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Why are more people not buying long term care insurance to complete their retirement plan?

The biggest reason is that many in the industry are not asking them to do this. At least that is what industry research suggests. Consumers say they have not bought LTC insurance because no one has recommended they do so.

In short, somebody is missing the boat. This can change.

As insurance industry representatives help clients plan for their golden years, they need to make sure the clients understand that without LTC insurance, they could be jeopardizing the funds they are counting on to last them through retirement.

The risk is real. Today, approximately one in five people over age 65 and half of those over 85 need assistance with day-to-day activities, according to a 2001 report, “Baby Boomers Get an F in Financial Planning for Old Age,” from the American Council of Life Insurers.

Whether individuals receive care in their own homes, an assisted living facility or a nursing home, these services cost money–a lot of money. On a national average, a year in a nursing home costs over $50,000; home health care is less expensive but can easily run $12,000 a year, according to “The 2002 Guide To Long-Term Care Insurance” by the Health Insurance Association of America.

Unfortunately, many people end up paying for these services out of their own pockets, often depleting a lifetime of savings.

The advisors job is to help clients understand how LTC insurance can prevent this from happening to them.

Many people still mistakenly believe their health insurance, Medicare Supplement plan or Medicare will cover their LTC needs. This simply isnt so.

Others think Medicaid is the answer. But they dont realize Medicaid pays only for those who meet federal poverty guidelines. That means people would have to “spend down” their own savings to poverty level in order to become eligible. Not a very appealing prospect.

Another problem is that people tend to think LTC insurance is much more expensive than it really is. In one survey, a large majority of people polled indicated they had no idea how much LTC insurance actually costs.

When weighing the cost of LTC premiums against the actual cost of services, the cost is a no-brainer. A LTC insurance policy reduces by 66% a persons chance of having to spend his or her assets to pay for nursing home care to the point of impoverishment and Medicaid eligibility, according to a September 2002 study from HIAA.

So, when talking to clients about planning for retirement, make sure the client understands the risk. Simply put, paying for LTC services out of pocket could easily deplete everything the client has worked a lifetime to accumulate.

Then offer a sensible solution–a LTC insurance plan that will help protect those assets and that will allow the client to enjoy retirement as planned.

is vice president and product manager of disability income, critical illness, long term care and supplemental health products at Mutual of Omaha. He can be reached at john.clark@mutualofomaha.com.


Reproduced from National Underwriter Edition, April 28, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.