New Long-Term Care Policies Gain Traction

BOSTON (TheStreet) -- With life spans and health care costs alike on the rise and America graying with the first wave of retiring baby boomers, the selling points for long-term care insurance might seem simple enough.

The product, however, has faltered in recent years, failing to build a base of dedicated consumers. As a result, in recent months major insurance companies have been either dropping products or raising annual premiums by as much as 40%.

But while some are waving the white flag, other companies are finding new variations of the policies that may finally be resonating with customers.

The reluctance of so many to forgo this coverage is in part psychological -- the insurance industry has long recognized that its target audience, and the financial advisers serving them, are reluctant to dwell on mortality. That traditional policies are expensive and often have a "use it or lose it" approach to payouts doesn't help.

A recent survey by Lincoln Financial Group illustrates the reluctance of the targeted marketplace. The study found that 65% of Americans believe it is important to plan for the possibility of needing long-term care, but only 44% have actually made any effort to protect themselves.

Though most said they understand the financial risks associated with long-term care, they are nevertheless expecting savings, investments and entitlement programs to pay for any future needs: 75% said they would use savings; 56% said they would be willing to sell their homes; 41% said they would be willing to refinance their homes; 21% said they would be willing to go into debt; and 18% said they would be willing to declare bankruptcy to qualify for government aid.

Stand-alone long-term care insurance ranked seventh as a likely source of funding.

A survey late last year by New York Life found similar results among baby boomers.

Four in 10 said their parents' long-term care experiences made them more inclined to buy coverage, but just 9% of boomers have actually bought a policy. Only 27% of boomers could estimate the annual cost of nursing-home care, and a majority assumed they will be able to use government funding to pay their long-term care bills. "Although boomers face a seven in 10 chance they may need long-term care at some point in life, 47% said they would hold off on purchasing it because they feel it is a product they will never need," the survey said.