Over the years, I am often surprised by the number of senior living counselors and sales professionals who are unfamiliar with the types of contracts available with a Life Plan Community, also known as a Continuing Care Retirement Community (CCRC). I suggest that a truly superior sales counselor should have a firm knowledge of all types of contracts in order to more effectively assist prospects navigating the maze of senior living options. Prospects are typically trying to make a decision while organizing, digesting, and comparing communities that may not be apples-to-apples comparisons at all. If a sales professional has a thorough knowledge of the residency contracts available, he/she can better serve the prospect during comparison shopping and the decision-making process.
During the months of July and August, the RD Blog will cover the types of contracts offered by a Life Plan Community and broadly define each one. Additionally, the blog will suggest ways in which a sales counselor might emphasize the strengths of one type of contract versus another.
To begin the series, listed below are the types of contracts with a brief description of each:
Type A - LifeCare (or Extensive) Contract
A LifeCare Contract usually has a higher Entry Fee and Monthly Fee; however, a portion of future health care costs are covered within this fee structure. Therefore, if and when a resident moves into a higher level of care, there is little or no variation in the Monthly Fee.
Type B - Modified Contract
In general, a Modified Contract is less expensive than a LifeCare Contract, both in the Entry Fee and Monthly Fee. Under the terms of this contract, if a resident moves into a higher level of care, he/she will either pay a discounted rate or receive a pre-determined number of days at no additional cost.
Type C - Fee-for-Service Contract
The Entry Fee and the Monthly Fee are lower in a Fee-for-Service Contract; however, when a resident moves into a higher level of care, the Monthly Fee will increase to the amount of the daily market rate within a particular level of care.
Type D - Rental Agreement
A Rental Agreement does not have an Entry Fee although some communities require a nominal Community Fee. The Monthly Fee tends to be more substantial in order to cover all of the services without the benefit of an Entry Fee. Similar to the Fee-for-Service Agreement, if a resident moves into a higher level of care, the Monthly Fee increases to the market rate for that level of service.
Type E - Equity-Based Contract
Within this Equity Contract, the resident actually purchases equity in their home. A Monthly Fee is still required during residency in Independent Living and when a resident moves to a higher level of care, he/she pays the current market rate. In a few Equity Based communities, the resident may receive a reduction in the market rate for higher levels of care.
Each contract has specific advantages that has a unique appeal to the various personal circumstances of a prospect. A superior sales counselor should be able to speak to the advantages and disadvantages of each contract type as it relates to different situations. The July/August blogs will explore each contract type individually and suggest techniques to promote the unique sales position of each one.
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