So, how do you get the most from your Long Term Care Insurance contract?
You did all of the right things: you overcame your planning deficit disorder (PDD) and purchased a long-term care contract years ago while premiums were much less expensive. You also did so right before medical issues started popping up in your mid 60’s. Yes, having a long-term care insurance contract is a wonderful thing. It will provide you with the dollars necessary to pay for some or all of the expenses associated with your care and in the process allow you to maintain your independence and peace of mind knowing that you’ll never be a burden to your kids or friends.
However there are still a few things you should know and do NOW, well before needing to file a claim from your long-term care contract. At that time you may not be in the best mental or physical position to take care of this yourself. So, the first thing is to locate your contract and familiarize yourself with its terms. Make sure you know what your benefits are and at what point they will first be paid. Most people just aren’t familiar with the specifics relating to the various clauses and definitions of their LTC insurance contracts, for example:
The Waiting Period: When the benefits are first eligible to be paid out, how many actual days of service are required to satisfy the contracts waiting period? Some contracts only count an individual days of service as 1 day, while others count even one day a week as seven days of service.
Duration: How long will your contracts benefits last?
Inflation Options: Make certain you’re aware of the specific costs for the various types of inflation options available – Simple, Compound, Cost of Living, 5% or 3%.
Eligibility: The definitions that must first be met before benefits are paid. What are the stated activities of daily living, that one must not be able to do? In most contracts an individual must be unable to do 2 of the 5 activities of daily living before they could collect benefits. However not all contacts have the same criteria. Just be aware of your particular situation so you avoid any unpleasant surprises later.
Type of Care Provider: Professional or Informal. Must the provider be a licensed individual from a licensed Home Care agency (professional) or can a non-licensed individual (informal) perform the care. Is it a “reimbursement contract” where you need bills in order to be paid? Or is it an “indemnity contract” where you get paid the full daily benefit amount without needing to present any bills.
Many times state rules have changed and the newer generation of contracts have changed their definitions in order become less restrictive and more competitive; however, many of the older contracts have not. For example earlier contracts from the 80’s didn’t include payment for assisted living facilities simply because they didn’t exist 30 years ago. They will only pay for care in your home or at a skilled nursing facility. However, current contracts will pay for care in a more comprehensive setting, either in your home, at an assisted living facility, or at a skilled nursing facility.
Although the insurance industry paid out over $6.5 billion dollars to 264,000 individuals during 2012, there’s never been a default by any insurer in New York. That’s not to say there haven’t been any problems in the industry. Most notable has been the large number of insurers requesting and having been granted a double-digit rate increase by the various state insurance departments. The reason is that the insurance industry miscalculated what the premiums should have been and instead, charged their early customers far less than they actually should have. This information is now based on historical data which wasn’t available 25+ years ago. All of this has resulted in a difficult time for some early insurers that participated in this market place. Some of those insurance company cost-cutting measures have resulted in reduced staffing of their claims department. Or, in some cases the claims department has actually been outsourced to a third party provider that in some cases has not had the customer’s best interest of the insured in mind when paying a claim.
These conditions combined with today’s historic low interest environment has even further exacerbated the relationship between insured individuals attempting to get their claim paid and those insurance companies that are unable or sometimes unwilling to pay a claim as quickly as they should. The point is that it’s important to know what you’re up against before you actually have to come up against it.
My suggestion is that you contact the agent or broker that you purchased your contract from and ask him/her to discuss their experiences with their other clients filing a claim with your insurer. Ask your broker about the company’s claim paying experience and see what percentage of claims hasn’t been paid. The percentage should be well under 2%. Find out if your agent/broker actually has any claims experience — have they ever filed a claim for another client? Have there been any complaints made to the better business bureau about this company. This can easily be checked through your various city and state insurance departments.
A good broker will always maintain a working relationship with their clients and never is that relationship more important to a client than at claim time. This is when the professional can show his/her worth by assisting you through any difficulty you may have in dealing with an uncooperative or administratively hampered claims department. An experienced professional that knows their way around the claims process can be a very effective and invaluable partner when it comes time to get a long-term care claim paid. Don’t wait until you actually have a claim to find out what you should know today. Reintroduce yourself to your broker and be as prepared as you can be. If he or she is not able to service you properly, then develop a new relationship with someone who will be there to assist you when needed. Get as much help as you can get when it comes to getting paid. Remember the squeakiest wheel gets the oil.
A long-term care contract from a financially strong company will allow a family member or friend to care about you and not for you. It’s up to you to learn to manage your expectations now while you are able to participate in the process, and know what to expect. Make sure you select someone to advocate for you when dealing with the long-term care insurance company and then give them the written authority to do so. That’s the time for a lifelong trusted friend to be asked to step up and do what needs to be done in the event of a friend becoming infirm.