A recent nationwide omnibus survey of 1,005 American adults shows although knowledge about long-term care insurance is increasing, barriers are still in place that are preventing purchase. Both the perceived high cost and a lack of awareness about coverage were common themes voiced by Americans as they answered questions about long-term care planning in the Thrivent Financial for Lutherans survey.
Consider this: life expectancy is increasing; medical technology continues to improve; baby boomers are beginning to retire. All of these issues create a perfect storm for the probability of needing long-term care, but many Americans aren’t prepared for the costs – and that’s where long-term care insurance could come into play.
The costs for long-term care are staggering. According to the American Association of Long-Term Care Insurance, the average annual cost of full-time nursing home care is $76,285 for a semi-private room. Based on the average hourly rate of $21 per hour for a home health aide, eight hours of care a day is $61,320 annually.
Those figures should motivate Americans to begin planning for long-term care, but Thrivent Financial’s survey indicated that more than half of the population is still not even aware of what long-term care insurance covers.
· 24% of respondents say they are well-educated on the topic.
· 52% of respondents say they’ve heard about long-term care insurance, but don’t know the specifics about what it covers.
· 25% of respondents had no knowledge about what long-term care insurance covers.
Wisdom of the ages?
Surprisingly, the younger generation seems to have a better grasp on the importance on preparing for long-term care. When asked about their current long-term care insurance ownership, as well as future plans for purchasing if it is not currently owned, 18-34 year olds answered as follows:
· 15% said they currently own long-term care insurance.
· 41% said they don’t currently own long-term care insurance, but they plan to in the future.
· 44% said they don’t currently own long-term care insurance, and they don’t plan to purchase it in the future.
For the 35-54 year olds, the results showed:
· 15% of 35-54 year olds said they currently own long-term care insurance.
· 25% of 35-54 year olds said they don’t currently own long-term care insurance, but they plan to in the future.
· 60% of 35-54 year olds said they don’t currently own long-term care insurance, and they don’t plan to purchase it in the future.
Finally, for those ages 55 and up, the results showed:
· 17% of those ages 55+ said they currently own long-term care insurance.
· 17% of those ages 55+ said they don’t currently own long-term care insurance, but they plan to in the future.
Page 2 of 2 - · 66% of those ages 55+ said they don’t currently own long-term care insurance, and they don’t plan to purchase it in the future.
Barriers to purchasing long-term care insurance
The Thrivent Financial survey asked respondents to identify reasons for not purchasing long-term care insurance. The responses indicated:
· 51% of respondents thought long-term care insurance is too expensive.
· 24% of respondents didn’t know what long-term care insurance was.
· 10% of respondents said it didn’t apply to them and that they could pay on their own.
· 8% of respondents didn’t believe the provider of the long-term care insurance would pay.
· 7% of respondents said they won’t need it because they have family members that will care for them and help pay for care.
If a 50-year-old person purchases a long-term care insurance policy with a monthly benefit of $5,000 for a 36-month period, the average cost would be about $1,050 annually. If a person pays for the long-term care insurance for 20 years before eventually needing to use the policy, an amount of $21,000 would be paid in premiums. This cost is minimal compared to three-years of long-term care, either in a home setting or in a long-term care facility.
“We often hear that cost is an inhibitor to purchasing long-term care insurance,” said Dean Anderson, product leader at Thrivent Financial for Lutherans. “In reality, though, it is often a wise financial decision.”
So, when is the right time to purchase?
Nearly two out of five respondents (36%) believe that the age of 50-65 is the appropriate time to start looking at purchasing long-term care insurance. 23% of men and 27% of women felt that long-term care insurance should be looked at in the 40-50 age range. Of interest, men (24%), more so than women (18%), feel that between the ages of 33-40 is a good age to start considering long-term care insurance.
About the Thrivent Financial Long-Term Care Insurance Survey
Data for this survey was collected via national omnibus survey by Ipsos. Interviewing took place between Aug. 31 and Sept. 4, 2012, among a national cross-section of 1,005 adults age 18+ of whom 49% were male and 51% were female. The margin of error is +/- 2.5%.