Editor's Note: This is the first of a two-part installment on long-term care insurance FAQs. Be sure to check out more answers covering topics like carriers and group markets tomorrow!
In the ever changing world of long-term care (LTC), advisors looking to educate clients on LTC solutions frequently have many questions about underwriting, plan design, rates, group plans and other topics, such as when is the optimal time for a client to buy LTC insurance, or whether seminars should be used for prospecting.
Tom Riekse Jr., managing principal of LTCI Partners, a brokerage general agency specializing in LTC insurance, shared insights with
Insurance Business America on some of the most commonly asked questions by advisors when it comes to LTC solutions.
Underwriting
Q: Are there variations by carrier when it comes to underwriting long-term care (LTC) insurance?
A: There are variations from carrier to carrier. For example, height and weight charts are different, or some carriers will cover insulin-dependent diabetics and some will not. There are times when we have a client with multiple health issues that makes it a challenge to find a carrier. However, we are usually still able to find a carrier willing to consider coverage. What we have found is that prescreening clients up front makes a big difference in getting them covered. It is important for advisors to get as much information as they can about their client as prescreening provides the information needed to identify the right carrier.
Q: What do I do if my client is declined?
A: With solid prescreening, we are seeing about 75 percent of our cases are approved. If a carrier does choose to decline coverage, we immediately contact the advisor. If the carrier provides us the reason for declining, we share that information with the advisor. Additionally, once we have that information in hand, we then approach other carriers that we know may be willing to accept this particular client. It’s important for advisors to set expectations for their clients up front, letting them know that the majority of the time clients are approved, but if for some reason they are not, it is possible other carriers will consider the policy. Additionally, underwriting percentages adjust according to the client’s age, so it is always prudent to know what that figure is to properly manage your client’s expectations.
Q: What do carriers require for the underwriting process?
A: Once an application is submitted, a carrier will order medical records and do a phone interview with the client to review their medical history and the prescription drugs being used. Some carriers will send an examiner to the client’s house, particularly if they are older, to personally go over the medical history and take blood and urine samples. It’s important for advisors to let their clients know to expect this direct contact when they enter the underwriting process.
Plan Design
Q: When it comes to the elimination period, what is calendar-day vs. service-day?
A: With calendar-day elimination periods, every day counts, which means 90 days is 90 days. From a client perspective, calendar-day elimination periods are easier to understand and it is also easier for an advisor to explain. If you have a service-day elimination period, you must have received service in order for that day to count. For example, if a client has home health care three days during a week, only those three days would count.
Q: What is the most common plan design?
A: Historically, an LTC plan was $150 a day, or $200 a day, with lifetime benefits and a five percent compound cost of living adjustment (COLA). Today, newer LTC plans are typically $4,500 to $6,000 a month for three years, with a three percent COLA and 90-day elimination period.
Q: Does anyone still offer the limited payment, 10-pay option?
A: There are some carriers that still offer a 10-pay option. We usually see the 10-pay option in the corporate marketplace as a benefit for an executive during their high-income earning years, particularly if they are the business owner and they can deduct it from their taxes.
Q: What is the benefit of shared care?
A: For couples, shared care provides a bridge to each other’s benefits. Each person has their own policy, but if one person uses up all their benefits they can tap into their partner’s policy. Many policies today include this option. It is important to note that to add shared care to a plan a client should expect to pay from 12 to 25 percent more in premiums.
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