1. A tax-deferred internal cash accumulation account with withdrawal features similar to an annuity.
   
   
2. Life insurance that pays an income tax-free death benefit that typically doubles the size of the initial single premium.
   
   
3. An income tax-free long term care benefit paid out as a living benefit that may leverage the amount of the single premium payment by as much as a factor of six.

Thus, for instance, a 65 year-old, non-smoking woman has $100,000 in assets that could be used to pay for long term care. She decides to invest $50,000 in a single premium LTC Life policy. This provides her with $103,522 in death benefits that are income tax-free under IRC Section 101(a)(1). Additionally, she receives a $310,566 benefit for long term care that is income tax-free under IRC Section 104(a)(3). The policy may come with a return of premium guarantee, even if the policy is fully surrendered in the initial years. A residual death benefit may be paid beneficiaries even if all long term care benefits are utilized by the policyholder.

LTC Life is making strong inroads into the retirement market, addressing a concern many buyers have with long term care insurance (LTCI) sold as an indemnity product. In the classic design, the purchaser may view that LTCI premiums have no direct investment return if the person insured never enters a nursing home. With LTC Life even the expense factor of the long term care coverage comes with less bite. In the hybrid design, the single premium is leveraged, producing the long term care benefits as an "add on" to the traditional cash value tax-deferral advantages and the income tax-free death benefit expected from life insurance.

The problem is not the consumer's acceptance of the concept, but the need we have as salespersons to adapt. "How do I sell this product?" is the question we most frequently get asked. "Is it long term care insurance or is it life insurance." The answer is that the product is both. Moreover, to allow the consumer to access the attractive packaging of the long term care benefits that LTC offers, we as salespersons have to learn how to sell life insurance in the senior retirement market, one of the most difficult markets in which to gain acceptance of the life insurance concept, to say nothing of life insurance underwriting.

We have found the following five steps are important as a salesperson adapts to the selling requirements of LTC Life.

Step 1. Ask for Certificates of Deposit and other Fixed Income Investments.

LTC Life sale typically involves a single premium payment of $50,000 or more, not a monthly payment or systematic approach familiar in dollar cost averaging sales.

With a lump sum investment, you are entering into an asset transfer process. First you must find the appropriate asset or assets to reposition into the LTC Life product and the second step involves moving that asset. Assets that frequently qualify for consideration are bank certificates of deposit or other fixed income investments such as bond funds. Check to see, for instance, if your client's certificate of deposit is maturing in an uneven amount. If so, that is a good indication that the client is not utilizing interest earnings to meet living expenses. Ask the client what financial objective the bond fund was created to meet. If the answer is vague, such as "for my retirement," then the client probably has no specific purpose for that particular investment.

Once you have found a lump sum of money sitting in a retirement-oriented investment, the next step is to move the money if the LTC Life product suits your client's needs. A good approach is to compare for the client the gains of moving that product into LTC Life. The client is subject to income tax on certificate of deposit gains and may be willing to trade the safety of the FDIC deposit guarantee for the leveraging advantages of LTC Life. The bond fund is subject to market fluctuation, again a feature with less appeal than the principal guarantee and minimum guaranteed interest rates credited to most LTC Life product designs. LTC Life offers distinct advantages that certificates of deposit and other fixed income investments typically do not provide, even if the client intends the CD or bond fund to be ear-marked for the grandchildren if they are not used to cover long term care expenses.

Step. 2. Configure LTC Life as a MEC.

Seniors are typically resistant to buying life insurance. Yes, when the family had young children yet in school, life insurance was viewed as needed protection. Perhaps some life insurance from younger years has been retained for estate tax needs. But people 65 years of age or older generally feel their need for life insurance, with the possible exception of burial insurance, has passed. Hardly anyone enters retirement years without having had some medical problem that perhaps even yet requires daily medication.

One way to simplify the medical underwriting requirements is to reduce the amount of pure risk in the insurance contract. This can be accomplished by configuring the LTC Life application so the policy is a Modified Endowment Contract. Because there is less pure insurance in the contract, the life company has less risk exposure, a consideration that may ease the underwriting requirements.

Granted, for many years life insurance agents are used to seeing flashing red lights go off on any illustration that is configured as a MEC. Yet, there is no legal prohibition from selling a MEC, as long as the client realizes what is being purchased and there is full disclosure by the agent. The main loss in a MEC is that the client cannot borrow out of the contract income tax-free. All withdrawals from a MEC are subject to income tax on a FIFO basis that considers the first dollars withdrawn to be interest earnings. Still, most seniors in the retirement market are averse to borrowing of any form. Going to a MEC design, then, will only forfeit a borrowing feature that most seniors purchasing LTC Life will never use.

