Two-Step Policy Design

by | Mar 11, 2022

Been declined for long-term care insurance?

There are hundreds (probably thousands) of health conditions that are considered “too high of a risk” for any long-term care insurance company to insure you.

We’ve helped thousands of clients get approved for long-term care insurance, but we’ve also had hundreds of clients be declined. 

So what can you do if you have a health condition that has caused you to be declined for long-term care insurance? 
What if you have a health condition that makes you a “high risk” in the eyes of the insurance company?
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Our Answer:

We’ll design your coverage in such a way that the insurance company considers you less of a risk and, therefore, more likely to insure you.

How can that be done?

Buy two different policies. 

One policy will have capped benefits (usually 360 days of benefits).

The other policy will have a 365-day elimination period (deductible).

It’s actually easier for us to get you approved this way, buying two complementary policies, rather than just one. In fact, you’ll have richer overall benefits and there will be little to no overlap between these two policies, even if you’ve already been declined for long-term care insurance.

This is a two-step process. 

Step One: Buy a policy with 360 days of benefits

A policy with only 360 days reduces the insurance company’s risk.

Even if you have health problems insurance companies are more likely to approve a policy that has only 360 days of benefits. In fact, most policies like this have “simplified underwriting” that requires only:

  1. A short paper (or electronic) application, with one page of health questions
  2. A 20-minute phone health interview, and 
  3. A prescription drug review

Approval of your application usually takes only 3 to 5 business days.

No medical records are needed.
No blood is drawn.
No urine samples are required.
No intrusive visit by an insurance company nurse.

Although these policies go by many different names, I call them “Recovery Care” policies.

Warning: there are some horrible policies. But a good “Recovery Care” policy is like a traditional long-term care insurance policy in two very important ways:

  1. It pays for the same type of care as a long-term care policy:
    1. care at home, 
    2. care in assisted living facilities, 
    3. nursing home care, etc…
  2. It has similar benefit triggers. In other words you can qualify for benefits from a good “Recovery Care” policy in the same way you would qualify for benefits from a traditional long-term care insurance policy.

A good “Recovery Care” policy can be even better than a traditional long-term care insurance policy in two ways:

  1. The benefits can be restored, and you can use the policy more than once. For example, a policy with 360 days of benefits could pay up to 720 days of benefits if you needed care more than once.
  2. The policy can pay for a short period of care that lasts less than 90 days. (Traditional long-term care insurance policies usually only pay benefits if your care is expected to last 90 days or more). 

As I mentioned, I like to call this type of policy a “Recovery Care” policy because it can be used more than once. If you need care and then fully recover, whatever benefits you received from the policy are put back into the policy and can be used the next time you need care. (Note: You usually have to be fully recovered for six to twelve months in order for the benefits you used to be put back into the policy.)

Step Two: Buy a policy with a 365-day elimination period (deductible)

What is the elimination period?

The elimination period is similar to a deductible. The elimination period is the number of days you receive care for which the insurance company does NOT pay benefits. 

When you apply for a long-term care insurance policy, you can choose from a variety of elimination periods:

It means that care is covered by the insurance company on day 1. The insurance company starts to pay benefits beginning with your 1st day of qualified care.

It means that the first 15 days of care will NOT be covered by the insurance company. The insurance company starts to pay benefits beginning with your 16th day of qualified care.

It means that the first 30 days of care will NOT be covered by the insurance company. The insurance company starts to pay benefits beginning with your 31st day of qualified care.

It means that the first 60 days of care will NOT be covered by the insurance company. The insurance company starts to pay benefits beginning with your 61st day of qualified care.

It means that the first 90 days of care will NOT be covered by the insurance company. The insurance company starts to pay benefits beginning with your 91st day of qualified care.

It means that the first 180 days of care will NOT be covered by the insurance company. The insurance company starts to pay benefits beginning with your 181st day of qualified care.

It means that the first 365 days of care will NOT be covered by the insurance company. The insurance company starts to pay benefits beginning with your 366th day of qualified care.

It means that the first 730 days of care will NOT be covered by the insurance company. The insurance company starts to pay benefits beginning with your 731st day of qualified care.

It means that the first 1095 days of care will NOT be covered by the insurance company. The insurance company starts to pay benefits beginning with your 1095th day of qualified care.

It means that the first 1460 days of care will NOT be covered by the insurance company. The insurance company starts to pay benefits beginning with your 1461st day of qualified care.

“90 days” is the elimination period most people choose for their long-term care policy. It means that the first 90 days of care will NOT be covered by the insurance company. The insurance company starts to pay benefits beginning with your 91st day of qualified care. 

If you have a higher-risk health condition, the insurance company may not want to insure you if you have a 90-day elimination period. 

That’s why “Step Two” is to buy a policy with a 365-day elimination period. If you have a higher-risk health condition, the insurance company may be more willing to insure you because they would not have to pay any benefits for your care until you’ve needed care for 365 days.

“But, Scott, I don’t want a policy that won’t pay any benefits for the first 365 days of care.
I don’t want to wait 365 days for my policy to kick in.”

 

That’s why you should own two policies:

Policy #1 is a good “Recovery Care” policy with about 360 days of benefits (and a shorter elimination period).

Policy #2 is a traditional long-term care insurance policy with a 365-day elimination period.

 

*Note: 

Some states restrict how long an elimination period can be.

90 days is the longest elimination period available for sale to residents of Connecticut and Vermont.
180 days is the longest elimination period available for sale to residents of Florida.
365 days is the longest elimination period available for sale to residents of California, Kansas, Massachusetts, New York, and South Dakota.

To learn more, or to see if you qualify for long-term care insurance, please schedule a quick phone call with me.

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