LTCI and Boomers: Gap in Perceived Value and Actual Purchases

'Majority' of boomers recognize value, few purchase policies, study finds

While a majority of boomers recognize the potential value of long-term care insurance, few have actually purchased a policy. A survey by New York Life released Tuesday found that although 85% of boomers said LTCI provides peace of mind, and 84% said it could protect retirement income, just 9% of boomers have purchased a policy.

"The results show that there is a need and desire for the product among Baby Boomers ... however, there is little action," Mike Gallo, senior vice president of long-term care for New York Life, said by e-mail. "This shows that there is a clear need for financial advisors and agents to educate their clients and to incorporate long-term care planning into the overall retirement planning discussions. Clients need to be made aware of their options and presented with the vehicles to best plan for a potential long-term care event."

Gallo noted that while the economy limited sales of LTCI policies last year, "2010 year-to-date sales are up across the industry."

"One reason for this may be  that through the difficult economic times, people have had to seriously rethink their retirement plans. Where previously they may have considered self-funding an LTCi event, this may no longer be a feasible option," he wrote. Furthermore, consumers are aware that price isn't the only factor in shopping for coverage, and are considering the "quality and financial strength" to their insurance providers, Gallo wrote. "Boomers realize it is important to buy LTCi from a strong company, as the policy must often last 20, 30 or even more years."

Respondents were asked to describe their parents' experience with long-term care insurance. Seventy-two percent of those whose parents had LTCI said it was a good value, both for their parents and themselves. Sixty-one percent of boomers said one of the benefits of their parents having LTCI was that they were able to focus on their own financial goals. Eighty-four percent said they had to contribute less to their parents' care, and 77% said they weren't required to spend as much time caring for a parent. Over three-quarters said the quality of care their parents received with LTCI was better than what they otherwise would have had.

In comparison, of those whose parents did not have long-term care insurance, 71% said it would have provided peace of mind for their family, and 63% said their parents would have received better care. Forty percent said LTCI would have made it easier for their parents to receive care.

Boomers have learned from their parents' experiences with long-term care; 42% say that it has made them "more inclined" to buy coverage. Sixty-four percent of boomers whose parents had LTCI said they were likely to buy a policy, compared with just 37% of boomers whose parents did not have LTCI.

Why then do so few boomers purchase long-term care insurance? The study theorizes that a lack of information may be the problem. Just 27% of boomers could estimate the annual cost of nursing home care, and "a majority" assume government programs will pay for the cost of care. Almost half agreed LTCI wasn't worth the cost because they "may never use it." Additionally, boomers may simply be unwilling to address the issue – 35% said it was an issue for "later in life."

Almost 90% of boomers are afraid of not being able to afford the "best possible care" and 87% are worried that their care needs will exhaust their savings. Eighty-four percent are worried about receiving low-quality care, and 83% are worried that they won't have access to the best care.

A further concern among boomers is that their families would be overburdened caring for them should they need it. Eighty-four percent say they worry that their spouse would be overwhelmed by the responsibility, and 79% have the same worry for their children.

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