY thing. Your average AP must be what, $5000 per policy.

Bill,
Very rarely are single applicants less than $3,500 and couples are $6,000-$8,000. Luckily, I work in a high networth area.

NYS Partnership minimum daily benefits are $270 (increasing to $280 in 2014) and 5% cmp. inflation riders are mandated for every carrier except one, who just started offering a 3.5% cmp.

My Traitional proposals are usually 3 & 5 years with a $250/day benefit & 3% cmp. I do about 70% 5 years & 30% 3 years. Average age is about 59, but I still do alot of business for those
65-72.

I haven't written a $2,000 AP for a single in over 10 years.