Why Long-Term Care Insurance Matters to CUs

Plans allow CUs to help members, employees protect their financial assets.

October 15, 2012

Most of us know how important it is to insure our cars, homes, and other possessions against catastrophic damage.

But when it comes to insuring our hard-earned savings, investments, and property against the catastrophic expense of a long-term medical condition, we often don’t see the need as clearly—until it’s too late.

Offering members and employees information and access to long-term care (LTC) insurance policies ties into a credit union’s role in helping people build and protect their financial assets.

LTC insurance marketing is intensifying as more baby boomers reach retirement age. By associating your trusted credit union brand with a reliable LTC insurance provider, you help members navigate the many protection options.

You also  create another potential bond that strengthens a member’s ties to your credit union.

The Increasing Cost of Long-Term Care Services

According to the MetLife Mature Market Institute’s 2011 survey on long-term care costs and services, the 2011 national average rates have increased over 2010, outpacing the national medical inflation rate.

Long-term assistance with the basics of daily life, such as eating, bathing, and getting around, can drain a carefully built nest egg very quickly.

LTC Provider 2011 Average Rate 2011 Average Annual Cost Increase Over 2010
Private nursing home $239 per day $87,235 4.4%
Assisted living facility $3,477 per month $41,724 5.6%
Adult day services $70 per day $25,550 4.5%

Source: “Market Survey of Long-Term Care Costs,” MetLife Mature Market Institute, October 2011.

Common misconceptions

LTC insurance generally covers assistance people need when they lose the ability to perform three or more “activities of daily living” for an expected period of at least 90 days. The activities are essential daily functions such as dressing, eating, and bathing.

The cost for these services is outpacing the medical inflation rate, according to the MetLife Mature Market Institute (“The increasing cost of long-term care services”).

A common mistake is believing Medicare pays for these services. It doesn’t.

Medicaid does, but only after you’ve exhausted most personal assets. Another mistake is associating LTC insurance solely with nursing home care.

But properly designed policies offer members more choices and control in where and how they receive their care.

In 2011, about half of all new individual LTC insurance claims were for home services, while nursing home care and assisted living care accounted for about one-third and one-fifth of new claims, respectively, according to the American Association for Long-Term Care Insurance.

A key risk for members is delaying the decision to buy LTC insurance until age and poor health make them ineligible or unable to afford the premiums.

Another important consideration is a family’s ability to withstand the expense, time commitment, and physical and mental stress of providing long-term care.

A licensed LTC representative can help members understand when and what type of LTC insurance is best for their families.

Protect executives’ supplemental retirement benefits

In addition to marketing LTC insurance to your most eligible members, these products can help you protect top executives and board members.

Credit union executives and board members often fall into a prime category of consumers who need LTC insurance: middle- to retirement-age professionals with substantial retirement accounts to protect.

To bolster retirement benefit plans for executives, many credit unions have turned to supplemental benefits such as 457(f) and 457(b) accounts. LTC insurance can protect these nest eggs.

And there are advantages for the credit union and the executive if the credit union purchases the policy.

If the employer purchases a qualifying policy on behalf of an executive, the benefit isn’t treated as taxable income for the executive.

Credit unions can control the cost of this benefit by adjusting the daily benefit amount, the length and comprehensiveness of coverage, and other variables.

These products can vary significantly among providers, so work with an experienced broker who knows your credit union.

JANE CHESBRO is vice president of specialty distribution strategy and operations for CUNA Mutual Group. Contact her at 800-356-2644, ext. 6658475.

CUNA Mutual Group is a marketing name for CUNA Mutual Holding Company, its affiliates and subsidiaries, including licensed insurance agencies that offer long term care insurance to credit union members through the program described in these materials. Long-term care insurance policies are issued by multiple independent licensed insurance carriers. The insurance offered is not a deposit, and is not federally insured, sold or guaranteed by credit unions. Your credit union enables this insurance program to be offered and is entitled to compensation from CUNA Mutual Group.