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LTC Insurance

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Why Do People Buy Long Term Care Insurance?
Special Partnership Between California and Insurance Companies
Uninsurable Conditions
Elements of a Long Term Care Policy

Quick, what do you think of when you think of Long Term Care Insurance? Chances are you thought of Nursing Home Insurance. Well you better think again. This ain’t your father’s insurance!! The problem is that most of us still think of Long Term Care Insurance (LTCI) as very restrictive, very expensive, and very confusing because the earlier policies were in fact, all those things.

Like any insurance LTCI is a form of risk management. It transfers the risk of paying for care for long periods of time, 90 days or more, from the client to the insurance company. The question is, what are your chances of needing this insurance? If you have to pay for care, where will the money come from? What have you done to prepare for this event? While it’s true that you probably will never need LTCI, what would the consequences be to you and your family if you do need that care?

Like any other insurance, you must assess the risk of needing it. In California, we probably don’t need insurance on our homes for hurricanes, but we do for earthquakes. The probability of an event happening determines our decision to buy insurance or not. If we think an event won’t happen to us, we will self insure. Such is the case with LTCI. But we have a psychological problem that we don’t with most other insurances…DENIAL! We simply think it can’t happen to us or someone we care about. LTCI just isn’t for me! Well here are some statistics that may make you rethink that position. The chances of these events occurring are:

House Fire - Major 1:1,200
Auto Accident - Car Totaled 1:240
LTC - 2.5 Years in Nursing Home 1:3

Why do we buy homeowner’s insurance and car insurance, but not LTCI, when the chances of having a stay in a Long Term Care facility are 1 in 3?

It’s true that all insurance is a bet between you and the insurance company that an event will or won’t happen. You bet it will, but hope it won’t, and they bet that it won’t and they keep the premiums. Some people would say that the premiums are “wasted” if they never collect on the policy. But others think that is prudent risk management and a cost of doing business. How you decide what to do regarding buying insurance depends on how you regard the chances of an event occurring, and how much exposure you want to the risk of that event. It is a very personal decision to make.

The other thing that determines if you buy LTCI is the downside risk of what you would pay to self insure. The average national annual cost of a private room in a nursing home in 2014 was $87,600 or $240/day according to Genworth Cost of Care Survey. Semi-private room was $212/day. In San Jose it was $261/day. A private 1 bedroom in ALF national annual cost is $42,600. And don’t forget extras like telephone, cable TV, beautician, laundry, etc. Most people could not pay the cost of this kind of care for long periods of time. You could wind up using everything that you have accumulated over your life (savings, retirement, kids college, even your house) to pay for this care. And let’s not forget long enduring diseases such as Alzheimer’s, or accidents that could last for as much as 20 years! Here are two surveys that relate to this topic.

Insurance is one way of leveraging this kind of risk so that you will not have to invade the funds and assets that you have worked for so hard all your life. This allows you to leave a legacy and security for your family and loved ones. It protects their future. So LTCI is sold not to individuals, but to families. LTCI is not a replacement for family care, but rather a way of enhancing it. It gives you options that you don’t have without it. LTCI can bring in a professional and informal caregiver to handle work caregivers find time consuming, embarrassing, or stressful. If you love your family, it is an easy concept.

Mr and Mrs Smith: An Example of Insurance Leveraging Benefits (PDF, 31k)


The 1st LTCI policies were written in 1975 by AMEX & Traveler’s. Early policies had vague language making it harder when insurance companies would authorize a claim, others used Medicare criteria. They had higher premiums than now, they lacked claims experience. They liberally used gatekeepers. Post-claim underwriting was done. Then the infamous ’88 Consumer’s Report article was written, exposing the shortcomings of Long Term Care Insurance policies. This created a public outcry. The National Association of Insurance Commissioners (NAIC) adopted LTC Model Act in 1986, LTCI Model Regulation in 1987 making policies more standard and fair. In 1993 Nat’l Assoc of Insurance Commissioners (NAIC) published “LTCI Model Regulations” While NAIC Model Regulation initiated today’s LTCI policies, it was the Health Insurance Portability & Accountability Act of 1996 (HIPAA) that deserves the credit for standardizing product. Remember, there wasn’t much auto insurance sold in the 20’s either.


Now, instead of LTCI covering just Nursing Homes, comprehensive policies cover institutions like Skilled Nursing Facilities, Nursing Homes, Assisted Living Facilities, as well as home care. It covers custodial care that Medicare, Medi-Cal (Medicaid), and health insurance do not cover.

While there are many riders, options, and types of LTCI, Agape LTC can help you select the kind tailor made for your unique circumstances. We can pick from any of the insurance carriers licensed in the state of California to serve your particular needs. Navigating the complexity of LTCI will be considerably easier with Agape LTC helping you.

Also, if you already have a LTCI policy, is it up to date? Does it have all the features that a modern LTCI policy should have? Will it protect you and your family if you need care? You might want to review it. Sometimes, older policies need to be either supplemented or replaced. Policies have improved since the early days. It’s like a car, older cars didn’t have seat belts or air bags. You can put seat belts in an older car, but not air bags, you’d have to get a new car. It is the same with LTCI.

