Archive for May, 2012

Long Term Care Insurance Claims

May 28, 2012

The largest long term care claim has grown to $1.7 million.  While searching for something else, I came upon my notes from a presentation by Genworth Financial on that company’s long term care insurance claims experience.  Genworth is by far the largest player in the long term care insurance market with more people insured than any other carrier.   Here are some interesting claims facts.*

Where People Receive Care:

      Home Care: First benefit 72%, Latest benefit 64%.

      Assisted Living: First benefit 13%, Latest benefit 18%.

      Nursing home: First benefit 15%, Latest benefit 18%.

      Of 100 people who receive long term care benefits, 80 never transition from where they started, 15 people transition once, and 5 people transition twice.

Claim Duration: 44% of claims last less than one year due to short recoverable illness, sudden terminal illness, or single use of non-caregiving benefits (equipment, training, etc.).  The average length of claims that last more than a year is 3.9 years.  14% of claims will last more than 5 years.  The largest single claim is $1.2 million (That claim is ongoing and the amount of benefits paid has just been updated to $1.7 million.)  The claimant, a woman, purchased coverage at age 43.  Three years later, her long term care insurance claim began and has continued for almost 15 years.  Genworth’s longest claim has been ongoing for 18.7 years. 

Age at Time of Claim: Age 50 & younger, 1%.  Age 51-55, 2%.  Age 56-60, 3%.  Age 61-65, 5%.  Age 66-70, 11%.  Age 71-75, 19%.  Age 76-80, 27%.  Age 81-85, 23%.  Age 86-90, 7%.  Age 91-95, 2%.  At the extremes, Genworth Financial’s youngest claimant (at time of claim) was age 27 and the oldest age 103.  The average age of claimant was 78.4.

Leading Reasons for Needing Care (for claims lasting more than one year): Dementia (mostly Alzheimer’s Disease), 45%.  Cardiovascular, 17%.  Musculoskeletal, 14%.  Cancer, 5%.  Respiratory, 5%.

*All of the above comes from a study of Genworth Financial’s claims covering the period December, 1974 through December 31, 2010.  Please note that the study only includes people needing care who had long term care insurance.  What might the numbers be for people needing care who did not have insurance? 

What can we glean from this information?  The average long term care insurance claim that lasts for at least a year goes on for about four years.  But 14% of the claims last more than five years, with some much longer.  The average age at which someone begins a claim is about 78, but some start later and some begin much earlier.  Dementia is the largest single claim diagnosis, but people need long term care services for many reasons.  Very few of us are “average”.  The need for long term care services can happen to anyone at any time.

Disclaimer: Actual policy language, rather than the contents of this eNewsletter always takes precedence.  Long term care insurance policies vary from company to company & within the same company.  Raymond Smith, The Long Term Care Specialist, does not give legal or tax advice.  Consult your tax advisor or attorney for these matters.

 

© Raymond Smith, The Long Term Care Specialist, 2012

New Short Term Care Insurance

May 28, 2012

A new kind of care insurance (It does not meet the requirements of tax-qualified long term care insurance) is emerging…short term care, or recovery care.  Policies are less expensive and underwriting qualification (medical history) is often easier.  For whom may this be appropriate?

1. As an add-on for people who have a traditional long term care insurance policy, but with a 60 days or longer elimination period.  May be uncomfortable with the idea of having to pay for the first 60, 90, 180 or even more days of long term care out of pocket.  Short term care insurance can help fill the elimination period gap.

2. People with less than $100,000 in assets (often $20,000 – $60,000) who want protection against the cost of home care during a short term recovery that would not be covered by medical insurance.

3. People who know they need traditional, extended protection, tax-qualified long term care insurance but have waited too long to apply: a). They no longer qualify medically.  b). Because they have become older while waiting to apply, the traditional policy premiums can no longer be afforded.

The short term care policies have similarities and differences with traditional tax-qualified long term care insurance.  Benefit triggers for both are: the insured person must need assistance with at least two of the six Activities of Daily Living (bathing, dessing, eating, continence, toileting and transferring) OR suffers from a severe cognitive impairment (Example: Alzheimer’s).  Unlike tradional long term care policies, short term care polices do not require  that  the need for assistance be expected to last for at least 90 days.

Short term care policies cover just that…a shorter benefit period of typically one year or less.  Elimination periods (The number of days of needing assistance before begining to accrue  benefit dollars) are shorter.  The selected Elimination Period can be  20, 30, 40, or 60 days.  Some policies even offer a zero-day Elimination Period.

Some short term care policies cover home care, adult day care, assisted living and nursing homes.  Others only cover nursing homes.  Benefit amounts can range from about $50 to $400 per day.  Some insurance companies may also offer inflation protection as an option. 

Easier underwriting: Someone using supplemental oxygen or showing signs of dementia will still be uninsurable.  On the other hand, a diabetic applicant who requires insulin may be approved.  Short term care policy applications have 10- 12 medical  history questions.  If you can honestly answer “no” to all of them, you will generally be approved.  It is a much simpler process.

As I was writing this article, today’s mail brought an offer to purchase a “Home Recovery Plan”.  The offer came from an organization that doesn’t know I am an insurance broker.  This one will pay a benefit of $200 per day for up to 40 days per year.  Less benefits by far than the traditional long term care policies that my wife and I have…but then also less expensive.

Please contact me if you or someone you know may be interested in learning more about the new short term care insurance policies.  In the right circumstances, these policies can perform a valuable function.

Disclaimer: Actual policy language, rather than the contents of this eNewsletter always takes precedence.  Insurance policies vary from company to company & within the same company.  Raymond Smith, The Long Term Care Specialist, does not give legal or tax advice.  Consult your tax advisor or attorney for these matters.

 

© Raymond Smith, The Long Term Care Specialist, 2012