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It's common sense. The healthier your client is, the less likely they are to use LTC benefits in the short to medium term. The less likely they are to use LTC benefits, the fewer claims the carrier will pay out, and the less expensive long-term care insurance will be.
We tend to view health underwriting as a necessary evil. In fact, it should be viewed favorably as a way for people to cash in on their good health when planning for long-term care. Companies have become smarter in the way they underwrite coverage and use tools such as prescription drug records to make a more accurate determination of risk.
In the spirit of "underwriting is good," we've listed LTC product categories and typical underwriting requirements. The plans mentioned below all include the 7702(B) tax-qualified LTC benefits - except for the very last product.
| Product | Typical Carrier Underwriting Tools | How Long Does it Take for a Decision? | Comments |
| Recurring Premium Life/LTC Plans | Life and LTC, including para-med, EKG, cognitive screen, medical records, and drug screen | In-depth underwriting, can take up to a month | Need to underwrite for mortality and morbidity risk |
| Standalone LTC Insurance | Para-med, medical records, phone interview, in-person assessment for older applicants | In-depth underwriting, can take up to a month | Some carriers don't use para-meds but order medical records on all |
| Single Premium Life/LTC Plans |
Drug screen and phone interview, medical records if needed |
Can be very fast (less than a week) or longer if medical records needed | The policy holder is self-insuring a significant portion of risk - means less risk to carrier |
| Multi-Life Corporate LTC Plans |
Application with knock out health questions |
Simplified Issue underwriting - fast | Need either employer paid executive group or large voluntary group plan to be eligible |
| Annuity/LTC Plans |
Application with knock out health questions |
Simplified Issue - fast | Additional underwriting may result in bigger benefit - but good option for many non-cognitive LTC declines |
| Point of Need Annuity |
In person medical assessment and medical record review |
In-depth, could take a month or more | With this type of immediate annuity the sicker you are the higher the monthly benefit |
As you can see, there is a variety of underwriting types. If you have a client declined for coverage, consider some alternate solutions such as an annuity/ltc plan. Make underwriting a part of the client planning conversation.
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