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What Is Underwriting In Long-Term Care Insurance?

Quick Answer

When you apply for Long-Term Care Insurance, the insurance company will review your health and family history to determine eligibility. There are health issues that prevent you from obtaining coverage. However, every company has its own underwriting rules, and a specialist can match you with the right company.

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Detailed Answer

We may hear unfamiliar terms when learning about Long-Term Care Insurance. It can be difficult to learn about these terms, especially since information often includes jargon.

LTC News was created to help you navigate Long-Term Care Insurance and long-term health care. We aim to illuminate the Long-Term Care Insurance industry and its processes by breaking down unfamiliar terms and technical information. 

One common term you may hear is underwriting. We’ll discuss what underwriting is in this article. We’ll also cover how underwriting affects your policy and how your health can impact your ability to get coverage. 

What Is Long-Term Care Insurance Underwriting?

Underwriting is a risk analysis process used by insurance companies. From an insurance company’s perspective, insuring individuals with certain pre-existing conditions can be financially risky. 

To mitigate this risk, companies created guidelines that explain which conditions should and should not be insured. Long-Term Care Insurance companies use these guidelines to evaluate the risk of insuring each individual. 

The underwriting process starts after an applicant applies for coverage. An underwriter then reviews their application to determine whether or not they can qualify for coverage. 

In this section, we’ll dive into underwriting in more detail. This section will cover the following questions:

  • What is a Long-Term Care Insurance underwriter?
  • How do Long-Term Care Insurance companies use underwriting guidelines?

What Is A Long-Term Care Insurance Underwriter?

Underwriters are risk analysis professionals. They're responsible for determining whether or not an applicant can start a new Long-Term Care Insurance policy. 

Underwriters never work directly with applicants. However, they do receive and review each person's application and medical records. Underwriters compare each applicant's health profile with the company's underwriting guidelines. 

Each company has different guidelines. This is why it may be easier to get coverage at one company than at another. We'll discuss these guidelines more in the following section. 

General Underwriting Guidelines For Long-Term Care Insurance

Underwriting guidelines are rules insurance companies use to evaluate applicants for new policies. 

Underwriting guidelines cover a variety of factors that can impact your ability to get coverage. For example, some health conditions can prevent you from qualifying for a new policy.

Underwriting guidelines vary by company, but generally, they include:

  • Criteria for preferred, standard, and substandard rate classes
  • Insurable and uninsurable health conditions
  • Insurable and uninsurable health condition combinations
  • Insurable and uninsurable medications
  • Health condition stability

But it's not only a health condition or medication that matters. How that condition or medication affects you also plays a significant role in the underwriting process. 

For example, let's say you have a condition that has been under control for a long time. Conditions that are under control demonstrate stability. stable condition might not greatly impact your ability to qualify for a policy, depending on the condition. 

Most common conditions alone won't disqualify applicants. However, multiple conditions combined may make it harder to qualify.

For example, mild arthritis with chronic pain that is managed and well-controlled may not disqualify someone. If you add neuropathy to the mix, it could make that applicant uninsurable. 

How Do Health & Underwriting Affect LTC Insurance Premiums & Coverage?

Many people may assume Long-Term Care Insurance works the same way as health insurance. However, health insurance and LTC Insurance have very different types of underwriting. 

Long-Term Care Insurance is medically underwritten. In other words, your current health and health history significantly impact your premium price and your ability to qualify for coverage. 

In this section, we’ll discuss:

  • How an applicant’s age affects underwriting
  • How health-related factors can affect the premium a policyholder pays for LTC Insurance 
  • Factors that can immediately disqualify an applicant from LTC Insurance coverage 

Before we dive in, it’s also important to note that applicants can’t start a new Long-Term Care Insurance policy if they need care at the time of application. As a result, this section will only apply to those who apply for LTC Insurance coverage before they need long-term health care. 

RELATED: How Does Long-Term Care Insurance Differ From Other Types Of Insurance?

Age & Underwriting In Long-Term Care Insurance

An applicant's age has an impact on underwriting. Individuals will find it more challenging to qualify for coverage as they age.

All Long-Term Care Insurance underwriting guidelines have a cut-off age. For many insurance companies, this cut-off age ranges from 73 to 75. Insurance companies won't consider applicants older than their cut-off age.

A few companies offer older cut-off ages. This means they'll consider applicants older than 75 or even into their 80s. But even these companies are unlikely to insure elderly individuals. Elderly applicants must have great physical and mental health to qualify for a new policy. 

