More Americans need LTCI — and most overestimate the costBlog added by Vanessa De La Rosa on January 30, 2013
Vanessa De La Rosa

Vanessa De La Rosa

Denver, CO

Joined: September 24, 2012

Americans are living longer these days, but they’re also living sicker. The 2012 America’s Health Rankings shows there are fewer deaths from heart disease and cancer, but more chronic illnesses like obesity, diabetes and high blood pressure. The likelihood that your average American will need long-term care at some point is quite high.

An Urban Institute study asserts that long-term care is the leading source of catastrophic out-of-pocket medical costs, which can lead to severe financial problems, if not complete impoverishment.

On top of that, smaller family sizes and rising divorce rates take a significant toll on the unpaid familial caregiving option. This means there is all the more need for long-term care insurance, yet planning financially for this type of coverage can often overwhelm consumers.

But it turns out that this stress might be based on misunderstanding. A new InsuranceQuotes study reveals that the majority of Americans admit they don’t know much about long-term care insurance and are overestimating just how much it will cost them. Piloted by Princeton Survey Research Associates International (PSRAI), the survey interviewed 1,001 adults across the country, with a 3.7 percent margin of error.

Fifty-six percent of those surveyed estimated that the average annual premium per year for a healthy 55-year-old couple was about $7,000 or more. However, according to the American Association for Long-Term Care Insurance, the actual average cost per year is $2,700.

Twenty percent underestimated the annual cost, and 16 percent correctly estimated it as ranging between $2,000 and $3,000 per year.

Fifty-three percent of those surveyed said they are “not too familiar” with long-term care insurance, and 26 percent said they are “not at all familiar.” Only five percent of the interviewees already have long-term care insurance.

Long-term care insurance can be a critically important part of a long-term financial plan, but only if people take the time to explore different options and get educated about what makes sense for them,” said InsuranceQuotes.com editor-in-chief John Egan.

If this study is truly representative of the American majority, then it’s critical that insurance advisors continue to recognize and address consumers’ lack of knowledge. Even more critical: Advisors must communicate the actual costs to their prospects early on, since many people clearly have no understanding of just how affordable this option can be.
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