Last week I was quoted in the Sun Chronicle by a local reporter. The reporter needed a few quotes for an article that she was writing on long-term care. She had read a recent study that showed more people were putting off buying long-term care insurance. Her conclusion was that people were too busy and planning wasn’t at the top of their list.
My quote that made the paper was, “When you should start planning depends on a number of factors,” he said. “The process today is a lot more complicated now than it used to be.” “You definitely want to start early, looking at financial plans,” Zikes said, “but you have to weigh the benefits for yourself.” Yes, that is not a typo, she called me Mitch Zikes throughout the article. 🙂
My wife thought my answer wasn’t all that informative and sounded a bit uneducated. I explained to her that was the first thing that I said before giving the reporter a lengthy answer. It wasn’t that I was misquoted, but all the important details from our conversation were left out of the article. I disagree with most of her conclusion that people don’t have the time to think about planning for sickness and death.
I believe that people don’t buy long-term care insurance as much because it is getting more and more expensive. Only a few companies now offer insurance and the premiums are very high. Premiums can continue to rise even after you buy the coverage. Women on average can pay up to 30% more than men. Years ago, long-term care insurance was very cheap and underwriters underestimated the costs of nursing home coverage. This put many insurance companies out of business paying out claims.
Many financial advisors make their clients sign forms that they decided against buying long-term care insurance. Family members often sue financial advisors when they learn that mom or dad didn’t have long-term insurance. What the family doesn’t realize is that the premiums have become unaffordable. If you read the fine print of these policies, there is also a maximum number of days or years that it will be covered. It is only likely to save on average $125,000-$250,000.
The reporter wrote that I said planning depends on a number of factors when considering long-term care insurance. She left out all the factors from her article. They are cumulative savings, health, expenses/budgets, income, goals, and the most important is attitude towards money. People have different attitudes towards money, and many would rather invest the premiums in the stock market rather than buy the insurance. If you get sick early in life, the long-term insurance is a better choice. If you get sick much later in life, your investments should be able to cover the cost of care.
Another consideration is many long-term insurance polices don’t start until you’re almost permanently disabled for a certain time period. You need to demonstrate you have lost the ability to engage in at least two activities of daily living: eating, bathing, dressing, toileting, walking and continence. Many buyers of long-term care are surprised to learn that recovery from major surgery is not covered. It might be better to have the money accessible in an investment account to pay for these costs.
I always recommend a long-term care quote for clients that are interested in learning more about their options. The conclusion that they usually reach is that they are either rich enough to cover the nursing home care, or too poor to afford it. There are also other strategies to cover nursing home care such as buying life insurance. Heirs can get a nice inheritance if it is not used for nursing home care. These insurance premiums will also not rise later in life unlike long-term care insurance.
I’m glad that I was able to help the reporter reach her deadline, but the article would have been more informative if she added all the details about why less people are buying long-term insurance. I might have overwhelmed her with my lengthy response to her question, when all she wanted me to say was that people should start planning earlier. My quote to her that the financial process is more complicated that it used to be and everyone should weigh the benefits themselves, would have been much better at the end of this article.
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