1. What’s the Best Fit. Standalone vs. Linked-Benefits vs
What’s the Best Fit? Standalone vs. Linked-Benefits vs. Life Insurance with ADB/CI Riders
Steve Cain, CLTC
National Sales Leader | Long-Term Care
Highland Capital Brokerage

2. Today’s Discussion The need for Long-Term Care planning
Statistics…and more statistics
What is LTC Insurance?
Policy design 101
Why Traditional LTC is awesome

3. Actually…here’s what we’ll cover
Retirement planning & healthcare conversations
Marketplace update
Behavioral finance and Long-Term Care
LTC Insurance planning solutions
What’s the best fit?
Highland resources
Q&A

4. Retirement Decision Points

5. Retirement Planning & Healthcare Conversations

6. Industry Update Healthcare Reform’s Potential Impact on LTC Insurance:
-- Interest rates rising
-- Federal Tax credits for health insurance (LTC Insurance?)
-- Increase in HSA limits?
-- Proposed changes to Medicaid
Pennsylvania court approves liquidation Penn Treaty
Market entrants (Individual, Multi-life and Linked-Benefits)
Sales growth
Genworth shareholders approve $2.7B acquisition by China Oceanwide (transaction is pending regulatory approval)
Also, according to AALTCI, the LTCI industry (partial reporting) paid out $8.65 billion in claims in 2016

7. 2nd Generation Standalone LTC Insurance

8. Typical Components of the LTC Insurance Pitch
Describe THE PROBLEM
Describe THE RISK AND THE COST
Describe THE POLICY
Behavioral Finance – each component of the “old sale” is totally undermined by our decision biases
People aren’t rational
Avoid stats – they destroy empathy
Stories & emotions are critical
Appeal to the consumer as smarter than their peers
Focus on an easy process

9. Turning Objections Into Opportunity

10. Now What? Tips for Discussions…
Keeping choices as simple as possible
Focus on the possible gain LTC will provide instead of the possible loss
Use stories, not statistics! 
Focus on now benefits, not the future
Help Guide Heuristics (“rules of thumb”)
Force a choice
Follow-up
Keeping choices as simple as possible.  As an advisor, you may think your job is to give a possible buyer multiple options for planning for care, such as spread sheeting several insurance carriers or comparing standalone and linked products.  However, the reality is consumers don't want this - they want a recommendation with just a few choices.  Limit the options they can consider.
Focus on the possible gain LTC will provide instead of the possible loss.  Gamblers fell worse about losses than good about wins. Likewise, people who are considering LTC Insurance don't want to think about loss when planning for care, such as how their retirement savings may be depleted.  Instead, try and focus on the fact that a small LTC Insurance premium gives the policyholder the possibility of a BIG payoff in benefits.  For example, a $2,000 annual premium could result in $300,000 to pay for high-quality care ah at home.
Use stories, not statistics!   Statistics are important for discovering trends and insights, but they are awful when used for discussing LTC planning.  Statistics destroy empathy and emotion.  People are way too optimistic about their future and think they will be on the winning side of a statistic.  Focus on stories and experience when talking about planning for LTC.
Focus on now benefits, not the future.  It's incredibly hard for people to imagine aging and needing help.  Only something like an aging suit can really give people a glimpse of how needing care will affect them and their families.  Instead, focus on the "now" benefits  of LTC Insurance.  The now benefits for LTC Insurance are harder to quantify, but they can include peace of mind, good health underwriting, and locking into a lower premium before a birthday.
Help Guide Heuristics (rules of thumb). For analytical advisors, it's tempting to use tools such as cost of care surveys that project the cost of care 40 years in the future when designing plans.  A better approach is to "follow the crowd" and recommend benefits similar to what policyholders are actually buying.  You may think that people want customized solutions, but most would feel more comfortable picking options similar to other buyers.  Recommend they do what most people are doing.
Force a choice.  When people have to make a decision, such as actively signing off the fact they have been offered LTC insurance but declined, they will be more likely to buy.  LTC planning is easy to delay, and people don't want to be told they can't delay that decision forever

