4 insurer methods for covering an LTCI client who's almost in

Q. Do conditional premium receipts and coverage during the application period differ by carrier? For example, is the client covered from the date of application or from the date that the application is approved by the carrier?

A. Four different carriers – four different types of coverage!

I recently wrote a couple in their early 50s. Both qualified for a best health rating. When I went to deliver the policy, I called them for several weeks and could not locate them. Finally, the wife called to tell me that, while the policy has going through the underwriting process, her husband had been rushed to the hospital with Guillain–Barré disease. He was now going to need nursing home care.

I breathed a sigh of relief when I realized that his hospital stay began after the underwriters had received the medical records. But I began to wonder what the situation would be depending on the carrier where I submit the policy.

For us agents when we are taking an application, by the time we get to the page with the conditional premium receipt, most of us don’t take the time to explain these provision. By that time, all of the parties involved are ready for the meeting to end.

And when a carrier issues a new policy, how many of us review the back of the booklet to see if these provisions have changed? I don’t. (But I definitely will now.) So when I decided to write a column on this topic, I was really surprised how the coverage differed between the various companies.

The information below is based on individual policies for coverage beginning when the application is submitted (rather than requesting a later effective date). Also, I have tried to (somewhat) summarize the official language.

Company 1

For payment received, this receipt is given and accepted with the express understanding that the insurance applied for will go into effect on the date of the accurately completed application if the applicant is found to be insurable in accordance with the Company’s underwriting standards as of the date of the application, the policy is issued and the initial premium has been received by the Company.

See also: 5 steps to deal with LTCI declines.

Company 2

Start Date – When Temporary Insurance Begins

The temporary insurance provided by this Agreement will begin at 12:00 a.m., where the Applicant(s) live(s), on the latest of these dates:

The date the above sum is received; or

The date the application is signed by the Producer(s) and Applicant(s); or

The date this Agreement is signed by the Producer(s) and Applicant(s).

Benefit – Temporary Insurance Benefit

No matter how much insurance you applied for or how much of an advance payment you made, the following limitations apply to the coverage under this Agreement:

The Maximum Monthly Benefit is LIMITED TO THE LESSER OF $3,000 per month or the amount of Maximum Monthly Benefit for long-term care for which you applied.
The maximum amount of benefits paid under this Agreement is LIMITED TO twelve times the amount of Maximum Monthly

Benefit as specified in Subsection 1, above.

No insurance exists under this Agreement for any health conditions for which there was diagnosis, treatment or consultation within one year prior to the date this Agreement begins. In no event will benefits be paid for the same loss under both this Agreement and any policy issued from the application.

End Date – When Temporary Insurance Ends

If you first qualify for benefits under the policy after the date of the application and before any of items (1)-(5) below occur, you will have coverage pursuant to the terms and conditions of this Agreement. If you do not qualify for benefits before the first of any of items (1)-(5) below occur, this coverage will automatically terminate at 12:01 a.m., where the Applicant(s) live(s).

60 days from the date of this Agreement; or
The date that insurance takes effect under the policy applied for; or
The date a policy, other than as applied for, is offered by a Producer to the Applicant(s); or
The date (Company) mails the premium refund and letter informing the Applicant(s) that the policy applied for will not be issued; or
The date (Company) mails notice of termination of this Agreement to the Applicant(s).

Company 3

Submission of the application and payment of the initial premium does not place any insurance in force. If (Company) determines that the applicant was not entitled to insurance under (Company) underwriting rules and standards for the amount applied for, the insurance will not become effective, and all premiums paid with the application will be refunded to the applicant.

Company 4

This company now has two application forms that must be completed, and its conditional insurance agreement reflects that. The first form asks for general information about the client and also contains the knock-out questions. Form two asks for more specific health information.

1. We will not decline your Application based on any change in your health status that occurs after you signed this Application Part 1 for Individual Long Term Care Insurance, although the (Company) may decline your Application based on information we obtain after the date you signed this Application Part 1 for Long Term Care Insurance that does not indicate a change in your health status; or information we learn as part of our underwriting process so long as that information does not indicate a change in your health status.

2. If we approve your application, we will provide coverage under the policy for which your Application was made, and that policy will be effective as of the date you signed this Application Part 1 …

3. If we decline your Application, we will provide limited coverage for Covered Expenses incurred on or after the date you signed this Application Part 1 … through the date your application is declined. For purposes of this Conditional Insurance Agreement only, your Application shall be deemed declined, if not otherwise declined sooner by us, if we do not approve it within 120 days of the date you signed this Application Part 1 for Individual Long Term Care Insurance, although we reserve the right to approve your Application at a later time. …

… in no event will the total payment of Covered Expenses exceed the lesser of (a) $10,000; or (b) the actual Covered Expenses incurred. This Conditional Insurance Agreement will only pay benefits for Covered Expenses that are incurred within 180 days following the date you signed this Application Part 1 … or the date that your Application is declined, whichever occurs first.

Health Insurance