Common Misconceptions Harbored by Agents New to LTC
Having trained over 20,000 agents in various phases of LTC insurance sales, I can pinpoint common misconceptions among newcomers to this exciting market. Here's the list I combat in every training class:
It's nursing home insurance - There are only 1.5 million people in nursing homes and almost 10 million people being cared for in the community, mostly at home. Some are in adult day care and the fastest growing form of long-term care is assisted living. Do the math - less than 15% of LTC occurs in a nursing home. When asked what I do for a living, I always tell people that I train insurance agents to sell long-term care insurance which pays if you need extended care at home, in adult day care, in an assisted living facility, and by the way, if you should need it as a last resort, there's even a benefit for nursing home care - imagine that!
It's for old folks - Forty percent of the people needing long-term care are working-age adults, ages 18-64. Most of these younger people are not in nursing homes as only 10% of nursing home patients are under 65. Due to underwriting difficulties and the higher premium associated with older people, the prime marketing window is ages 50-69. Younger people will buy, mainly those with personal experiences and some older people will, but with many people in their 70's and up, health is way low, premium is way high, and denial is not a river in Egypt! (It also hurts my feelings when they fall asleep in the middle of the seminar or sales presentation . . .)
Drop the inflation rider if people can't afford it - it's better to sell something than nothing. My response to this is it's better for the economy, as it means private-pay dollars going to the LTC provider, but is it better for the individual policyholder? If the client doesn't have enough benefit at claim time and can't make up the difference, the person will go on welfare (Medicaid) immediately and that's not why he or she is buying an LTC policy. (Dust off those E&O policies!) Here are two phrases to help sell inflation coverage:
1) "Mr. Jones, I'd rather sell you a Chevrolet that's loaded vs. a Cadillac without an engine." (This explains the analogy of perhaps a three year benefit period with the right inflation rider and the right daily or monthly benefit vs. a lifetime benefit period without inflation coverage.)
2) "Mr. Jones, you would never buy a health insurance policy from me that only pays hospital room rates at what they are today, now would you? We all know that hospital costs go up constantly, and so do long-term care costs." In addition, I never ask prospects if they want inflation coverage, I simply tell them what we are going to do based on their age.
With restoration of benefits, you can sell shorter benefit periods. A dinner companion recently highlighted this terrible abuse for me. His wife is nearing four years in a nursing home with no immediate end in sight. He only purchased a four year benefit period for her, however, because the agent told him about the great feature in the policy that would restore the benefit period after she used up the four years. He is extremely angry about the deception. People who have continuous care longer than a year rarely get better.
With alternate plan of care, you don't have to sell home health care benefits. The alternate plan of care benefit is designed to pay care that is less expensive than nursing home care and several companies now spell this out in the policy language. It doesn't take a rocket scientist to figure out there isn't enough premium in a facility only policy to pay unlimited home health care. Even if the policy has a lifetime benefit period, people live longer at home than in a nursing home, and the insurance company is not going to pay unlimited home health care.
Good ratings are all that matter when choosing an insurance company. I advise agents and consumers alike - look for billions, not millions, in assets. Then steer clear of companies that pay benefits out too quickly, have low rates, liberal underwriting and pay high commissions. ("Paying benefits too quickly" can mean a one-ADL benefit trigger, a book of business that has predominantly a zero waiting period, and/or policies that pay for short-term conditions, i.e. policies without the 90-day certification requirement.)
Phyllis Shelton is President of LTC Consultants, a Nashville, Tennessee based firm that provides live and correspondence training with continuing education credits and marketing and sales aids to the insurance industry. Call 1-800-844-4893 for her 2000 training schedule, a free materials catalogue, and information on private training classes.
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