Some Things to Remember When Shopping for Long Term Care Insurance
- Ask questions.
Long term care is a new and growing field of insurance, which makes it particularly attractive for new companies trying to make a name. Because it is also different than traditional life, health and disability income insurance, even established companies trying to penetrate this market may not do it very well. For these reasons, you need to ask your agent about the insurance company selling a policy as well as the long term care policy and its provisions. You need to be certain the insurance company is reputable and that both the company and the agent are properly licensed to sell long term care insurance. Your state insurance department can answer these questions.
- Check with several companies and agents.
Comparison shopping is important. Worksheets for you to compare the different types of coverage and various long term care insurance policies you are considering are considered crucial to help you determine which plan best meets your needs. Be sure to compare benefits, the types of facilities that are covered, the limits on coverage, the exclusions and, most importantly, the premium. You may find that policies from different companies with the same coverage, benefits and limitations do not cost the same.
The top providers in the long term care insurance business are discussed in our article, Leading Insurance Companies in the Long Term Care Insurance Marketplace.
- Check rate increase histories.
You need to know the rate increase histories for the companies you are considering. Ask specifically whether companies have increased their long term care policy rates and, if so, how often and for how much. Ask to see written documentation that shows and explains the increases or that certifies there have been no increases.
Be aware that some insurance companies avoid the stigma associated with rate increases. Instead, to meet the need for premium increases, they may stop selling an existing policy, then create a similar policy and sell it at a higher premium rate.
Some state insurance departments prepare an annual consumer rate guide for long term care insurance. These guides usually include an overview of long term care insurance, a list of companies that sell this type of insurance in your state, along with their rate histories, and the types of benefits and policies available. Some guides also include examples of different combinations of coverage and provide rates to help you compare polices. Contact your state insurance department to see if this information is available.
- Take your time and compare types of coverage.
An agent may try to convince you to move quickly when you consider purchasing a long term care insurance policy. The longer you wait, the more expensive the premium will be, you may be told. Even if this were true, you should take your time because a wrong decision could cost you far more than a slight delay would.
To get you to buy quickly, an agent also might tell you his company is about to take its current policy off the market and replace it with a new product with a much higher premium. But you will be told that you can lock in the current premium if you buy at once. You may get the lower rate but it won’t be locked in. Insurance companies can increase premiums on almost all long term care policies as long as the increase is done on a class basis – even if the policy has been taken off the market. While you might save some money by buying a product before it is taken off the market, don’t be rushed in making your decision. If you feel pressured, maybe you have the wrong agent and/or the wrong insurance company.
- Make certain you understand your long term care policy.
When making this important decision, you need to know what the policy covers and, equally as important, what it does not cover. If you have any questions, call the insurance company, not the agent, before you buy, especially if any information confuses you or is different from the information in the company literature. Do not trust any sales representative or materials that say this is your only chance to buy long term care insurance.
Some companies sell their policies through agents, while others sell through the mail, without agents. No matter how you buy your policy, check with the company’s home office if you don’t understand your policy. Do not ask for the sales department. The claims department is a good place to start for questions relating to benefits. The underwriting department should be able to answer most other questions. If the home office cannot answer your questions satisfactorily, you should try another company.
- Be careful not to be misled by advertising.
Endorsement by a “trusted” celebrity has proven to be an effective form of advertising, but you need to know that celebrities are paid for their endorsements. Also, many are professional actors who know how to elicit certain responses from an audience and look sincere at the same time. Some may actually believe in the product they are endorsing though they probably know nothing about it. They are not insurance experts.
You also need to be wary about any product that seems to be endorsed by a government agency or program. Because some people think association with Medicare or another government agency adds legitimacy, some ads seem to tie a long term care insurance policy to these programs. Do not be deceived. Medicare does not sell or endorse long term care insurance policies. Neither do other government agencies. Similarly, don’t trust cards you receive in the mail or faxes that look like official government documents without checking with the government agency. Insurance companies or agents looking for buyers may use such deceptive practices.
You should also be careful if anyone questions you over the phone about Medicare or your insurance. Any information you give may be sold to a marketing firm that will try to call you, come to your home or use the mail to sell you insurance.
- Don’t buy more coverage than you need.
When shopping for long term care insurance policy, you should buy one that meets your needs. Buying a policy with the idea that you can add more later can be unnecessarily expensive. You do not need more than one policy to get appropriate coverage.
If you later decide to switch polices, be sure the new policy is better than the one you have and that you understand what you might be losing with the switch. Also, if you do switch, be sure the new company has accepted your application and issued the new policy before you cancel the old one.
