How long do long-term care insurance claims last? Do claimants typically exhaust limited-duration policies?
If you’re having trouble with LTCI market penetration due to confusion over questions like these, help is on the way. These are just two of the questions asked and answered in a new guide from the American Association for Long-Term Care Insurance. The eight-page booklet provides insights into the duration of long-term care insurance claims based on a study conducted for the organization by Milliman, Inc.
“Most people, at this point, have been through LTCI 101–the facts, the risk, the need,” says Jesse Slome, executive director of the American Association for Long-Term Care Insurance. “They’ve read about it on the Internet of seen it reported on cable news. They’re now going to their advisor and asking largely the same two questions: ‘Will I need this and, if so, how much?’”
According to Slome, the guide combines claims-related data from various studies conducted over the past year by the trade group to help with the decision-making process.
“More consumers are purchasing limited duration policies as a way to keep the cost of long-term care insurance affordable,” he says. “In 2009, almost one-third of individual buyers purchased a 3-year benefit period. Is that sufficient coverage or will they ultimately run out of benefit dollars? Typically, it was enough coverage, and it was much cheaper than lifetime of unlimited coverage.”
Slome notes a policy designed to pay benefits for three-years costs between 42-and 54 percent less than a policy that will pay claims for an unlimited number of years. The study found that one in 10 of three-year policies actually paid benefits beyond the 36-month time period and only 8 percent actually exhausted their policy benefits.
“The problem with the information we receive from the government is that it includes information on individuals that are extremely unlikely to purchase LTCI coverage,” Slome adds. “With the study we’ve conducted, we were able to only look at buyers and projected buyers from a pricing standpoint, so it’s much more relevant information for the advisor’s target markets. In order for advisors to be successful, especially with baby boomers, they need to realize the limited funds the demographic has, and tailor policies accordingly.”