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Your uninsurable long-term care insurance client

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If your client was declined for long-term care insurance (LTCI), what can or should you do next? 

Keep in mind that what you do in these situations can speak volumes about your professionalism and thoroughness as you present yourself as a long-term care consultant rather than a salesperson.

It’s imperative to know from a planning standpoint what options might still be available for your client and which ones won’t work. 

First of all, are they uninsurable with all long-term care insurance companies?

Remember that underwriting standards vary from one company to the next so even though your client was declined by one carrier, the client might have a chance at another one.

For instance, if your client had a stroke a number of years ago, some carriers will not make an offer to that client under any circumstances no matter how long ago the stroke event took place. Others may actually still make an offer after an acceptable period of stability.

So make sure you know what the lay of the land is within the industry.

Ideally, uncovering these kinds of deal breaker medical histories is the kind of informal field underwriting that you should inquire about before an application ever gets submitted so as to reduce or eliminate the possibility of an unnecessary decline and the ensuing application fatigue for your client…..and you.

Some medical conditions will be permanently uninsurable, but others with enough recovery and stability time might be considered in the future. You should if possible provide your client an estimate of the timeframe when they might be able to revisit LTCI in the future so they can include it in their plans. Furthermore, insurance companies from time to time change their underwriting standards and in some cases improve on the offers they might be able to make from what their standards were previously.

If your client is still uninsurable with just about any insurance company, what are some of the next possible steps?

For awhile, it looked as if a component of the Patient Protection and Affordable Care Act of 2010 (PPACA), the Community Living Assistance and Support Services (CLASS) program, would create an option for uninsurable individuals. The U.S. Department of Health and Human Services has now given up on implementing the program, and that means uninsurable and hard-to-insure individuals will no longer be able to use it as a fallback.

Most of the hybrid LTC insurance products that are life-insurance-based or asset-based combinations have their own knock-out underwriting questions, so these products probably aren’t available either for most uninsurable clients. But you might want to double check to be sure.

If your client is working and starts a new job with an employer that offers LTC insurance benefits on a guaranteed-issue basis or with limited underwriting, your client may be able to obtain coverage this way. This is usually an offer provided to a new employee for a very limited timeframe.

So it is of the utmost importance for them to not miss the enrollment cutoff as typically if one tries to enroll after the deadline, underwriting questions would then be required and your client is back in the same uninsurable boat. On rare occasions an employer’s LTC benefits might allow an open enrollment for existing employees on a guaranteed-issue basis, so the recommendation here is to make sure your client reads internal employee announcements and communications faithfully.

It’s also very important to remember that even if your client was declined for coverage when they applied for a fully underwritten non-group individual policy, some employer-based long-term care insurance policies are offered with limited underwriting based typically on fewer questions. So a condition that resulted in a declination previously might actually have a window for approval under these circumstances.

Some annuity and life insurance carriers extend a limited number of LTC services to policyholders that might include for instance phone and/or web based LTC claim and planning assistance, a listing of community resources as well as possible LTC provider discounts.

Similarly, with some LTC insurance policies, when one spouse or partner is declined for coverage but the other is approved and puts their policy in force, these kinds of services described above if included on their policy can be extended to the uninsurable spouse/partner and possibly to other extended family members like parents, siblings, and children. It’s important to distinguish these services from traditional paid LTC benefits.

When devising a retirement plan, it might make sense for your client who self-insures some or all of their LTC costs to earmark a targeted amount of their assets perhaps in a separate investment portfolio dedicated for this purpose.

In this situation, it might also be a good idea to separately address the risk profile of that portfolio depending on a projected hypothetical time frame assets could be withdrawn to pay for LTC expenses. Most out-of-pocket LTC costs like home health aides, home nursing visits, assisted living room charges, and nursing home fees can be included on your client’s federal tax return for a possible below-the-line tax deduction. This could at least defray some of the cost impact.

And don’t forget if your client and/or spouse does have an existing qualifying LTC policy, the cost of the policy premiums up to the age-based cap may be able to be added to these cumulative medical costs for this tax deduction as well. Be sure to recommend that your client consult with their tax advisor for more advice on these matters.

Lastly and very importantly, it may be very useful for your uninsurable client to meet with an attorney well versed and specializing in elder law and preferably a member of the National Academy of Elder Law Attorneys, Vienna, Va.

There are various estate and legal planning strategies that can help address paying for long-term care and how to help protect and allocate your client and their spouse’s assets. These might include giving away assets, utilizing pooled trusts, re-titling other assets in a spouse’s name, etc. and becoming more aware of community resources that might be available to your client.

Medicaid, the federal/state partnership may be available for your client to pay for certain cost though typically only after a lengthy and sometimes costly spend down process for the client and potentially their spouse. Additionally, Medicaid covers nursing home care only in most states and does not pay for home care or assisted living except in limited circumstances.

In summary, if your client is uninsurable the value you can provide to them doesn’t end there it may just begin and by providing a thorough service, your reward may well be referrals to other prospective LTC clients.