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GO LONG!
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MORE PEOPLE
ARE PURCHASING LONG-TERM CARE INSURANCE, AND MORE COMPANIES ARE
PROVIDING IT AS AN EXECUTIVE BENEFIT.
BY WILLIAM POE
Just a decade ago, few people knew anything about long-term care
insurance, and even fewer people were buying it. How things change!
“During the last five years in St. Louis, long-term care insurance
sales have tripled,” says Baird Nabholz, St. Louis managing consultant
for UnumProvident Corp.
“Our growth rate has been very good,” echoes Mike Garrett, a State
Farm Insurance agent in the city of Wildwood.
Indeed, insurance industry statistics show that sales of long-term
care insurance increased at an average growth rate of 21 percent
between 1987 and 1997. Yet, despite that high rate of growth, long-term
care insurance products have penetrated only a fraction of the potential
U.S. market. By 1999, for example, policies totaled only about 6.8
million, and most of those were owned by people age 65 and older,
one study found.
“We’ve seen quick growth, but, like other insurance providers, we
started from a low baseline number,” Nabholz acknowledges.
But now UnumProvident is seeing sales growth fueled by employers
who are increasingly providing long-term care insurance as a company
benefit to key employees.
“The majority of policies we sell have at least some employer funding,”
Nabholz says.
| "DURING
THE LAST FIVE YEARS IN ST. LOUIS, LONG-TERM CARE INSURANCE
SALES HAVE TRIPLED." |
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Baird
Nabholz
St. Louis managing consultant,
UnumProvident Corp.
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UnumProvident now sells three employer-sponsored products for each
individual policy, says John Noble, director of products market
organization. Interestingly, Noble says that premium revenues are
higher from individuals than groups, because individual purchasers
tend to be older and thus pay higher annual premiums.
In fact, most industry analysts say it is the high cost of premiums
that has hampered the sales growth of long-term care insurance.
This is expensive insurance. Of course, so is the cost of long-term
care. Depending on your age, annual insurance premiums can range
from $1,000 to as much as $8,000. Most individuals are paying $2,500
to $3,000 a year, officials say. On the other side of the equation
is the cost of long-term care. The average U.S. annual cost for
nursing home care in 1997 was $46,000.
What are the odds that you will require a nursing home or other
long-term care? It is estimated that one-third of Americans aged
65 and older will require a stay in a nursing home for longer than
three months. Others might need care at home or in an assisted-
living facility.
To Sylvia DeWitt, St. Louis field vice president of American Express
Financial Advisors, it is the likelihood of long-term care that
proves the value of long-term care insurance.
| "LONG-TERM
CARE INSURANCE IS SO VALUABLE AND IMPORTANT, BECAUSE
IT TRANSFERS THE RISK, WHICH MAY BE A CERTAINTY, TO
AN INSURANCE COMPANY. IT JUST MAKES SENSE." |
|
Sylvia
DeWitt
field vice president,
American Express Financial Advisors
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“Long-term care insurance is so valuable and important, because
it transfers the risk, which may be a certainty, to an insurance
company. It just makes sense,” DeWitt says.
“People are living longer now, and the need has become more pronounced,”
agrees State Farm’s Garrett. “You also have the needs of the ‘sandwich
generation’—adults with children but also with elderly parents.
We have sons and daughters buying long-term care insurance on behalf
of their parents.”
Garrett says individuals should not wait until late in life to buy
protection against the costs of long-term care.
“My average buyer is in his or her late 50s,” Garrett says. “There
is some interest from people in their late 60s and early 70s, but
higher premium costs become much more of a financial burden for
them. I’m starting to focus on people in their early to mid-50s.”
Local executives say that customer education is the greatest need
in the long-term care insurance field.
“When people understand the need for long-term care insurance, cost
becomes less of a concern,” Noble says. “The average person on the
street just doesn’t understand the need. Some people, for instance,
believe erroneously that long-term care is covered by their regular
health insurance or by Medicare. With rare exceptions, it’s not.”
Garrett adds, “The first step is education and getting people to
look at long-term care insurance in purely economic terms. The key
questions are how you are going to pay for long-term care and how
much of it can you afford.”
If an individual has no long-term care coverage, options are generally
two-fold: spend personal (or family) assets for care or seek care
under Medicaid (the federal-state health insurance program for people
with limited income and low assets).
“At $50,000 a year, it doesn’t take long in a nursing facility to
wipe out all of the assets you have,” Garrett says. “And Medicaid
is becoming more strict in how they evaluate your assets for eligibility.
It’s becoming more and more difficult to do, and do you really want
to spend down all of your assets anyway, so you can qualify for
one of the limited number of Medicaid beds available?”
Garrett says long-term care insurance should always be considered
in the light of an individual’s total financial picture.
“Long-term care insurance is increasingly one component of a person’s
financial portfolio,” Garrett says.
DeWitt says an individual’s financial planner can outline the pertinent
parameters that should be part of a decision to purchase long-term
care insurance, and Garrett says an insurance agent can best provide
information on an array of long-term care insurance options including
daily benefit amounts, elimination periods, maximum lifetime benefit
amounts, and inflation protection.
“It’s important to remember that long-term care insurance, from
an actuarial perspective, is very similar to life insurance,” Garrett
stresses. “As you age, the insurance becomes more expensive.”
William V. Poe is principal of Poe Communications, a St. Louis
advertising and marketing communications firm.
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