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November 23, 2011 at 12:58 AM
The current ups and downs in the economy and the long-term care insurance (LTCI) market are, sadly, getting in the way of what could be interesting efforts at truly long-term long-term care (LTC) planning.
When we’re buying insurance that will pay benefits in old age, the earlier we get it, the better.
Premium payments go into a general account, the general account assets go into high-quality bonds and other investments, and investment income rolls into the general account, steadily turning mounds of cash into mountains through the miracle of compound growth.
Genworth Financial Inc., Richmond, Va. (NYSE:GNW), found recently when it surveyed 1,073 U.S. adults ages 25 and older, with incomes of $50,000 and over, that 57% said the best time to buy LTCI is when consumers are ages 45 to 64.
But 7% of the survey participants said the best time to buy LTCI is when consumers are ages 18 to 34, and, really, that’s obviously right. Some unfortunate 30-year-olds suffer catastrophic illnesses or injuries and do end up needing LTC, and, if they didn’t, any properly underwritten LTCI sold to them ought to be cheap because, under normal circumstances, they are so far from needing LTC.
Some have suggested that one simple, affordable way to cope with retirement income financing would be to arrange to buy an equity-indexed annuity for every new baby.
Perhaps a similar strategy would work for preparing for LTC needs.
Congress tried to create a universal voluntary LTC program and failed because the result, the CLASS program, could operate only in a government-run universe in which federal fairy godmothers make the actuarial stuff work.
Perhaps, in a more cheerful, more confident age, when the problems of today and the struggles of the CLASS program designers are behind us, private LTC insurers could use great commercials and low prices to persuade “young invincibles” in their 20s to buy LTCI through conventionally underwritten, conventionally priced commercial LTCI programs that would be affordable because the insureds would be so young and, in most cases, so far from needing LTC.
Maybe insurers could perform that feat by packaging LTCI together with health insurance.
The idea of selling anything more expensive than state-mandated auto insurance to the young invincibles may seem to fanciful today, but there’s another, potentially more approachable youth market in need of LTCI: The parents of many of the babies born this year.
