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Seven Points to Consider When Evaluating a Client’s LTC Coverage

Don’t wait until they actually have a claim to find out what they should know today.

If you helped your clients purchase a long-term care (LTC) policy years ago while they were younger, healthier and premiums were much less expensive, and you helped them maintain their coverage through several rate increases, congratulations. Having a LTC insurance contract is a wonderful thing. It will provide them with the dollars necessary to pay for some or all of the expenses associated with their care. My 25 years of experience in providing clients with LTC coverage and paying their claims, as well as a 2012 American Health Insurance Professional study, indicate that an individual with private LTC insurance coverage often receives a 60-90% increase in the amount of paid care than an individual without private insurance receives. Second, because their coverage likely provides for a care coordinator, it will allow them to maintain their independence and peace of mind knowing that they’ll never be a burden to their kids, other family members or friends. The care coordinator allows family members and or friends to care about your client and not ­for your client.

Seven Points to Consider

Clients should locate their contract and familiarize themselves with its terms and conditions. Make sure they know what their benefits are and consider whether they need to be increased or decreased. Then, make certain they and their kids are aware of the following seven points:

The waiting period: When the benefits are first eligible to be paid out, how many actual days of service must the client pay to satisfy the contracts waiting period? Some contracts only count an individual day of service as one day, while others count one day a week as a week of service. What will or won’t Medicare pay for?

Duration: How long will the contracts benefits last? Many clients may still have a lifetime benefit, and if your client experiences a premium increase, it may make sense to reduce the coverage to a more affordable 5- or 6-year plan, but not less than that.

Inflation options: Make certain your clients are aware of the costs for the various types of inflation options – for example, simple, compound and cost of living. Most important, have them evaluate whether it still makes sense to maintain the extremely expensive inflation option they may have purchased 15 or 20+ years ago when they were in their 50s or 60s.                       

Daily benefit:  It may make sense for clients to reduce their daily benefit if their benefit has grown beyond the average cost of care in the geographic area your client intends to retire in.

Eligibility:  What are the stated activities of daily living (ADLs) that your client must not be able to do to be eligible for coverage? In most contracts, an individual must be unable to do two of the five ADLs before they could collect benefits. However not all contacts have the same criteria. Be aware of the particulars in your clients’ situations to make certain that they avoid any unpleasant surprises later. It’s important to be aware of which ADLs are included in the two out of five. For example, many of the earlier contracts excluded bathing because bathing is one of the most difficult things to do.

Type of care provider:  Must the provider be a licensed individual from a licensed home care agency (professional), or can a non-licensed individual, a family member or friend, (informal) perform the care. Is it a “reimbursement contract” in which they need bills to be paid? Or is it an “indemnity contract,” in which they get paid the full daily benefit amount without needing to present any bills. 

State tax credits: It’s been my experience that many insured’s as well as their accountants have neglected to take advantage of the various state tax credits or corporate deductions created as an incentive to encourage consumers, be they business owners or executives to purchase LTC coverage. New York has a 20% dollar-for-dollar tax credit against a policy holders New York State income taxes.  


Newer policies have changed their definitions to become less restrictive and more competitive, however, many of the older contracts haven’t. For example, contracts from the 80s didn’t include payment for assisted living facilities simply because they didn’t exist 30 years ago. In addition to a traditional stand alone LTC insurance policy, today a client can combine LTC coverage with a life insurance policy called a “combination” or “linked policy.” Make clients aware of this option during any review, as such a plan allows an individual to withdraw proceeds from the death benefit on a tax free basis and assures that if the Insured never requires LTC, their beneficiaries will receive the full death benefit at their passing.

It should also be noted, according to the U.S. Dept of Health & Human Services, the age at which consumers have purchased LTC coverage has declined from age 68 in the 1990s to age 59 as of 2010.

Although the insurance industry has paid out over $9 billion dollars in claims annually during 2014, (the last year info was available) to well over a million individuals over the last 25 years with a claim’s paid rate of well over 98%, things have changed. Because the actuaries for the various insurers miscalculated what the premiums should have been, and despite the previous premium increases, this misjudgment has resulted in a difficult time for some early entrant insurers in the LTC marketplace. Some of those insurance company cost-cutting measures have resulted in reduced staffing of their claims department.

These conditions, combined with today’s historic low interest environment, have further exacerbated the relationship between insured individuals attempting to get their claims paid and several financially afflicted insurance companies that are unable or sometimes unwilling to pay a claim as quickly as they should. It’s important for your clients to know what they’re up against before they actually have to come up against it.   

You should be able to tell your clients whether there are any problems with their particular insurer, and if so, how to best get a claim through an uncooperative or administratively hampered claims department. Either a persistent friend or an experienced professional can be a very effective and invaluable partner at claims time, so suggest they select someone they can rely on to advocate for them in case the need arises. Don’t wait until they actually have a claim to find out what they should know today. Reintroduce yourself to your clients to help them be as prepared as they can. Make sure they have properly authorized the individual selected to advocate for them at claim time, as they may not be in the best position to do so themselves. Plan ahead and remember the squeakiest wheel gets the oil. Remind clients that If all else fails, threatening to or filing a complaint with the State Insurance Department usually gets things moving.

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