`Senior-Friendly LTC Planning Includes Addressing The Underwriting Issues
Choosing the right long term care insurance carrier can be critical to getting LTC insurance placed.
The senior prospect who is planning to use a LTC policy to pay for care usually offers underwriting challenges that werent present earlier in his or her lifetime. Many seniors who denied the need to plan for LTC seek out this insurance only after theyve had a health scare.
The good news is such prospects are motivated to buy. The bad news is, you may not be able to help them.
Or can you? Depending on what their “problem” is, as one underwriting manager put it, “one companys decline is anothers standard.”
Lets take a look at the leading causes of underwriting declinations (see chart). This information was compiled from the experience of 19 insurers.
It is true that underwriters treatment of cancer, high blood pressure, and depression is relatively uniform across carriers. However, agents should keep in mind that underwriting for some disorders (such as obesity, diabetes, rheumatoid arthritis, stroke and osteoporosis) can vary dramatically between carriers.
When prospects with obesity or diabetes apply for life insurance, they are normally offered a rated policy. But, unlike life insurers, most LTC insurers do not offer rated policies. In the LTC world, the typical outcome for a substandard risk is either a modified offer or a decline. (A modified offer takes two forms: a shorter benefit period than applied for, or a longer elimination or waiting period.)
Its important to note that, if health improves, underwriting decisions can often be revisited. When given a modified offer, or if an application is declined, be sure to ask the underwriter if and when the decision can be revisited.
Meanwhile, encourage the client who received a modified offer to take the policy, thereby locking in protection while you continue to pursue coverage elsewhere.
A small number of LTC carriers offer rated policies. These ratings are not as sophisticated as life insurance substandard rates, which are expressed in a number of different tables. The few LTC insurers that offer rated policies typically have only two available ratings, such as 125% or 150%.
Due to the additional underwriting flexibility offered by ratings, however, a LTC agent may want to place medically questionable cases with such carriers.
Of course, ratings can be a double-edged sword. A company that doesnt offer ratings and must make a yes/no decision on every applicant may be motivated to take at standard rates a proposed insured that a company using ratings would also approve–but with a rating.
What can an agent do when an application is declined? First, request, in writing, an explanation of why the underwriting decision was made.