A new study from Lincoln Financial tells us a lot about what our clients and prospects really think about long-term care. The good news? It seems attitudes are finally shifting. More people are willing to talk about and plan for a time when they’ll need care.
The Problem: An Uncomfortable Subject
Traditionally, long-term care insurance has been a hard sell. Clients don’t want to think about nursing homes and the end of their lives, let alone pay for a product they want to believe they won’t need. The statistics, on the other hand, overwhelmingly indicate that they will.
- In 2015, the U.S. Department of Health & Human Services estimated that 52% of people who turn 65 will need long-term care during their lifetime.
- But a 2014 Lincoln Financial and Hanover Research survey found that only 20% of survey respondents thought they’d need long-term care. Clearly, there’s a disconnect between perception and reality.
- How much could this disconnect cost? The average American turning 65 today will need to pay $138,000 in future long-term care costs. About half of those costs can be covered by public programs or their long-term care insurance, but the Department of Health & Human Services estimates that the other half will need to be paid out-of-pocket.
So far, statistics like this haven’t been enough to move the needle on long-term care insurance.
The Shift: Longevity Is Real
A new Lincoln Financial survey indicates that old attitudes are changing. But why?
It might just be the natural byproduct of longevity and an aging population. As Bill Nash of Lincoln Financial said in a recent interview, “Everybody knows somebody who’s 90.”
In Lincoln’s 2016 survey, 46% of people surveyed said they or someone close to them had a personal experience of needing nursing home care.
As more people go through this experience (especially with aging parents), they experience the full range of effects that caregiving and unanticipated LTC costs can have on a family. Problems that used to be abstract are now concrete, and clients understand how stressful this situation can be if they don’t have a plan. Over time, these feelings become a common life experience we can talk about together more easily.
The new survey also found a key emotional shift in the way people view long-term care.
Here are a few highlights:
- If they suddenly had to become a caregiver, almost half of survey participants said they’d feel overwhelmed (44%). Compassion led the field, chosen by 52% of respondents as the emotion they most identified with. The big shift here is that overwhelm is a negative feeling, which many potential caregivers have traditionally been reluctant to express. It means we’re getting closer to having honest conversations about the emotional as well as the financial cost of care.
- GenX survey participants identified with the widest range of emotions, from overwhelm to compassion and anxiety. Because of their stage in life, they may be dealing both with children and aging parents, giving them a full and realistic perspective on the demands of care. Boomers and millennials, on the other hand, probably aren’t experiencing demands from both ends of the aging spectrum. If you’re looking for a way to narrow down your marketing efforts, try talking to your GenX clients, born between 1965 and 1980.
- Only 35% of respondents said they could (or would) pay for their loved ones to receive care in a long-term care facility. The same percentage said they’d quit their jobs to provide care. That means 65% of respondents can’t (or won’t) pay, nor will they quit their jobs. Where is that money going to come from?
So what does this shift mean for you as an advisor?
The Solution: Life/LTC Hybrids
As we mentioned earlier, stand-alone long-term care insurance policies are still a hard sell. The perceived high cost and the hope they won't need it makes clients hesitant to buy. However, standard LTCi is still the most frequently mentioned form of LTC planning advisors bring up with their clients.
The 2016 edition of Lincoln Financial’s survey found that a whopping 82% of advisors who talked with clients about LTC discussed traditional LTCi. Other solutions frequently mentioned are self-insuring with savings, estate planning, Medicare, and Social Security benefits. Surprisingly, life insurance with an LTC rider is only mentioned about 17% of the time, making it an underutilized asset.
If you've had no luck prospecting with stand-alone LTCi, it may be easier to talk about a multi-purpose life insurance policy that can also fund long-term care. One example is Lincoln’s MoneyGuard, a universal life policy with riders that reimburse your client for qualified LTC expenses. Hybrid policies like this provide the benefits of life insurance (guaranteed tax-free death benefit) with the added bonus of LTC coverage if your client needs it.
The advantages of hybrid policies are clear:
- Clients get tax-free reimbursements for their qualified LTC expenses. This often allows them to choose where they receive care, rather than choosing the least expensive option by default.
- If your client never needs long-term care, the beneficiary receives the full death benefit. If your client only used a portion of their available funds for LTC, the beneficiary gets the rest income-tax free.
- Because this is a universal life policy, the premiums will never increase if your client doesn’t take out loans or withdrawals. Similarly, there is likely no deductible or waiting period.
- Some carriers may also offer full or partial return-of-premium. This provides additional peace of mind for those who feel strongly that they won’t use their coverage.
That's our look at what prospects really think about long-term care!
Ready to start the conversation? Here are a few resources to help you:
- For more information on Lincoln's MoneyGuard product, click here.
- You can also check out Lincoln’s consumer-facing resources on long-term care.
- You can find ideal client profiles and conversation starters in our November 2017 LTC sales kit.