Reasons given by clients to not purchase LTC Insurance and my responses.

"I think I will wait to purchase LTC Insurance."

There are two good reasons not to wait: 1) Most insurance carriers increase premiums significantly after age 50.  Often, premiums double from age 40 to 60 and triple between ages 40 and 70.  2) Once a medical condition develops, a person may become ineligible for coverage or, if the person remains eligible, the premium will increase as persons rated less than "preferred" pay more.

"I might never use it."

Denial is one of the most common reasons that people don't purchase LTCi.  I ask the client if he/she would consider going without medical insurance or choose not to insure the family car or home.  There is a 1 in 15 chance they'll use their medical insurance, a 1 in 1,200 chance that they will file on their homeowner's insurance and a 1 in 240 chance that they will file a claim with their auto insurance.  Compare this with the almost 1 in 2 chance that they will need long term care services sometime in their lives.  Which coverage would they feel comfortable doing without?

I'm never going into a nursing home."

If that is the case, you will want to be sure that you have made provisions for care to be provided in your home or money that will pay for an assisted living facility.  Today, 82% of long term care benefits are provided in homes or assisted living facilities; only 18% in nursing homes.  Comprehensive long term care policies pay for in-home services, for respite services to relieve the family members who provide the care and for assisted living options in addition to nursing homes.

"The premiums are too expensive."

The primary reason that long term care premiums are expensive is that the risk to the insurance company is great.  Data shows that one of two persons will need this care during his/her lifetime. 

In 2006, services in and around Wichita to the home cost $17 to $18 per hour, the monthly cost of a quality assisted living facility is about $2,500 while a private pay room in a quality nursing home averages about $4,800.  Instead of paying those costs, one can pay $250 to $450 a month to provide those services when the need arises.  I find that the actual care plan costs between 3% and 5% of the annual cost of care.

"My children will take care of me."

That statement often leads to a good discusssion of how that might occur and which children could afford to do this both financially and physically.  However, I find that most of my clients are concerned that they will become a burden to their spouse and children if they become ill.  They also express a preference that trained professionals provide personal care rather than a child or sibling.

"The government will pay for my long term care."

The current government program, Medicaid, is a welfare program which is designed to be a last resort.  Medicaid requires that the person trying to qualify for assistance can not be worth more than $2,000 in stocks, bonds, mutual funds, RV's or rental or vacation properties.  The spouse can remain in the home and be allowed a maximum income (which differs by state).  If the person trying to qualify for Medicaid benefits has transferred weath to children or other entities within the past five years, there will be a penalty period when Medicaid will not provide benefits.  Moreover, persons on Medicaid typically are very limited in home services and lose the right to choose the facility in which they wish to reside.

"I will self-insure."

Many of my clients are well-off but choose to purchase long term care insurance.  When you stop to think about it, owning long term care insurance makes as much sense, and probably more, than owning a homeowner's policy or auto insurance.  In 1995, the Society of Actuaries said "Of every 1,000 people, five will experience a house fire, with a loss averaging $3,428; seventy will have an auto accident with an average loss of $3,000 and 600 will need long term care at an average cost of $45,000 to $80,000 per year.

Just as people transfer the risk to insurance companies for their homes, health care and cars, it makes sense to transfer the risk for long term care to an insurance company as the chances are far greater that long term care is needed.  One can pay the bills or the insurance company can pay them on the policyholder's behalf.  Doesn't it make sense to acquire services for three to five percent of the cost rather than to pay 100% of the cost?