Nothing could have prepared Ken McNaughton for the bureaucratic struggle he faced when trying to find long-term care for Leonard, his 87-year-old father-in-law, who suffered from dementia.

“You think there is a system in place, but there isn’t,” says McNaughton, a financial advisor with Victoria-based Zlotnick Lamb & Co. “It’s only as good as the social worker at the desk that week.”

Leonard’s dementia had reached the point at which he needed 24-hour supervision. But there were only a few homes in Victoria with full-service dementia wards that could deliver that type of care. It took over a year of meetings with caseworkers before McNaughton found suitable care for his father-in-law.

The cost of Leonard’s care was about $6,000 a month. Fortunately for Leonard and the McNaughtons, Leonard’s status as a Canadian veteran of the Second World War meant Veterans Affairs Canada would foot the bill.

Most Canadians don’t have that benefit. And with the cost of long-term care ranging from $1,600 a month to $7,000 a month, most advisors’ clients think they can rely on government assistance when they can no longer look after themselves. But, McNaughton says, that’s far from being the case: “It can be years before the government delivers assistance.”

Leonard’s story is not unique. Seniors make up 13% of the Canadian population, according to Statistics Canada. And as baby boomers age, that proportion is growing annually; it is expected to reach 27% by 2056. As your clients age, more and more of them are approaching the point at which they will need long-term care — and these clients make up a large market that could benefit significantly from LTC insurance.

Long-term care — whether it’s home care, assisted living, nursing-home care or Alzheimer’s facilities — is the largest out-of-pocket expense for adults over 65 in Canada; about one-quarter of seniors will require long-term care, according to research by Lévis, Que.-based Desjardins Financial Security. But industry experts agree that LTC insurance is being bought by only a small fraction of the population that will soon need it.

For some clients, LTC insurance can mean the difference between a financial struggle and comfort in old age. The industry standard for LTC is a monthly benefit rang-ing from $1,000 to $8,000. If a client begins investing in a policy while in his or her late 40s, the premium on that policy can be as low as $60 a month and the policy could be paid off by the time he or she retires.

As Patty Randall, founder of Vancouver-based LTC Long-Term Care Planning Canada Inc. , discovered, paying into an LTC policy is much more economical than paying for that care when it is needed. When Randall’s parents reached their 80s, her mother required at-home care and her father, who had Alzheimer’s disease, needed care in a facility. Government assistance took care of some of the costs, but Randall and her parents also had to use their savings.

“After helping my parents pay the tab of their care bill for years, I realized that paying the LTC premium for myself would be cheaper,” says Randall, author of Let’s Talk: The Care-Years … Taking Care of Our Parents/Planning For Ourselves.

Yet, LTC policy sales lag other insurance products. According to Toronto-based Sun Life Financial Inc. , advisors sell 100 times as many life insurance policies and 10 times as many critical illness insurance policies as LTC policies — although the benefits of LTC insurance could be as significant in clients’ lives as the other two types of insurance. Why, then, are LTC policy sales so comparatively low?



> Why LTC Is Not Selling

One major reason is that advisors are uncomfortable broaching the subject, says Sue MacLeay, LTC insurance specialist with Sun Life, who has been helping advisors sell LTC insurance for more than 10 years.

“Long-term care can be an uncomfortable concept for advisors to outline for their clients,” says MacLeay. “Clients want to talk about the fun things they will do in retirement, and it’s difficult to get them to understand that one day they will be too old to do anything. But they still need a plan for that time.”

Many misconceptions about LTC insurance prevent clients from asking about the product, adds Nathalie Tremblay, health products manager, individual insurance, with Desjardins.

“People think the government will pay for the care,” she says, “but they don’t understand if that happens, they won’t have control over the type of care they receive.”

Randall can relate to that. When it was time for her to find a care facility for her father using government channels, she found herself spending hours filling out forms at care facilities. Says Randall: “It’s a very emotional and time-consuming, horrible experience that takes over your life.”

But if your clients have the funding to pay for care, McNaughton says, it’s a different story: “There are always careworkers or care facilities open for business when you are willing to pay privately.”

Some clients also assume — wrongly — that when they need long-term care, they will have the resources to pay for it, he adds: “They say, ‘I will just sell my house.’ But I then say, ‘What about your spouse? Where is she or he going to live? In the home with you?’”

These clients also think their spouses or their kids will take care of them, adds MacLeay, but that’s also a misconception: “Are the kids going to quit their full-time jobs to take care of Mom and Dad?”

Some clients also don’t understand that one person alone does not have the resources needed to supervise or care properly for a family member with Alzheimer’s or dementia. Most such patients require 24-hour supervision.



> Starting The Conversation

Opening the long-term care discussion doesn’t have to be awkward, as long as you use the right approach. Says Randall: “It’s best to give [clients] a little information at a time and let it percolate.”

A good way to start is by running a small article about LTC in your client newsletter. This article could include definitions of what LTC policies are. The write-up could also include anecdotes about people who have bought LTC policies and successfully claimed on them.

That will set the mood for broaching the subject with your clients face to face. When you do invite your clients in to discuss long-term care needs, remain respectful and tactful, says Tremblay: “Just because you are preparing your clients for long-term care doesn’t mean you need to tell them that they will be in diapers.”

Keep the conversation positive, Randall says, and ask clients the following question: “What does successful aging look like?

