`Senior-Friendly LTC Planning Includes Addressing The Underwriting Issues

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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.

Next, ask your client to get copies of their medical records, so you can make more informed inquiries to the underwriting departments of other companies.

If the person is uninsurable now, determine if insurance may be revisited in the future.

Also decide whether to investigate other payment sources that do not involve medical underwriting.

Here are six questions you should ask before you have a client meeting:

–Do you have any health problems?

–What medications are you on (and for what)?

–Have you been advised to have any tests, medical procedures or surgery?

–Do you drive?

–Do you use a cane or walker?

–What is your height and weight (to enable me to run accurate numbers)?

As for recommended coverages, that will naturally depend on need. But, as a reminder, here are five top options that seniors have if they plan to private-pay for their care: LTC insurance (stand-alone, combo, or LTC rider on a life or annuity policy); reverse mortgage (if the client plans to stay in the home); current income and life savings; life settlement (if age 60 and up); and viatical settlement (if terminally ill).

A last suggestion: When your client does eventually need LTC, help him or her with the financial transactions or refer the client to someone who can. These are helpful things to do, and they establish you as a professional who goes the distance.

, CSA, is president of The Long Term Care Learning Institute, Plymouth, Mass. Her e-mail is md@marileedriscoll.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, April 29, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.