As an insurance agent, you may have questions about long-term care insurance (LTCI). As the population ages, more people will need care – and too few people have made plans for the cost. Since November is Long-Term Care Insurance Awareness Month, it’s the perfect time to brush up on your knowledge with this long-term care insurance FAQ.
Q1: What is the state of the LTCI market?
A1: The long-term care insurance market has struggled in the past. A report from the New York State Department of Financial Services says policies were initially priced too low and it took years for insurers to gather enough data to price policies accurately.
However, the need for coverage is massive. The population is aging, and the Administration for Community Living (ACL) says most people turning 65 will need long-term care at some point in their remaining years.
According to S&P Global, the number of new U.S. individual long-term care insurance policies surged in 2021. Between 2018 and 2020, around 57,000 new lives were insured each year. In 2021, more than 153,000 new lives were insured.
Q2: What do I need to sell LTCI?
A2: Before you can sell long-term care insurance, you need to meet all relevant state requirements. These may be more involved than what you’re used to for other life and health products. In addition to fulfilling the regular producer licensing requirements, your state may require you to undergo initial training before you can sell, solicit, or negotiate long-term care insurance. There may also be refresher training that you must complete periodically. Learn more about getting ready to sell long-term care insurance.
Q3: When do most people buy LTCI?
A4: Although younger people may sometimes need long-term care due to a disability, the long-term care insurance market primarily targets older individuals who are preparing for their potential long-term care needs during retirement. For this reason, most people purchase long-term care insurance in their 50s, 60s, or 70s.
The American Association for Long-Term Care Insurance (AALTCI) says 27% of policyholders purchase coverage before they turn 55, whereas 55% purchase coverage between the ages of 55 and 65 and 18% of buyers are 66 or older.
People who purchase long-term care insurance in their 50s or early 60s have three advantages over those who wait until their late 60s or 70s. First, if they need long-term care services earlier than they expected, they’ll have coverage. Second, they may be able to qualify for better rates and lock in those prices. Third, older applicants are more likely to have health challenges, which increases their risk of being denied coverage.
Q4: Is LTCI expensive?
A4: Long-term care insurance can be pricey, but the cost of insurance can pale in comparison to the cost of long-term care services.
The cost of premiums largely depends on the health of the applicant. The AALTCI says a single 55-year-old man who qualifies for “Select” health and purchases $165,000 level benefits can expect to pay around $950 a year for coverage. Assuming he keeps coverage at this rate for 30 years, he’ll pay $28,500.
This may seem like a lot, but it can be much less expensive than paying for care out of pocket. According to the ACL, 69% of people will need long-term care services for an average of three years. A semi-private room in a nursing home costs an average of $6,844 a month, a one-bedroom unit in an assisted living facility $3,628 a month, and a health aide $20.50 per hour. At these prices, someone who needs nursing home care for a year could expect to spend $82,128.
According to AALTCI, the average long-term care insurance claim is $142,043.
Q5: Can seniors use HSAs to pay LTCI premiums?
A5: Seniors with health savings accounts (HSAs) may be able to use their funds to pay for long-term care insurance.
Although long-term care insurance can provide a good value, the cost of the premiums can still present a barrier to coverage. Using an HSA to pay for coverage can reduce this burden, due to the tax advantages that HSAs offer. HSAs are funded with pre-tax dollars, and account holders can use their funds tax free as long as they meet certain requirements.
Long-term care insurance premiums may be considered an eligible expense, but it’s important to make sure that the policy meets certain conditions and that the amount does not exceed the maximum eligible deduction. Learn more about using HSAs to pay for long-term care insurance.
Q6: What are common objections to coverage?
A6: Some people balk at the price of long-term care insurance, especially if they think they don’t need coverage because Medicare or Medicaid will pay for long-term care services. You can overcome this objection by educating prospects on the truth about Medicare and Medicaid.
First, Medicare does NOT cover most long-term care expenses; it covers medically-necessary care – long-term care is not medical in nature. According to the ACL, Medicare covers skilled nursing care that follows a recent hospitalization, but coverage is limited to 100 days.
Medicaid provides more long-term care coverage, but individuals must meet state resource and income limits first. Furthermore, Medicaid may try to recover the benefits. According to AARP, Medicaid can put a lien against a beneficiary’s house. Plus, after the beneficiary’s spouse dies, the state may file a claim against the estate to recover funds spent on nursing home care. Although Medicaid may be the best (or only) option for individuals with limited resources, it may not be ideal for those who are hoping to leave an estate for their heirs.
You should also warn your clients about state filial responsibility laws, which can hold adult children financially responsible for their parents’ care.
Q7: What do I need to keep in mind when helping clients compare policy options?
A7: Policies typically provide coverage if a policyholder can no longer perform two or more of the activities daily of living. However, many other aspects of coverage vary substantially between policies. When comparing policies, consider the following:
- Which services does the policy cover? According to the ACL, most policies are comprehensive. They include coverage for skilled nursing care, personal care, and occupational, speech, physical, and rehabilitation therapy in the home as well as coverage for nursing homes, Alzheimer’s special care facilities, assisted living facilities, adult day service centers, hospices, and respite services.
- What are the limits? Long-term care is expensive. Inflation means costs may be even more expensive when the policyholder makes a claim.
- What is the benefit period? Some policies provide lifetime benefits, but others only provide benefits for a limited number of years.
- What is the waiting period? Many policies have a waiting period (also called an elimination period) that must pass before the policyholder can receive benefits.
Q8: What sales tools are available to help me sell LTCI?
A8: DIS has lots of great sales tools to help you sell long-term care insurance.
- The Long-Term Care Insurance Broker Kit
- The Ultimate Long-Term Care Insurance Sales Script
- The Ultimate Long-Term Care Insurance Case Design Resource
- 10 Facts to Know About Long-Term Care
- The Top Five Reasons to Secure Long-Term Care Insurance Now
Are you ready to start selling long-term care insurance? DIS can help. Find even more great resources here.