It has been a perplexing question for years. When an estimated 70% of adults may need long term care, why do most refuse to buy insurance to cover it? Many explanations have been offered, such as research from Boston College’s Center for Retirement Research which concluded that many simply do not need it, “individuals (generally those with minimal or very large estates) should not buy insurance”. Other common reasons include the high costs of long term care insurance or that many mistakenly believe government benefits like Medicare and Medicaid can meet their needs, etc.
A recent study by the Wall Street Journal (“Why People Don’t Buy Long Term Care Insurance; by Olivia Mitchell and Daniel Gottlieb; June 14, 2015) has shed more light on the issue. The study’s findings suggest that a significant reason consumers may not be buying has to do with their perception of long term care insurance. By excluding key factors when making complicated decisions (so called “narrow framing”), many people view long term care insurance as an investment (and a very lousy one), rather than as financial protection insurance. Also, they view the insurance premiums as a waste of money if long term care is never needed, rather than as insurance against risk like other insurance – homeowners, auto, health, etc.
Despite many excuses that discourage purchasing long term care insurance, it is something many should seriously consider. It is unfortunate that current attitudes discourage many who could benefit from long term care insurance from even considering it. The Wall Street Journal study also looked into possible remedies to better serve consumers. The study suggests that the insurance industry should focus more on children whose parents need long term care because they would be more acutely aware of the benefits of long term care insurance.
Also, insurance companies should emphasize the benefits the policies provide (i.e. protection from nursing home costs), rather than trying to scare people into buying insurance. This is particularly true with life insurance policies that also have a long term care insurance component. Unlike traditional long term care insurance, the premium is not “wasted” if long term care is not needed. Instead, the death benefit from the life insurance is paid to the named beneficiaries. For many people, this can be a very prudent investment against the devastating costs of long term care.
While it may be difficult to look beyond your perceptions of long term care insurance and poor advertising by insurance companies, it is a shame that many pass up an opportunity to protect their estate. With policies on the market that provide both life insurance and long term care insurance, it is something many people should seriously consider. Meet with a qualified elder law attorney to discuss your options and determine how best to protect your estate.
- Costs of Long Term care
- Mistakes to Avoid When Purchasing Long Term Care Insurance
- Long Term Care Insurance – Premiums on the Rise