Insurance companies have been targeting long term care insurance to specific individuals over the past 30 years. Let’s face it; this kind of insurance is not attractive to everyone. Insurers know that and industry experts say that from the insurance company perspective, this is a sale based on fear or risk.

Some of these targeting strategies, especially those practiced in the 1980’s and early 1990’s, are now coming under scrutiny. Congress has begun an investigation into how these policies were sold to see if insurers might have strong-armed consumers into purchasing insurance they may not have needed. We asked Bob Scott, a partner with the Advocate Law Group. He explains how these policies may have been sold.

According to Scott, “One target market is the older person himself who may be concerned that he may deplete his assets and have to go into a nursing home. He might think, ‘You know, I won’t be able to stay at home. I won’t be able to take care of myself. I may lose everything I possibly ever had. What’ll happen to me? There’s nobody to take care of me.’

The second target market is the family member of an older person who says, ‘My God, mom or dad or aunt Millie is getting on in years. I’m the family member responsible for his or her care and that will really tie me up. I won’t be able to work. I won’t be able to do this. I don’t know what’s going to happen in the event that he’s going to need some care and I really don’t want to put him in a nursing home. I don’t want him to have to rely on the mercies of the Social Security Medicaid System down the road, so let’s just buy some insurance to protect against that.’”

Buying long term care insurance for children and grandchildren

Another opportunity insurer’s saw for long term care insurance was quite the opposite from what Scott talked about above – purchasing long term care insurance for the younger generation. But why? Scott says, “The insurance company would love people to buy this product when they’re very young as the likelihood of something going wrong when you’re very young is very, very low and therefore the product is priced lower. However, the longer you put in the money, the more assets you’ll build up and make the investments spread out.

It’s wonderful to sell a product to someone that’s young because they may get tired of paying for it and let it lapse, so all they have to do is collect the premium and never have to pay out any claims. It’s a great deal for an insurance company. It’s also a great deal for the agent because he or she gets a rather substantial first year commission and ongoing commissions for a while on these long term care policies. That’s what motivates insurance agents to sell the product and commissions aren’t cheap!”