Should you sell long term care insurance with higher daily/monthly benefits and shorter benefit periods, or lower daily/monthly benefits and longer benefit periods? It would seem as if the first would be the better option, but believe it or not, there are certain LTCI products that do the job better when they are designed the second way.
Gender as a factor in plan design
Gender is one major factor that can lead to differences in LTCI utilization – in general, bigger LTCI policies should be designed for women. This is largely because, according to the American Association for Long-Term Care Insurance (AALTCI):
“Women spend twice as many years in a disabled state (as men) at the end of their lives. More than 70 percent of nursing home residents are women. Over three-fourths (75.7 percent) of residents in assisted living communities are women. Almost two-thirds of formal (paid) home care users and informal (unpaid) care recipients are women. Among people age 75 or older, women are 60 percent more likely than men to need help with one or more activities of daily living such as eating, bathing, dressing, or getting around their home.”
I lean toward recommending longer benefit periods in exchange for lower daily/monthly benefits, however. Although AALTCI’s statistics say there is only a 20 percent chance of needing care for more than five years at age 65, what about the clients who fall into that 20 percent? If they do need this length of care, they may wind up exhausting their LTCI benefit period.
But just because these are the facts today, these facts are not likely to remain constant. In all likelihood, the use of LTCI will most likely increase for several reasons — and perhaps by quite a bit. For one, the people who are collecting LTCI benefits today are the first wave of people to do so. Second of all, there is an LTCI learning curve that is not well-understood.
The LTCI pioneers
This first wave of LTCI claimants, their families, and their providers are not very familiar with what LTCI is or when and how to use it. I have helped many doctors and home health care agencies complete LTCI claim forms because they have never seen one before. As more LTCI is placed and used, however, it’s likely to be better understood and more relied upon.
This leads to an observation, which I wish I had not seen so often: This first wave of claimants also appears to be very stoic and reluctant to file claims on their LTCI. They don’t seem to want to improve the quality of their lives by obtaining care that won’t cost them anything, even though they have high daily benefits and lifetime benefit and zero-day elimination periods, and even after I explain their policy will go into waiver of premium if they will simply seek the care they need.
The future of LTCI usage
LTCI usage will very likely increase as baby boomers start needing care. Compared with older generations, many of us avoid discomfort whenever possible and have grown accustomed to instant gratification. Furthermore, our families are small and our children are scattered all over the country, making informal care less available. As boomers learn more about when, where, and how they should use LTCI, they are likely to go on claim much sooner than today’s clients.
And finally, as improvements in medical technology drive the popularity of longer benefit periods, people with chronic care needs will be able to live even longer.
But for today, longer benefit periods, which come with the tradeoff of lower benefit payouts, may end up being the way to go with some of your clients.