Six ways to have better LTC conversations with clients

When planning for LTC, some financial professionals use “LTC Assessments” or “LTC Estimators” to help calculate how much LTC expenses might be for the client. That’s a good idea, but keep in mind the number arrived at on the assessment should be your starting point, not the end number. Showing your client a large number can be a big mistake because once sticker shock sets in, it could be hard for the client to recover and move forward with planning. A more palatable way to discuss costs and the amount to insure is the “good, better, best” approach.

Start with the “good” plan, and let the client ask you about the “better” and “best” plans. First, look at what nonessential income the client has that could be used to offset the cost of care. Such income is a resource that could be used to partially pay LTC costs and will lessen the amount of insurance needed. Also, find out how important leaving an inheritance to loved ones is and what proportion of the client’s assets he or she wants to leave to heirs. This information could identify additional resources.

Good
To calculate the amount needed for a “good” plan, determine the amount needed for an average home health care situation, and then subtract any nonessential income and resources that could be used to help pay for those costs. Keep in mind that home health care costs will be in addition to the cost of living in the residence. Because many people need only home health care, the “good” plan might be good enough.

Better
The client may then ask what the “better” plan is. That would be insuring for assisted living. Again, you would subtract the nonessential income and resources available from the actual estimated cost of care to calculate the actual amount to insure. If the individual needing care is a surviving spouse, there may be even more nonessential income to work with because expenses such as house payments, property taxes, a car and associated expenses, etc. disappear when the last remaining spouse leaves the home. This additional income could help boost the plan and may help cover expenses for more extensive care needs such as a nursing home or memory care. But keep in mind that predicting who will survive the other spouse is going to be difficult — if not impossible — unless there are other factors to consider, such as a large difference in age between the spouses.

Best
Finally, you may be asked about the “best” plan. Using the same formula as described above, try to plan for an amount that could fund care for an extended period of time or that could fund the cost of more expensive care, such as nursing home, memory care units, 24/7 care at home, etc.

The idea is to start low and let the client decide whether they want to hear the next level of planning — so that it is the client asking you for details on more expensive solutions, and you can stop where his or her comfort level lies. The conversation is more likely to end with success when the client is gently led through the information. Please keep in mind that no plan can guarantee to cover all LTC costs that could ultimately occur.

Financial professionals sometimes make the mistake of showing one solution to a couple, then wonder why only one party (or neither) purchases LTC coverage. As it turns out, 82% of people buying traditional LTC policies are married, yet twice as many of these types of policies are sold to women.⁵ People buy what looks and feels good to them — and provides a sense that their need is met. Long-term care is not at the top of the list with many clients (especially men), so the solution you offer should meet an underlying need or concern. That could mean showing different solutions to each party of the couple.

You will often find that men don't want to believe they will need long-term care — and if for some unforeseen reason they do need it, they will probably be counting on their spouse to provide care. Therefore, to many men, LTC coverage is a waste of money. To get a man’s buy-in, you may have to appeal to his sense of logic. Show him something that isn't a waste of money if the policy is little or never used by presenting a solution that provides a return one way or the other. That may be why life insurance with an LTC rider has a larger take rate with men than any other LTC solution. The death benefit provides true leverage with a decent rate of return that can be illustrated. A “win” is had either way because a satisfactory rate of return is realized, whether as a death benefit or an LTC benefit.

Women are more overtly open to purchasing an LTC solution, therefore they want a solution that best addresses the concerns they may have should an LTC event occur. Women often take a more emotional approach to LTC and may worry how their care needs could impact other family members. Thus, they tend to focus more on having enough coverage (benefit periods, inflation, etc.), being able to compensate family members to provide care,⁶ or making sure there are adequate funds to pay for outside caregivers so that family members do not have to provide care, etc.

While not always the case, it is more likely that the wife (or female of a couple) is more interested in purchasing LTC coverage than her partner is. Therefore, when discussing LTC with a couple, it may help if you can get the woman to speak her feelings first. A woman is more likely to voice concerns, such as how the couple’s LTC needs could impact the family if no planning is in place and how her own health and financial security could be impacted should her husband need expensive care. In other words, the wife is more likely to focus on the consequences of not having a long-term care plan and funding in place.

When you encourage the wife to lead the discussion, she is less likely to be put into a position of contradicting her husband and may be more forthcoming with her feelings. Once the husband hears her legitimate concerns about the consequences of not planning ahead, the tone has been set to address and avoid potential consequences that could impact their entire family — and putting a plan in place is more likely to happen.

Long-term care can be complex, because there may be various factors for the client to consider when making the decision to purchase LTC coverage. Many financial professionals have experienced the frustration of thinking the LTC planning was moving along fine, only to have the client back out in the end. Thus, it is also important to identify any secondary fears or concerns a client may have so that you can present a solution that meets the LTC need as well as the underlying concern. That may mean presenting a different LTC solution to each party of the couple. Some common fears with a corresponding solution are:

• “What if I never need long-term care? Is this still a good investment?” With this concern, you can show the client an LTC rider on life insurance and the rate of return on the policy that could result whether long-term care is needed or not. Being able to visualize the actual return on the policy may warm up a client who's getting cold feet.
• “At the very least, I want my money returned to my kids if I never need care.” If LTC funding is the primary concern (not life insurance), you can show the client a linked-benefit policy, where the death benefit is usually equal to or more than the premiums paid, thus assuring the client that there is little or no loss of premium dollars.
• “I dealt with my mother's LTC policy, and it was a nightmare collecting and sending in all the bills and receipts for reimbursement. I would rather just pay my own way and keep it easy!” Fortunately, there are a variety of indemnity and cash indemnity LTC benefit solutions available. With most companies, these solutions do not require any monthly claims paperwork in order to collect LTC benefits. To dig deeper, ask about other potential wishes (such as paying family members to provide care). This may lead to the need for a cash indemnity product in which the insurance company does not place any restrictions on how LTC benefits are used.

Use words that are positive to the goal in mind. Keep the conversation focused on LTC solutions, not LTC policies. If the financial professional refers to “policies,” the client may be more defensive, feeling that someone is trying to talk him or her into something they don't want to buy (especially men). If you refer to LTC “solutions,” you (as the financial professional) are more likely to come across as a problem-solver.

Also, avoid words such as “burden” and “stuck” and replace them with words such as “challenge.” No one wants to be described by someone else as a “burden to others.” However, it is totally realistic and respectful to describe a situation as “a challenge for adult children to juggle care for a parent with their own life’s responsibilities.” Making these word substitutions will help you have a more respectful and thoughtful conversation while maintaining a realistic discussion.