Taking Care of Mom and Dad: LTC Preexisting Conditions
All policies will contain a preexisting condition provision of some kind. Most will contain a six-month preexisting condition provision that basically will not provide benefits for any preexisting condition during the first six months that the policy is in force. More liberal policies may state that all preexisting conditions are covered as of the effective date of the policy if the condition is stated on the application.
A preexisting condition is usually defined an illness or physical impairment that has required medical treatment or advice within a certain period of time prior to the start of coverage. The specified period of time is usually six months...sometimes it's a year or 18 months. But this period doesn't mean an insurance company has to limit its questions about your parents' health history; it can ask about -- and base its underwriting decisions on -- their complete history.
One way insurance companies limit their exposure to preexisting conditions is by reducing the benefit amounts they offer.
Again, let's say your mother applies for a LTC policy with a daily benefit amount of $150, following a 30-day elimination period. Benefits are payable for up to five years. Your mother indicates on the application that she has several medical problems: high blood pressure, arthritis, borderline diabetes and hardening of the arteries.
Your mother's medical history presents underwriting problems. The insurance company may use it to limit the daily benefit it offers your mother. It may approve the policy issue but only for $50 per day in benefits. In essence, the policy is reduced from a total benefit of $273,750 (five years x $150 per day) to $91,250.
Another underwriting approach that could be used for your mother's situation would be to increase the elimination period from 30 days to 90 or 100 days. The insurance company could also approve the policy with a shorter benefit period.
Whatever the approach, the insurance company will try to limit coverage based on any preexisting conditions your mother has -- and on her entire health history.
