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Understanding LTC Underwriting

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As underwriting requirements toughen in the LTC insurance market, some clients may find themselves unable to get insurance. One way to help your client find alternative means of coverage is to understand what is involved in the underwriting for LTC policies.

Chris Tuttle, a CFP who specializes in LTC insurance, says he sits down with the client first and, in addition to the financial data, makes sure he understands the client’s complete medical picture. Tuttle is most interested in any predisposition to cognitive problems and to mobility problems. He reminds advisors to consider the six ADLs, or activities of daily living: bathing, continence, dressing, eating, toileting, and transferring (the ability to move from a bed to a chair). LTC policy benefit activation can begin at the loss of two or more of these functions of daily life. “What we’re trying to figure out,” he continues, “is whether people have either existing or predispositional problems. One of the first things I do is find out if people have any signs of osteoporosis or brittle bones, or cognitive disorders.”

Next, says Tuttle, he gets a complete list of all medications and prescriptions: types of drugs and dosages. Has the client had surgery? If the client’s been recommended for hip surgery, he suggests a six-month wait after the surgery to apply for LTC insurance. The reason? Underwriting will check doctors’ records, and if there’s a diagnosis of a need for hip surgery and the client hasn’t yet had it, the process will stop and the application will not be accepted. There are aggressive marketing people, he points out, who will advocate putting in an application regardless, but that won’t work. Advisors need to have a complete discussion with the client about medications, doctor relationships, and past or forthcoming surgery, focusing on mobility and cognitive issues. “I’m far less concerned about cancer,” Tuttle says, in discussing LTC insurance than he would be if he were in his “life insurance mode.”

Companies that have a long history of disability insurance underwriting will offer better prospects for certain clients, because they will better understand the health issues involved.–Marlene Y. Satter