Step 3. Conduct a Life Insurance Inventory.

Frequently seniors have multiple life insurance contracts accumulated for various reasons over many years of matrimony and raising families, plus multiple employment settings. There may be some old "key person" policies that were retained after the client left or sold a company. You may find an assortment of term, whole life, and universal life contracts purchased over a period as long as 50 years.

Some of these contracts can be consolidated or closed. You may find substantial cash value that can be transferred to the LTC Life contract, providing some or perhaps even all the funding requirements of the new contract. Once you have positioned life insurance in the context of generational wealth transfer and long term care benefits, you have opened up the discussion in a way the client may find refreshing. Looking at old life insurance contracts suddenly may make sense in light of the LTC Life opportunity where a client may move into a life insurance contract that now makes sense, one that is truly designed to answer the client's current most pressing financial planning question, namely, "How best do I prepare for retirement?" Take a survey of existing life insurance contracts and see if there are life insurance premium expenses that can be reduced and if there are any cash values that may better be positioned in the new LTC Life contract.

Step 4. Look to the Spouse and Underwrite LTC Life as a Joint Life or Survivorship Case.

In many cases, carriers provide a Joint Life or Survivorship version of the LTC Life policy. The product design may still have a separate long term care benefit structure available for each spouse, such that one spouse cannot exhaust the long term care benefit payout of the other. Still, the ability to underwrite in what amounts to a "second to die" structure, gives you added flexibility constructing the cases as a joint life product. Put simply, only one of the spouses has to be reasonably healthy for the policy to pass through underwriting. In other words, one of the spouses can have relatively serious health issues and the policy can still be issued. The only limitation is that both spouses will have to be able to pass the long term care medical underwriting which the LTC Life policy generally addresses as distinct from the strict mortality focus of traditional life insurance underwriting.

Another advantage to approaching the case as a spousal consideration is the ability to more comprehensively address the financial planning needs of the couple. Once again, you can take the opportunity to propose the joint life possibility as a way of making sure both spouses are aware of the long term care needs they each face.

Step. 5. View Your LTC Life Cases as Filling a Pipeline.

Another difference from a transaction or "ticket drop" sale is that the underwriting cycle means that your LTC Life cases may take from 30 days to 90 days to be issued, depending upon the complexity of the health issues that come up in the medical underwriting and the proficiency of the carrier's life underwriting division. When making the sale, you should prepare your clients for time period involved in advance, so they expect the underwriting process to take some time and to avoid them becoming frustrated at the delay and possibly losing interest in the sale.

The underwriting cycle has a clear impact on your compensation for the sale. You will receive commission when the case is issued, after the completion of the underwriting process, not when the case is submitted. The best way to view the business is to imagine you are creating a pipeline. You fill the pipeline with prospects and what emerges from the other end are issued policies and commissions. At the beginning of the process, nothing is yet flowing out the end of the pipeline. After you have been at the sale of LTC Life for some time, you can expect a regular flow of issued policies and commissions from the business you submitted 30 to 90 days before. The output remains constant just as long as your prospecting and selling remain constant. Keep feeding cases into the pipeline and positive results will keep flowing out.

You should view selling LTC Life as an on-going campaign, a continuing effort, not a one-time shot through your client base. LTC Life when sold correctly has a deep market among retirement-oriented seniors. Still, no product is right for anyone. You will continue to find prospects for which a stand-alone life insurance product specifically designed for generational wealth transfer is best. You will also continue to find prospects where a top-end stand-alone LTCI product best suits their long term care needs. If you include LTC Life in your product inventory, you will add a "linked benefit" approach that offers the opportunity to leverage a lump sum of your client's retirement savings for multiple benefits, including both generational wealth transfer and long term care on a tax-favored basis.

Authors:

Jerome R. Corsi holds a Ph.D. from Harvard University. He has spent the past 25 years in the financial services industry, focusing largely upon alternative methods of distribution, including bank marketing. He is a Managing Director of US Financial Marketing Group (USFMG), where he is the editor of www.theusbroker.com, a website devoted to offering leading insurance products to independent life insurance agents. Dr. Corsi can be reached at jcorsi@theusbroker.com. Dr. Corsi can also be reached at his New Jersey office (phone: 973-989-2393).

Ron Corlew graduated from Florida State University with a Bachelors degree in Economics. He brings to his position as President of Signature Financial Services a broad sales and marketing background, with 15 years of experience in the Finance and Insurance Industries. Mr. Corlew can be reached via e-mail at ron@signaturefinancial.com. Mr. Corlew can also be reached at Signature Financial Services headquarters in Ft. Washington, Pennsylvania (phone: 800-828-1910).

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