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Taking Care of Mom and Dad: Underwriting LTC Insurance

LTC policies will contain some exclusions or limitations. Common exclusions include: war or act of war, intentionally self-inflicted injuries, losses covered by workers' compensation or other government programs and losses due to personality disorders that are not subject to a physical or organic disease. Mental or personality disorders resulting from an illness or accident are covered, including Alzheimer's disease.

Long-term care underwriting is concerned with some of the same factors as health insurance underwriting -- but there are some differences in the kinds of conditions that cause problems.

A person who has a heart condition that could require surgery might not be a good candidate for health insurance, but might be accepted for LTC insurance because the condition would probably not result in a nursing home stay.

Your parents will be asked questions about their health when applying for coverage. Some companies use a short form, which only asks if the applicant has been hospitalized in the last 12 months or if he/she is confined to a wheelchair. If the answer is "no," the policy will usually be issued on the spot.

It's important that these health questions be answered truthfully. If the insurance company later finds out your parents lied about their health, it can cancel the policy and return the premiums paid, leaving your parents with no coverage. The insurance company can usually do this within two years after a policy is issued.

Additional or detailed medical information may be obtained from your parents by an additional questionnaire or from their doctor through an Attending Physician's Statement sent by the insurance company (with your parents' permission). However, applicants for LTC insurance are rarely required to take a physical exam.

Once the underwriting information is gathered, the underwriter will basically classify the person as a standard or substandard risk. Accordingly, if the applicant is a standard risk, he or she will pay the standard rate or premium for the policy. Substandard risks may have to pay an extra premium for the policy, have a policy issued with a rider omitting some element of the coverage or they may be declined.

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