On the opposite end of the spectrum, many companies won’t accept applicants younger than 40. That being said, younger applicants usually have an easier time qualifying for Long-Term Care Insurance. They're more likely to get a preferred rate class. We'll discuss rate classes more in the next section.

RELATED: When Is The Best Time To Apply For Long-Term Care Insurance?

Health & Rate Classes In Long-Term Care Insurance 

Rate classes divide individuals into categories when they start new policies. These categories determine premium rates and occasionally eligibility for maximum benefits. 

There are generally three rate classes in Long-Term Care Insurance:

  • Preferred
  • Standard
  • Sub-standard

Most people fall into a standard rate class. However, some individuals may be in better or worse health than others. Underwriters assign a rate class to each approved applicant. 

It’s also important to note that some companies may only offer some of the rate classes listed above. Some other companies may offer all the rate classes mentioned above but call them by a different name. Check with your Long-Term Care Insurance professional if you have questions about rate classes. 

Preferred Rate Class

The preferred rate class is the top rate individuals can qualify for. This rate class is actually a discount given to those in excellent health. Those with the preferred rate class tend to be younger, but older individuals can also qualify. 

Applicants with none or few health conditions generally fall into this rate class. Generally, they must meet healthy weight and height guidelines and be non-smokers. 

Most Long-Term Care Insurance companies want to see that the applicant has been to their doctor within 18 months of applying. They want to ensure the applicant has had a full physical and up-to-date lab work, including a comprehensive metabolic panel (CMP). 

Standard Rate Class

Standard, sometimes called select, is the average rate class. This class is for people with a few manageable health conditions. Applicants who fall into the standard rate class may have had more prominent issues in the past.

For instance, let’s say an applicant has high blood pressure and takes a few medications for it. This applicant also had a minor heart attack and surgery a few years ago. Since then, they’ve recovered without further issues. In this example, the applicant would likely qualify for a standard rate. 

Long-Term Care Insurance companies don’t expect applicants to have perfect health. However, they look for stability. Stability is how well or controlled a health condition may be. 

Sub-Standard Rate Class

Sub-standard rate classes are for individuals who can’t qualify for standard rates. Insurance companies consider those with a sub-standard rate class high-risk. Because of this, sub-standard rates are more expensive than standard rates.

Using the previous example for standard rate classes, let’s say the applicant has to take a prescription blood thinner for their heart condition. In this case, the applicant may only qualify for a sub-standard rate. Since only some companies offer substandard rates, applicants may not be able to get coverage at certain companies. 

In some cases, Long-Term Care Insurance companies may make counteroffers. A counteroffer is a higher rate than applied for, a limited benefit amount, or sometimes both.

Each company has different guidelines for sub-standard rate classes. Long-Term Care Insurance specialists may be able to answer questions about rate classes and help you apply to the right company. 

Knockout Questions & Uninsurable Conditions In Long-Term Care Insurance 

Knockout questions can immediately cause an underwriter to decline an application. Most knockout questions appear on the application with instructions not to proceed if the applicant answers "yes." This means applicants who answer "yes" would not be insurable by these companies. 

Most of these knockout questions cover pre-existing conditions. It's nearly impossible to list all these conditions, especially since they vary by company. 

Here's a list of conditions that could prevent applicants from qualifying for new policies:

  • Alzheimer's disease/dementia
  • Current cancer
  • Kidney disease requiring dialysis
  • Mobility issues
  • Oxygen use
  • Paralysis/spinal cord Injury
  • Parkinson's disease
  • Schizophrenia
  • Stroke with limitations
  • Uncontrolled diabetes 
  • Severe mental illness

Keep in mind this list does not include every uninsurable condition. You may want to speak with a Long-Term Care Insurance professional if you have concerns about your conditions. 

Professionals like LTC Insurance specialists can help determine if your pre-existing condition will prevent you from qualifying for coverage. They can also help you apply to a company that's more likely to insure you. 

Long-Term Care Insurance & Underwriting

Underwriting guidelines determine who can and cannot qualify for Long-Term Care Insurance. Underwriters lead this process by comparing applications to guidelines. Based on these guidelines, they then decide which applications to approve and decline. 

Health and underwriting are closely connected. Health has a large impact on your ability to qualify for coverage. This is why it’s important to apply for coverage before your health declines. It's impossible to get a new policy if you already need care. 

As you continue to explore Long-Term Care Insurance, here are a few other resources you may find helpful.

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