The current ups and downs in the economy and the long-term care insurance (LTCI) market are, sadly, getting in the way of what could be interesting efforts at truly long-term long-term care (LTC) planning.
When we’re buying insurance that will pay benefits in old age, the earlier we get it, the better.
Premium payments go into a general account, the general account assets go into high-quality bonds and other investments, and investment income rolls into the general account, steadily turning mounds of cash into mountains through the miracle of compound growth.
Genworth Financial Inc., Richmond, Va. (NYSE:GNW), found recently when it surveyed 1,073 U.S. adults ages 25 and older, with incomes of $50,000 and over, that 57% said the best time to buy LTCI is when consumers are ages 45 to 64.
But 7% of the survey participants said the best time to buy LTCI is when consumers are ages 18 to 34, and, really, that’s obviously right. Some unfortunate 30-year-olds suffer catastrophic illnesses or injuries and do end up needing LTC, and, if they didn't, any properly underwritten LTCI sold to them ought to be cheap because, under normal circumstances, they are so far from needing LTC.
Some have suggested that one simple, affordable way to cope with retirement income financing would be to arrange to buy an equity-indexed annuity for every new baby.
Perhaps a similar strategy would work for preparing for LTC needs.
Congress tried to create a universal voluntary LTC program and failed because the result, the CLASS program, could operate only in a government-run universe in which federal fairy godmothers make the actuarial stuff work.
Perhaps, in a more cheerful, more confident age, when the problems of today and the struggles of the CLASS program designers are behind us, private LTC insurers could use great commercials and low prices to persuade “young invincibles” in their 20s to buy LTCI through conventionally underwritten, conventionally priced commercial LTCI programs that would be affordable because the insureds would be so young and, in most cases, so far from needing LTC.
Maybe insurers could perform that feat by packaging LTCI together with health insurance.
The idea of selling anything more expensive than state-mandated auto insurance to the young invincibles may seem to fanciful today, but there’s another, potentially more approachable youth market in need of LTCI: The parents of many of the babies born this year.
The National Center for Health Statistics has estimated in a report based on preliminary U.S. birth data for 2010 that women had 4 million babies in this country last year, down 3% from the 2009 birth total.
But the fertility rate for women ages 40 to 44 increased slightly, to 10.2 babies per 1,000 women from 10 babies per 1,000 women in that age group in 2009.
In a perfect world, parents would buy LTCI for every one of those new babies. If the product could exclude coverage for LTC for developmental problems, and just cover the kinds of LTC that people could end up needing as adults, we could probably buy bare-bones private LTCI for every baby in the country for a few thousand dollars each.
In this world, getting people to think that far ahead, and developing the financial infrastructure necessary to support such long-range planning, might not be possible, but planning for the babies' parents' LTC needs might be a little easier.
The mothers in the 40-44 age group who gave birth last year have just produced the people who will be stuck in the sandwich generation starting in the 2040s.
The babies will grow up to be adults who are trying to have and rear their own children as their parents are entering their 70s and may also start to need help.
Many of those parents are buying life insurance, because they know they have to have life insurance.
In some cases, if those parents have excellent life insurance agents, they may be buying individual disability insurance, because it’s hard to imagine how one can bring up a child without a well-protected income.
How many of those parents even hear the suggestion that a small investment in affordable LTCI today might give their babies a higher quality of life in the 2040s?
Parents invest in music lessons, ballet lessons, even horseback riding lessons for young children in the hope of getting the children off to good starts in their careers. Why not invest in a product that could help give the children more time to focus their attention on their careers at a time when they may actually have careers?