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Who buys LTCI?

By Margie Barrie

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Q. Who should I be targeting for long-term care insurance (LTCI)? What are the surveys and studies showing about who is buying this protection, and why?

A. America’s Health Insurance Plans (AHIP) periodically releases a study of the LTCI industry.

Susan Coronel, executive director, LTC, shared the trade group’s most recent findings from “Who Buys Long-Term Care Insurance in 2010-2011?”

The study identifies which consumers purchase long-term care insurance (LTCI) and explores what motivates those consumers to do so.

It compares these findings with those consumers who made the active decision to not buy LTCI and to the general population of Americans ages 50 and older.

The study also tracks how product purchase decisions have changed over the past 20 years.

The AHIP researchers found that individuals are buying LTCI to meet more than one objective. About a third of the buyers indicated that protecting their assets and estates was the single most important reason for buying LTCI coverage.

For the most part, people do not decide to buy LTC insurance on their own. Spouses, agents and financial planners were cited as having a significant level of influence. Perhaps surprisingly, children take an active role in the purchase decision only rarely.

The AHIP researchers found that the agent’s recommendation and the insurer’s reputation are the reasons most often cited for the purchase of a particular company’s policy. 

Margie Barrie

Timing also plays a role: 55 percent of the buyers cited a belief that the “cost of insurance would increase in future” as the most important reason for purchasing their policies now.

Here are some of other interesting study findings:

  • Most non-buyers said that cost was the most significant barrier to purchase. This trend has persisted over the past 20 years. 
  • The average age of individual LTCI buyers has declined in the last 20 years from 68 years in 1990 to 59 years in 2010.
  • Over the past five years, the proportion of individuals purchasing inflation protection has stayed relatively constant at about three in four. Roughly half of all buyers have compound inflation protection.
  • The average policy duration has declined slightly over the past five years. There has been a significant decline in sales of policies with unlimited (lifetime) durations. The average benefit length is 4.8 years. 
  • Seventy-four percent of married purchasers buy a policy for each spouse.
  • Americans believe that it is not the government’s role to pay for the long-term care needs of all people. They do believe, however, that it is the government’s responsibility to encourage people to buy long-term care insurance.
  • Less than 25 percent of individuals in the general population actually know if their state has a Long-Term Care Partnership Program. However, about 45 percent of respondents indicated that they would be likely to purchase a private LTCI policy if their state participated in a Partnership Program.