Be careful not to buy more insurance than you actually need. For example, buying a policy with a $500 daily benefit to prepare for inflation is not wise. You should choose the daily benefit that matches the actual cost of long term care, then buy a less expensive inflation protection rider, if you wish.
- Make certain your application is accurate and complete.
An accurate medical history is extremely important for it will determine the cost and scope of coverage of your long term care policy. Any inaccuracies in the information provided on your application might cause the company to cancel your policy at the very time you need it the most, when you submit a claim. Misrepresentations about your health history, even if inadvertent, usually are not discovered until a claim is submitted and your records reveal something not disclosed on your application. That omission, or mistake, may give the insurance company the right to cancel your policy. Since you do not want this to happen, you need to be certain your answers to all the questions are accurate and complete before you sign and submit your application to the insurance company.
If an agent fills out your application, don’t sign it until you carefully read all the answers the agent has recorded. It is your responsibility to make sure the medical information is accurate and complete. Be wary if an agent assures you that the insurance company won’t care if you don’t include medical history that he says is too old or insignificant, a tactic sometimes called “field underwriting.” The home office underwriting department, not the agent, should decide whether the information is important. Remember the agent will get a commission if the company issues you a policy, which may be sufficient motive not to include anything in your health history that might cause the company not to issue your policy.
- Never pay your premium in cash.
You always want a written record of your premium payment to be sure non-payment is never an issue. This may be especially important if, shortly after your completed application is sent to the insurance company, you submit a claim. With many policies, you have coverage from the date of application as long as the underwriting of your medical history from the date of the application does not reveal a reason to decline coverage AND you have submitted your premium payment with your application. If you paid in cash and there is no record of payment and, for whatever reason, the money did not reach the home office with the application, you may not obtain the coverage to which you should be entitled.
- Be sure you have the name, address and telephone number of both the agent and the insurance company.
You must be able to follow up with the agent and the insurance company once you have completed your application and submitted your premium payment. You should have a local or a toll-free number for both the agent and the company.
- Contact the company or the agent if you don’t get your policy within 60 days.
You have the right to expect prompt handling of your application and delivery of your policy, especially since the insurance company has your money. When you get your policy, keep it in a safe place where you can find it easily, and be sure a relative or trusted friend also knows where you keep it.
- THIS IS IMPORTANT: Take a close look at your policy during the free look period.
If you decide you don’t want your policy, you can cancel it and get your money back. But to do this, you must tell the insurance company in writing that you don’t want the policy and you must do it within a specified time after you receive your policy. The number of days depends on the free look period stated in the policy. All states require a free look period and most, but not all, require the free look period to be stated on the cover page of the policy. In most states the free look period is 30 days. So, in most states, you have 30 days from the day you receive your policy to decide whether you want to keep it or send it back for a full refund of premium. If you choose to cancel your policy, you should do the following:
- Keep the envelope the policy was mailed in as evidence of the date you received the policy. If the agent delivered your policy, ask for a delivery receipt to document when you received the policy.
- Send a short letter asking for a refund when you return the policy.
- Send both the policy and the letter in one envelope by certified mail and keep the certified mail receipt.
- Keep copies of your letter and any subsequent communications.
To decide whether you want to keep your policy, you should read through the policy carefully as soon as you receive it to be sure it will provide the benefits you anticipated and that the amount of the premium is what you expected. You should also review the application one more time to be sure it accurately reflects your health history. If you have any questions at all, call your agent or the company immediately.
- Consider having your premium automatically withdrawn from your bank account.
Automatic withdrawal will protect your policy from lapse if you miss premium payments because of illness or some other reason.
- Investigate the financial stability of the insurance company before buying a long term care policy.
You want your insurance company to exist when you need it to begin paying claims. Several rating services analyze the financial strength of insurance companies. Their ratings show how their analysts assess the financial strength of various insurance companies. Because different services use different rating scales, you need to understand how each service labels its highest ratings and what the ratings mean for the companies you are considering.
Here are some of the rating agencies you may wish to contact:
- A.M. Best Company (900) 439-2200 or (800) 424-BEST or the on the Internet at http://www.ambest.com
- Fitch IBCA, Duff & Phelps, Inc. (212) 908-0800 or on the Internet at http://www.bankwatch.com
- Moody’s Investor Service, Inc. (212) 553-0377 or in the Internet at http://www.moodys.com
- Standard & Poor’s Insurance Rating Services (212) 488-2000 or on the Internet at https://standardandpoors.com
- Weiss Ratings, Inc. (800) 289-9222 or on the Internet at https://www.WeissRatings.com