Why people don’t buy long-term-care insurance

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When it comes to long-term care, dual contribution mount out. First, an estimated 70% of people will need such care, that will be costly. And second, many of them bar to buy word to cover it.

The doubt is, why?

Part of a explanation, no doubt, is that long-term-care word is expensive. Some people also competence be assuming, incorrectly, that they will validate for supervision assistance to assistance them compensate for nursing-home care. Rules are in place to invalidate many who won’t accommodate a despotic conditions required.

But a investigate suggests that a deeper problem competence be that consumers are looking during long-term-care policies in a wrong way; and, usually as important, that insurers competence be blank opportunities to tweak their products in ways that competence residence and overcome some of a base causes of those misunderstandings.

For instance, in a investigate we conducted recently, we found that many people courtesy long-term-care word as carrying no genuine value if eventually a payouts aren’t needed. That is, instead of looking during long-term-care word essentially as financial protection, many people consider of it as an investment — and a bad one during that. They see a premiums as income that would be squandered if a process owners eventually doesn’t need long-term care. They don’t consider about a inauspicious waste a process could assistance them avoid.

Moreover, a investigate suggests that some consumers’ rejecting of long-term-care word is formed on what psychologists call “narrow framing,” or people’s bent to bar pivotal factors when creation decisions. Narrow framing has been found to be common when people face difficult decisions — and selling for long-term-care word is positively one of those instances.

In a study, we looked during a subset of 1,900 respondents in a Health and Retirement Study, a nationally deputy consult of Americans over a age of 50. Based on their answers, we personal respondents according to how expected they were to be slight framers. We afterwards looked during either slight framers had opposite amounts of long-term-care insurance.

We found that slight framers were most reduction expected to have long-term-care insurance, compared with a normal person. Specifically, slight framers were usually half as expected to buy such word — a opening that persists regardless of respondents’ health status, risk tolerance, marital standing and wealth.

While a commentary advise that long-term-care-insurance providers are adult opposite some entrenched consumer attitudes, we trust that insurers could improved position their products in a marketplace by providing some-more information to consumers per a high luck of wanting care, and a high costs of such care.

Insurers also could concentration some-more selling toward adult children whose relatives will expected need nursing-home care, given a children are mostly wakeful of (and endangered about) a costs and advantages that word can provide.

Another proceed would be for insurers to stress policies that yield advantages in further to word for long-term-care costs. For example, some-more policies could embody retirement income payouts or life word — as some insurers already do offer.

While adding such facilities does make long-term-care policies some-more expensive, they assistance assuage concerns about policies being meaningless if long-term caring were not needed. In fact, many life-insurance companies already take this hook by including a assets member that pays out should a process owners endure a policy.

Dr. Mitchell is a highbrow of word and risk management, as good as business economics and open process during a Wharton School of a University of Pennsylvania. Dr. Gottlieb is an partner highbrow of word and risk management, as good as business economics and open process during Wharton. They can be reached during reports@wsj.com.

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