Why Do People Buy Long Term Care Insurance

  • Avoid spending assets for LTC
  • Make sure there are choices regarding the type of care received, avoiding dependence
  • Protect family members from having to pay for care (don’t want to be a burden)
  • Decrease chances of going on Medi-Cal
  • Personal experience, they know someone who used it
  • Assurance of quality care
  • Affordability
  • Tax advantages
  • Peace of mind

Special Partnership Between California and Insurance Companies

Check out the section on California Partnership for Long Term Care


The primary objective of underwriting is to collect, review, and correlate all available information regarding an applicant for Long Term Care Insurance coverage and to evaluate the risk to the company issuing coverage to that applicant.

Field Underwriting

  • Evaluate and report the applicant’s:
    • Past and present health
    • Current functional status
  • Determine if all factors would be acceptable to the company
  • Submit completed applications for qualified applicants to the Home Office

Home Office Underwriting

  • Evaluate completed application and attached information
  • Evaluate completed Agent’s Report & medical records
  • Evaluate results of Health Interview, when required
  • Evaluate results of a telephone interview, when required
  • Evaluate issue coverage to the applicants who qualify

Unique Factors in LTC Underwriting

  • Cognitive status
  • Functional capacity
    • The ability to perform Activities of Daily Living (ADL’s)
      • Bathing
      • Dressing
      • Toileting
      • Continence
      • Transferring
      • Ambulating
      • Eating
    • The ability to perform Instrumental Activities of Daily Living (IADL’s)
      • Shopping for personal items
      • Managing money
      • Using the telephone
      • Meal preparation
      • Medication management
      • Doing heavy housework
      • Doing light housework
    • Medical Histories which may result in the need for care
    • Multiple medical problems
    • Multiple medications
    • Treatment modalities
    • Chronological age vs Physiological age
    • Frailty
    • Personal Independence Factors that play an important role in maintaining an applicant’s personal independence:
      • Working either full or part time
      • A spouse in good health
      • Family of friend(s) living in the household
      • Volunteering at service clubs
      • Participating in hobbies and outside activities
      • Current ability to drive
      • Ability to travel and visit independently

Uninsurable Conditions

LTCI is not right for everybody. Some people will not be able to buy LTCI because of their health, finances, or limitations. Money purchases LTCI, health buys it.

Most LTCI policies will not insure conditions where recovery is rare or a cure in not available at this time, or the symptoms are severe and tend to be progressive. A partial list follows.

Specific Uninsurable Medical Conditions

  • AIDS
  • ADL limitations
  • AIDS related complex
  • Alzheimer’s Disease
  • Amputation due to disease
  • Amyotrophic Lateral Sclerosis (ALS, Lou Gehrig’s Disease)
  • Aplastic Anemia
  • Ataxia, Cerebellar
  • Autonomic Neuropathy (excluding impotence)
  • Autonomic Insufficiency (Shy-Drager Syndrome)
  • Cerebral Vascular Accident (CVA)
  • Chorea
  • Chronic Memory Loss
  • Cirrhosis of the liver (excluding primary biliary cirrhosis)
  • Cystic Fibrosis
  • Dementia
  • Dialysis, Kidney (Renal)
  • Diabetes treated with insulin or Rezulin
  • DWR failed
  • Forgetfulness (freq or persistent)
  • Gangrene due to diabetes or peripheral vascular disease
  • Huntington’s or other forms of Choera
  • Immune Deficiency Syndrome
  • Incontinence-Bowl incontinence-Bladder incontinence requiring assistance
  • Kidney (Renal) Dialysis
  • Leukemia-except Chronic Lymphocytic Leukemia (CLL) & Hairy Cell Leukemia (HCL)
  • Memory loss, chronic
  • Multiple Sclerosis (MS)
  • Muscular Dystrophy (MD)
  • Organ Transplants-except kidney
  • Organic Brain Syndrome (OBS)
  • Oxygen use
  • Paralysis/Paraplegia
  • Parkinson’s Disease
  • Pneumocystis Pneumonia
  • Quadriplegic
  • Senility
  • Short Portable failed
  • Spinal Cord Injury with ADL/IADL limitation
  • Strove (CVA)
  • Surgery scheduled or anticipated (except cataract under local)
  • Total Parenteral Nutrition (TPN) for regular/supplementary feeding or admin of meds
  • Walker or Wheelchair use

You are never too young to buy LTCI, to get a preferred rate your health must be exceptional. Body weight, blood pressure, diabetes are all considered.

Putting off buying LTCI:

  • For every year wait, premiums 14-22% higher
  • Percentage of people able to pass underwriting much less @ 70 than 60
  • 1:3 75-80 won’t qualify for coverage because of health
  • Could qualify for preferred rate, based on health, may need to go on claim earlier
  • 55 yo 3 yr LTC policy cost $772/yr, at age 65 same policy cost $1,456

Elements of a Long Term Care Policy

  • Type of coverage-institutional, home, or comprehensive
  • Daily dollar amount-what the policy will pay each day for care
  • Benefit period or Bank of dollars-how long or how much total money the policy will cover
  • Elimination period-the deductible part of a policy, when the coverage starts after initial diagnosis of the problem
  • Inflation protection-how the coverage increases with time
  • Other riders such as Restoration of Benefits, Non-forfeiture rider, Spouse or Companion Coverage, Care Coordination, Wavier of Premium, etc

Many of the policies features are covered in the MetLife publication: The Essentials (PDF, 134k).