Taking on that caregiving responsibility presents a lot of unique challenges. One of the most obvious obstacles is the health risks that caregivers face. Burn out is common. Fatigue and chronic illnesses can arise. Anxiety and depression occur as well.
Another significant issue that people face involves financial planning, especially if people need to plan for long-term care. And as the world continues to age at a faster rate, a Genworth study found that seven of 10 people will, eventually, require long-term care.
And, the cost of care is rising. In fact, the monthly median cost of a private room at a nursing home exceeds $9,000. This is why financial planning is so important, and it presents a great opportunity for you to educate your clients on the benefits of leveraging a Medicaid compliant annuity.
Before we explore the concept of a Medicaid compliant annuity, let's cover the basics of how an annuity works. As you know, an annuity is a financial product that pays out a certain amount of money over time in exchange for an upfront payment. It can earn tax-deferred interest, helping the annuitant (the owner of the annuity) enjoy a steady income stream during their retirement years.
Generally speaking, annuities are paid every year to the policy owner. Annuity products can be used to save for retirement, supplement income during retirement, or to provide long-term care benefits without depleting assets.
There are four primary types of annuities that your clients may benefit from. These types include:
Immediate Annuities
Deferred Annuities
Fixed Annuities
Variable Annuities
A Medicaid compliant annuity is considered an immediate annuity. It's specifically designed to help protect assets from being counted toward Medicaid eligibility requirements. The main difference between other annuities and a Medicaid compliant annuity is that a Medicaid compliant annuity must meet certain requirements in order to qualify, such as having no cash value and not offering any investment options.
Additionally, all funds within the annuity must be used immediately for the purpose of providing care for the individual listed on the policy.
A Medicaid compliant annuity enables the annuitant to convert liquid assets into an income stream, thus protecting their assets from being counted as a resource when determining Medicaid eligibility. As noted above, these annuities must meet certain requirements in order to be considered “Medicaid-compliant.”
Some of these requirements include the following:
The annuity must be irrevocable — your client cannot withdraw funds out of the annuity except through regular payments.
It must be non-assignable, showing no cash value.
It must be non-transferable, so it can only be in your annuitant's name, not any other party.
It needs to have a term limit that's shorter than your annuitant's life expectancy.
It should specify the period of time for which payments will be made to the annuitant.
These are just some of the requirements, and keep in mind that each state has different asset limits in place for Medicaid eligibility. The most important thing to focus on is finding the right clients who are a good match for this kind of annuity.
As a trusted insurance agency, you should put your clients’ needs first. Make sure you’re listening to each client’s goals and unique focus areas. For example, some clients may want to learn more about leveraging tax advantages through annuities and life insurance. Others may want to prioritize optimizing their finances for retirement using financial tools like annuities.
Some of the criteria that you should consider when helping clients determine if they’re a good fit for a Medicaid compliant annuity include the following:
If you have clients that fit within this criteria, it might be a good idea to engage with them and start highlighting the benefits of a Medicaid compliant annuity.
When it comes to selling Medicaid compliant annuities, you need to personalize how you position the benefits of it. The more you know about each client’s unique needs and goals, the better you can tailor your messaging so you speak to the most relevant features of the annuity.
Here are some best practices and strategies you can use to sell more Medicaid compliant annuities and delight your clients:
While agents tend to know the ins and outs of Medicaid eligibility, your clients may not. They need to fully understand how to leverage the benefits of Medicaid.
Start by describing how the program supports people with limited means to cover the costs of medical expenses. It’s a valuable financial tool that can be used for long-term care costs. While state qualifications vary, your client needs to fit the following the qualifications:
By sharing this information with your clients, you’re building trust and establishing your credibility. Clients will better understand your level of expertise in terms of how annuities can help them meet Medicaid requirements.
Show your clients the alternative options they face without Medicaid. Unfortunately, as noted above, the costs of nursing homes are high. And according to the U.S. Department of Health, 75 percent of single people and 50 percent of married couples will wipe out their savings within one year of entering a nursing home.
That’s a startling statistic, and your clients will be more inclined to inquire about finding ways to meet the qualifications of Medicaid. This is when you can explain how Medicaid compliant annuities work and present them with options your agency carries.
Speaking with your clients is just one component of the sales process. You want to provide them with detailed information so they can continue their own research if they want.
This is where marketing materials like brochures and explainer videos come in handy. You can mail them physical copies of promotional materials, email them digital assets, and then follow up with them to see if they need any additional information.
Marketing materials can keep your clients engaged while they assess their options and decide if a Medicaid compliant annuity is a good fit for them. These materials support your team’s ability to position your annuity products in a compelling way.
This is why ELCO Mutual provides our partners with marketing support. We want to empower our agents to effectively sell our annuities in a way that stands out from the competition.
The ELCO Mutual team is proud of being a leading life insurance and annuities provider since 1946. Our history demonstrates our continued commitment to provide policyholders with the best products on the market while providing them access to our team of qualified agents.
Contact the ELCO team today to learn more about how we support our agencies in selling annuities. We are here to walk you through our process and provide more details about how we can help your insurance agency delight new and existing clients while supporting your revenue growth goals.