Underwriting Principles In Long Term Care Insurance
Underwriting for Individual Policies
All states require the medical underwriting of individual policies. This helps insurance company to verify the applicants medical history and lifestyle before determining the type and price of the policy. Through underwriting, the company wont be able to refuse if the condition does not exist or not defined at the time of application. However, it could be a basis for the company to refuse coverage for anyone who has risk of future claims. The insurance code authorizes a company to discontinue coverage for pre-existing conditions after the issue of the policy for certain time period. However, most companies do not follow the pre-existing conditions especially when the policy is in effect at the time it is issued.
Insurance companies have the right to deny a claim if an applicant is proven guilty of using false information that could have affected the policy, whether it should have been issued or not. On the other hand, if the applicant revealed information that do not necessarily affect the policy, then the insurance company cannot change any future claims after the policy has been issued for two years or more. Also, iIf the person disclosed wrong age in the application, the policy benefits will be modified to the amount of benefit the person should have received at that certain age.
Long term care insurance companies use past and current medical records as reference to check if whether or not the person is qualified for coverage. Insurers normally conduct personal interviews with the applicants previous nurse or doctor. The company will try as much as possible to confirm what has been written in the application is true and not just a cock-and-bull story aimed to trick the company from a getting a coverage. The insurer will try to divulge of the person has short term memory problems and then conduct cognitive impairment survey.
Underwriting for Group Policies
Policies for large group do not need to be medically underwritten. However, the problem is how companies control the number of people with health problems or medical condition from getting coverage that may affect future claims. There are two ways to avoid this. First, the insurance company as much as possible tries to attract many employees to get insurance coverage. This helps counteract the number of people with health problems to people with medical records. Large group plans are only allowing 6% of eligible employees nationwide. This low participation rate does not necessarily reduce the number of unhealthy to the healthy individuals; thus, group plans should have higher benefits than of individual plans. Insurance companies encourage younger employees to sign on group coverage by providing attractive benefits and low premiums. Younger employees have less health issues compared to adults, this helps trim down the future claims. Another reason why younger employees are target of LTC insurance companies is that they are more likely to leave their jobs and will probably forget or leave the insurance they had with the previous company. This is a great benefit for the insurance company since they are not required to make claims for those employees who have left their insurance and they are not obliged to pay additional profit that they would have made if it was covered for adults.
The second way to control group policies is to limit or cut off benefits for employees. The company would only provide only three or four benefits for employees and reduce the amount allotted for home care. However, these limited benefits in group policies have future risks.
by: Jenny Nielsen
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