11. LTC Insurance Planning Solutions

12. LTC Insurance Planning Strategies
Standalone LTC Insurance
Linked-Benefits
Life Insurance with CI/ADB riders
Group Life Insurance with LTC Benefits
Annuities with LTC Riders
Immediate-need LTC Annuities
Short-Term Care

13. Linked-Benefits (Life/LTC)
LTC Insurance Planning Options
Standalone LTC
Life Insurance with
Linked-Benefits (Life/LTC)
Life Insurance with a
Qualified LTC Rider
Chronic Illness Rider
Tax Code: 7702B
Tax Code:
Life Portion - 101a1
LTC Portion - 104a3/7702B
Tax Code: 101(g)
LTC license required
No license needed
Indemnity or Reimbursement
Reimbursement
Indemnity Only
Cost only overs LTC benefits
Generally single premium that buys Life & LTC benefits
(longer premium durations available with certain carriers)
Additional up-front charge for rider
Charge can be up-front or back-end (“discounted acceleration”)
Total LTC benefit determined at issue
LTC benefits may not determined until claim is made
(depending on charge structure)
Full Underwriting
Most are Streamlined Underwriting
Life policy is usually underwritten separately from the LTC Rider; Depending on the product/company, the UW may be Full or Partial Underwriting
Some do not require additional underwriting b/c they are underwritten with life policy; others will require Full or Partial Underwriting
Qualifying Condition(s) can be Recoverable or Permanent
Qualifying Condition(s) must be Permanent with most companies
Do NOT offer any DB; “Use it or Lose it” (return of premium to beneficiary at additional cost)
Residual DB
(guaranteed minimum amount)
Some offer Residual DB (guaranteed minimum amount)
Residual DB is not in addition to, but a portion of the policy held from acceleration (such as 5%)

14. What’s the Best Fit?

15. Understanding the Acronyms: QLTCI, CI & ADB Riders
Chronic Illness Riders
Qualified Long-Term Care Riders
Claim Trigger
Severe cognitive impairment or unable to perform 2+ ADLs
Duration of condition
Unusually permanent
At least 90 days
Payment types
Indemnity
Indemnity or Reimbursement
Benefit types
Face amount acceleration and discounted acceleration
Face amount acceleration & Face amt. accel. with Extension
Tax treatment
Tax favored to greater of HIPAA per diem ($360 for 2017) or actual cost of care
Consumer Protections
Company not required to guarantee CI payments if policy goes into lapse while on claim
Company is required to guarantee LTC payments even if policy lapses while on claim
Distribution
Life license only
Requires Life license, A & H and LTC certification (in most states)

16. Claims Payment Methods
Reimbursement
Indemnity
Cash Indemnity
Only actual LTC costs are reimbursed
Bills and receipts must be submitted to determine reimbursement amount
Some companies work directly with provider to bill and reimburse for qualifying LTC expenses
Benefit limitations. Non-qualifying services must be paid for out of pocket
Licensed providers are generally required
Full monthly LTC benefit paid to owner
Some insurers do not require monthly proof of billed services, some do
Licensed provider must be used to meet minimum standards of the physician’s plan of care
Excess benefits not needed for care can be used for any purpose
Full monthly LTC benefit paid to owner
No bills or receipts to submit in order to collect monthly LTC benefits
Insurer places no restrictions on how LTC benefits are used - may be used as desired
Total care from informal or family care giver allowed

17. Just Remember…

18. Tax Treatment of Qualified LTC Insurance

19. Sources: 1. Treasury Regulation 1. 105-5. 2. IRS Code 7702B. 3
Sources: 1. Treasury Regulation IRS Code 7702B. 3. IRS Notice , Q and A 41 (HSA’s) . Other IRS Codes you need to know for LTC Insurance: 213, 106, 162.

20. What’s the best fit? What should I lead with?

21. HighCapFinancial Resources

22. (877) 422-5822 Inquiry@HighlandLTC.com
Thank you!
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