“Most people would rather watch beige paint dry than talk about long-term care insurance,” says Randall. “That’s why you need to keep the discussion positive.”

It’s often hard for clients to envision themselves at the point at which they won’t be able to take care of themselves. Research shows people feel 20 years younger than their actual age, adds Randall. “Because we feel so much younger than we really are,” she says, “clients are often in denial about the fact that one day they will need care.”@page_break@To combat that denial, it’s helpful to include some research on aging and long-term care in that first conversation. According to Desjardins, the fastest growing population segment is those aged 85 and over; 80% of these people need assistance. A couple aged 65 has a 60% chance that one partner will reach 90 or more.

If some clients still argue that they might not end up using the product, McNaughton adds, tell them: “It’s like life insurance — if you don’t need it, great. But if you do, you are damn glad you got it.”

It’s also important to educate clients on long-term care early — when they are in their 40s and 50s, the age range that experts call the “sweet spot.” From an underwriting standpoint, that’s when it’s cheaper to insure for an LTC policy, because the insurance company has a longer time horizon over which to collect and invest the premiums.

“By the time clients reach age 70, almost 80% of client applications are declined,” says Tremblay. “It’s much better to get insured sooner.”

Regardless of how you open the door to an LTC conversation, the bottom line is that your clients walk away from your meetings knowing their options, says McNaughton: “If you aren’t informing your clients about LTC, you are doing them a great injustice.”



> The Benefits Of LTC

When explaining to your clients the benefits of buying LTC insurance, it’s important to understand both how the product works and the blanket of coverage it provides.

Unlike life insurance or CI insurance, which pay out benefits in lump sums upon death or illness, an LTC policy is a living benefit that is paid out monthly. Clients buy policies today to ensure that when the time for long-term care arrives, they have a monthly income to supplement the cost of care. Typically, LTC policies pay out between $150 and $2,000 a week.

An LTC policy’s benefit is paid when it is deemed that the policyholder has lost his or her ability to be independent and can no longer perform two out of six daily living functions unaided — bathing, going to the toilet, transferring (say, from a bed to a wheelchair), eating, dressing or maintaining continence. The LTC policy also pays out if the policyholder suffers a substantial loss of cognitive function.

While some clients may think they can reserve a portion of their retirement income for long-term care expenses, Randall says, such plans rarely succeed.

“We have trouble setting aside the right amount of money for the type of care we will need because its so far down the road,” Randall says. “If you had spent three decades saving for retirement and the enjoyable lifestyle you envision, are you really going to want to shave a slice of that off and devote it to long-term care?”

The major benefit for your clients in having an LTC policy in place is that this gives the clients the power to choose the type of care they will have later on. Typically, about 90% of long-term care takes place in the home rather than in a retirement facility. With an LTC policy, your clients can ensure they will have the funding to enable them to stay in their homes for as long as possible.

“Government programs aren’t going to give you that choice,” says Tremblay. “With a policy, you have options.”

Once your clients begin receiving their LTC insurance benefits, they can use the money for whatever they want, adds Tremblay. Policyholders can pick the assisted-living centre they would like to reside in and the type of careworker they would like to hire, and they can purchase special equipment or medicine needed to assist with their living. These clients can even buy themselves and their caregiver a vacation.

“Similar to critical illness insurance,” Tremblay says, “the [LTC] insurer doesn’t monitor how you are spending your money — only that you need the LTC policy [benefits] in the first place.”

You and your clients can also be confident the policies will pay out, says David Baker, assistant vice president of health insurance at Sun Life. Since Sun Life launched its LTC insurance line in 1999, the company has paid out more than $16.8 million in LTC insurance benefits.

Another advantage for your clients is that the monthly LTC insurance benefits they will receive are tax-free — a big selling point for high net-worth clients, says McNaughton.

LTC is especially beneficial for single clients who worry about who will take care of them when they reach that age. “Since women live longer than men,” Randall says, “care is a very big concern for women.”

Throughout 10 years of consulting clients on LTC, MacLeay says, she has noticed that women clients are more receptive then men to the idea of LTC insurance: “Far more women attend seminars on care products than men, probably because they have a natural inclination to give care.” (That’s one reason why you should expect more resistance from male clients toward these products.)

When discussing LTC insurance, emphasize that CI and LTC complement each other to create a blanket of coverage, says Randall. One does not replace the other. CI insurance pays out a one-time lump sum when the policyholder is diagnosed with a serious illness specified within the CI policy. LTC insurance, on the other hand, provides income to support the policyholder’s needs over an extended period.

As LTC insurance products evolve, your clients can add a growing number of riders or options to their policies. For example, Sun Life offers an option to convert a portion of a CI policy into LTC.

Another rider can offer protection against inflation because the cost of care could rise substantially by the time the policyholder needs it.

Still another rider that comes along with LTC policies is the option of return of premiums at death. It’s an option for people who see themselves putting money into the LTC policy but don’t see the benefit if they should die before they make a claim. Says Tremblay: “It’s also a great option for a client who wants to leave a legacy.”



> Involve An LTC Specialist

If you still find it difficult to discuss LTC insurance with your clients, you can always arrange to have an LTC specialist from the insurer attend client meetings.

An LTC specialist can take the pressure off you in discussing the issues, says MacLeay: “It’s easier for someone who deals with hundreds of LTC cases to broach the subject than an advisor who may have only 20 or 30 clients with the product.” IE