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The problem with the lack of financial education on long-term care insurance


Alain Castonguay

8 January 2018 14:45

Pierre-Carl Michaud | Photo : Emily Tournevache, UQAM

One of the aspects of ageing that is causing the problem is the lack of financial knowledge in general in the population.

The return of the economics courses at the secondary level is a good news, » said professor of HEC Montréal, Pierre-Carl Michaud. It is unlikely that we are speaking of the risks associated with longevity or disability in high school.

When assessing the financial knowledge of the people, and especially those who are approaching retirement age, we can see that it is not very high. «There are enormous holes. It is known that older people still like to talk less about these topics. It is well known, it is documented, some cognitive decline sets in from the age of 60. We see this when we fill out questionnaires on cognitive abilities «, he says.

For any worker who has contributed during his career to a pension scheme, which has accumulated several hundreds of thousands of dollars of savings, difficult decisions must be made.

Can’t we assume that those people who have had good savings habits have a level of financial literacy higher than the average ? «Yes, but it depends on how they have accumulated their savings,» he said. People may know the basics of savings, but less the tax aspects related to the disbursement.

The knowledge is not the same for all aspects of retirement. Rendered in 65 years, the people really do not know how many years of life they have, the healthy life expectancy and the risks of addiction in end-of-life.

«We have done so in the context of our study, but we are talking about 25 %, 40 % ? If I need it, how much is the product ? How one assesses the cost of an annuity, how does it work ? These are all important issues, » he says.

While the assumption that the financial advisors are now better equipped to inform their clients of the impacts of the solutions offered, Mr. Michaud recalls that insurance products are often complex. «I put myself in the skin of a person 60 years of age who is offered a product for long-term care, with a premium of $ 200 per month. Can she understand if this is the price fair or not ? «

When he is offered an extended warranty for a consumer good, the customer can assess the adequacy of the coverage compared to the actual value of the property. In insurance, it is more complicated, he insists.

«We need to find new ways of communicating information on the risks related to health, so that people can make informed decisions. It is to be hoped more information in the public domain, but also to better equip the advisors. I’m sure they already have the tools. They could have more. «

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