Selling long-term care insurance to a healthy client can be an extremely challenging experience. Yet no financial plan is complete without addressing this potentially devastating effect of requiring long-term care. The problem is twofold: how to approach this critical conversation and how to fashion a solution using the available product options.
Understanding The Difference: Risk And Consequences
Generally, any conversation about extended care revolves around selling a product to solve the problem. Long-term care insurance is positioned as managing the risk and cost of care, both of which are backed by statistics. This risk-based approach works with sickly clients and those with prior LTC experience, but rarely with perhaps the most difficult demographic in insurance: healthy men (and to a degree, healthy women).
The reason, which appears obvious, is that men assess risk differently than women do. But the ultimate question is, why? Why would a person who tells you he (or again, she) loves his family and understands how awful it would be for them if he needed care nevertheless refuses to purchase long-term care insurance?
Studies have shown that men have developed characteristics that, in general, lead them to minimize or disregard risk. They perceive their behavior as less risky and are more likely to engage in behavior that could lead to undesirable or damaging outcomes than do women.
This manifests itself in a variety of ways, but here are a few examples, as reported in the American Psychological Association’s Psychological Bulletin.
» Men drive more recklessly, with fully 97 percent of dangerous driving offenses committed by men.
» Men use drugs (alcohol, tobacco, cannabis and cocaine) more than women do.
» Men also have a significantly higher death rate from nonvehicle accidents such as falls, drowning, electrocution, firearm accidents and fires.
It’s this tendency to ignore or feel indifferent about risk that makes it difficult for men to buy insurance. This is critical. Men tend to separate the risk of dying or becoming severely disabled — or in this case, needing extended care — from the consequences of doing so. If they don’t see something as a risk, then, in their minds, there are no consequences to them and therefore no consequences to those they love. Of course, these findings vary based on a wide variety of social and cultural factors.
Women, in general, are less likely to engage in risky and impulsive behavior and are more likely to weigh the potential cost of an action in comparison with the benefit.
As a result, women are more likely to look at the risk and consequences of an event as one and the same. In other words, a risk is a consequence. When it comes to long-term care, they may instinctively understand the emotional, physical and financial responsibilities associated with an extended illness or disability. They view the risk of needing care through the prism of its consequences.
In my personal experience of more than 25 years in the long-term care industry, I have often seen these ideas manifest as follows:
If you ask a man whether he believes he will ever need care over an extended period of years, the answer is a simple “no.”
In his mind, if there is no risk of the event happening, then there are no consequences. Therefore, why buy a product to cover them? Often, when a woman answered this question, the answer was “I hope I don’t,” thereby confirming the belief that risk and consequence are inevitably intertwined.
Again, while these gender-based differences to risk are supported by studies, they are not absolute, especially for many of today’s families. For example, many women are the primary financial providers for their families. Women in these roles may view risk as men would, and men, vice versa. It’s no different with same-sex couples.
Changing The Conversation
When discussing the subject of long-term care with clients and prospects, do not focus on the risk of him needing care, supported by endless statistics. Instead, focus on the consequences to them — those they love and are committed to protecting.
Give them the opportunity to consider what will happen to their family if they don’t take action. Have him think about the serious emotional, physical and financial consequences and you’ll connect to his deep-seated purpose to protect and provide for the people he invited into his life and promised to care for.
Here are sample discussions between an advisor and client that integrate these key points.
Advisor: “I need to talk to you about an event that, if not properly planned for and ever occurred, has the potential of causing serious if not irreversible consequences to your wife and children. It also has the potential of undermining your portfolio.”
Client: “What do you mean?”
Advisor: “The subject is extended care. Needing care of this nature is caused by illnesses that can be managed but never cured, like dementia and Parkinson’s disease. As they progress, they so severely compromise you that the people you said you would take care of will have no choice but to take care of you. And that’s the problem.”
Client: “This whole thing is based on my needing care, which I don’t think I will.”
Advisor: “Let’s take a look at this a different way. I believe you. I believe that you don’t think you will ever need care. But, rather than look at this as a series of risks to you, look at it as a series of consequences to them: those you love and have promised to protect.”
Client: “I understand, but we have enough assets to pay for my care.”
Advisor: “Yes, but let’s think it through. You’ve worked hard to put together a financial plan for you and your family. But all that would be in jeopardy. It would require a reallocation of income and depletion of your capital — that which has been accumulated to generate predictable streams of income later in life. Using capital causes unnecessary taxes, subjects withdrawals to market timing and could create liquidity issues. Perhaps most important, every capital dollar used for care is one less dollar available to generate income.”
Client: “I hadn’t thought about it that way. What should we do?”
Advisor: “You need to have a plan. Let’s discuss some options.”
Presenting The Plan
In the preceding conversation, the advisor focused on the client’s family instead of the client, and the consequences instead of the risks.
Next, when discussing how to pay for long-term care, the advisor should never focus on the product, only on developing a plan to mitigate the consequences.
A comprehensive long-term care plan can start with an understanding of who the other participating family members are and how they potentially could contribute. Then, you can move the discussion into how the financing would work, with the goal being to preserve the financial well-being of the family. Consideration should be given to the following elements:
» How much of the client’s assets/home equity could be available for long-term care expenses.
» Group benefits that might be available through the client’s employer.
» Long-term care insurance, although there are only about a dozen carriers left in the market, and the policies have not been very popular due to premium increases and limited benefits.
» The new “combo” or “hybrid” policies whereby your clients can purchase an annuity or whole life policy that they can draw on in the event they need to pay for long-term care. These policies can help meet broader planning objectives because they provide benefits even if the long-term care provisions are not used.
These products, as with life and disability income insurance, focus on the client’s commitment to their family, which should not end due to death, disability or the need for long-term care.
Harley Gordon is a founding member of the National Academy of Elder Law Attorneys and is the author of The Conversation: Helping Someone You Love Plan For An Extended Care Event. Harley may be contacted at [email protected]