NEW YORK - Advisers who recommend long-term-care insurance only to clients age 55 or older are dropping the ball, according to experts in the coverage line.
A report released last month by the American Association for Long-Term Care Insurance in Westlake Village, Calif., found that clients in good health have a much better chance of locking in premium discounts and guaranteed coverage by buying LTC insurance in their 40s or even earlier.
Ironically, a marketing blunder by insurers pioneering the coverage started the tradition of insuring people over a certain age.
"For many years, the insurers thought that their market was people age 65 and older. But even 55 is not an automatic minimum age," said Ron Iverson, an LTC adviser with Long-Term Solutions in Helena, Mont.
"Anyone whose portfolio needs protection is a prospect. The baby boomers - who are now about 40 to 60 years old - that's the crowd that has the assets," Mr. Iverson said.
"Most insurance companies initially didn't offer the coverage to people under age 50," said Chris Cooper, principal of a Toledo, Ohio, advisory firm that bears his name and that manages $165 million in assets. "They didn't understand the market at that time; they later moved the age downward."
Now, LTC coverage offered through group plans insures people as young as 18, Mr. Cooper noted.
Beat disease onset
"The ideal time to buy LTC insurance is when clients are in their 40s - before conditions that tend to manifest with age, such as multiple sclerosis, Parkinson's disease and fibromyalgia, arise," said Lynn Devitt, an LTC specialist with Newman Financial Services LLC in Minneapolis.
"If clients wait until they're in their 50s, they might be uninsurable due to arthritis, heart disease, high blood pressure or diabetes," Mr. Cooper said. Because LTC insurance policies are guaranteed renewable regardless of the policyholder's health, it makes sense to purchase the coverage at an earlier age, he added.
In addition to coverage availability, there are premium discounts to consider.
"Individuals who are in good health qualify for discounts that reduce the cost of LTC insurance by 10% to 20% each year," said Jesse Slome, executive director of the LTC insurance association.
It often is better to pay for the coverage when young and to take advantage of the discounts, because there is a greater need for liquidity once clients retire and no longer have a regular salary, the experts note.
More than half of applicants in the 40-to-49 age group qualify for good-health discounts, while about 32% of those in the 60-to-69 group qualify, according to the report.
Closing the sale
Some think that the fault for failing to buy LTC insurance lies not with insurers or clients but with financial advisers.
"Advisers will never be good LTC insurance salespeople," Ms. Devitt said. "It's a very specialized coverage."
Advisers are concerned that if they botch clients' LTC insurance, clients will wonder whether their investments are being similarly botched, Ms. Devitt added.
"It's best if the advisers form business alliances with LTC specialists," she said. Her firm splits commissions with advisers on a 50-50 basis.
"It's natural for financial advisers to develop relationships with LTC people," Mr. Iverson said. He noted that most advisers want to concentrate on their clients' investments - not their insurance.
Also, some advisers are hesitant to recommend an additional annual expense of about $2,500 to a couple in their 40s who already are financially stretched from paying for their kids' college education, according to Ms. Devitt.
But fee-only advisers, such as Mr. Cooper, refuse to relinquish control of their clients' LTC business.
"I have the LTC discussion with the client and then bring in the insurance brokers for premium quotes," he said. Mr. Cooper then helps the client analyze the quotes and make a decision.