Long-term care insurance can be hedge against increased longevity and rising medical costs that can put a financial strain on individuals and their loved ones. But from perceived cost issues to a natural reluctance to picture oneself in frail or declining health, many people are reluctant to address the need.
This is ironic because according to surveys of millionaire wealth levels by Spectrem Group, health issues ranked just below maintaining one’s financial position and having enough money set aside for retirement on their list of personal concerns. For example, 66% of mass affluent households with a net worth between $100,000 and $1 million net worth (not including primary residence) are most concerned about the health of their spouse, followed closely by their own health (63%) and a family health catastrophe (57%). Responses were similar in higher wealth households.
And yet only 20% of mass affluent investors currently own long-term care insurance, and 61% say they are unlikely to purchase it in the next two years. Costs, especially in the wake of the economic downturn, are most likely a factor in this decision.
It is not just the elderly who may be in need of long-term care. Forbes estimates that while nearly two-thirds of people over age 65 will need some type of care, either in a facility or at home, 40% percent of the people receiving long-term care services are actually between the ages of 18 and 64. Even more people in this age bracket are affected by long-term care because they may be bearing the financial burden of supporting an elderly family member (nearly half of millionaire households surveyed by Spectrem rank this as a major concern).
This may be why more households in higher wealth levels invest in long-term care insurance. Just under a third of investors with a net worth between $1 million and $4.9 million have it, with older investors ages 56 and up as well as those who are dependent on a financial advisor to make all of their financial decisions are most likely to carry it. But 71% overall said they are unlikely to purchase it in the next 24 months.
In ultra high net worth households (between $5 and $25 million, not including primary residence), 30% own long-term care insurance, with older households slightly more likely to carry it. Only 8% of investors at the wealth level said they plan to purchase it with the next two years.
The wealth level with the most participation in long-term health care insurance is the one that could self-fund a catastrophic health event, the $25 million investor (36%).