Older long-term care policies: tips on collecting the benefits your loved one deserves

Stay healthy: That's the best way to protect your assets, your family and your independence. Except for one  problem: we live in the real world. Even for those who diligently take care of their health, time marches on. There's a good chance that at some point we - or our parents or other loved ones - will require long-term care, whether at home, in an assisted living arrangement, or in a nursing home. Long-term care considerations must be part of any conversation I have with clients about asset preservation, because the costs are so great and can quickly devastate a middle class family's finances. According to a 2013 Genworth survey, the average national cost of a private room in a nursing home is now upwards of $83,000 annually.

Securing long-term care insurance is always a good idea. However, not everyone can pass the physical. And although tax deductions are available for premiums on qualified policies, long-term care insurance doesn't come cheap. So if you've been paying all along and the time arrives to file a claim, you shouldn't have to go into battle to collect benefits. But sadly, with some older policies, that can happen. Some policies were written ambiguously when the industry was in its infancy, when carriers really didn't know what to expect. Now, it's coming back to haunt some policyholders.

A recent Forbes article by Richard Eisenberg pinpoints problems families may face when trying to collect benefits, and offers tips to deal with insurers who may be reluctant to pay up. Below are some of his main recommendations, and mine, if you are filing a claim now for a loved one, or just want to be in the best position possible if and when you do:

• Read the policy VERY carefully, to make sure that you document the claim in a manner that is consistent with the policy's criteria. If you don't have a copy of the policy, ask the carrier for it and read it thoroughly before submitting the claim. Even if you are currently in good health and not in need of benefits, I recommend that you review your policy immediately and meet with a qualified insurance agent familiar with long-term care insurance, to see if the policy meets all your needs, and if additional long-term care options exist. (In my next post I will tell you about other types of policies, known as "hybrid policies," that may be available to you.) 

• Some insurance companies have specific requirements for the type of care provider they will cover. For example, some older policies will not pay a spouse for caregiving services. Others will only pay benefits if the caregiving facility has a certain type of license. Again, read the policy carefully to make sure the caregiver meets the stated coverage criteria. And of possible, research this before your loved one enters a  facility. Contact the insurance carrier and verify that your understanding is correct, because the wording on older policies can be vague. It's vital that you and the carrier are on the same page. 

• If a policy has lapsed because your parent or other loved one failed to pay the premiums due to cognitive impairment, you may be able to get the policy reinstated within a limited time frame, assuming you can provide the proper medical documentation. In Florida, the grace period is five months. Here is an excerpt of the Florida Statute 627.94073 that deals with reinstatement due to cognitive impairment:

If a policy is canceled due to nonpayment of premium, the policyholder is entitled to have the policy reinstated if, within a period of not less than 5 months after the date of cancellation, the policyholder or any secondary addressee designated pursuant to subsection (2) demonstrates that the failure to pay the premium when due was unintentional and due to the policyholder’s cognitive impairment, loss of functional capacity, or continuous confinement in a hospital, skilled nursing facility, or assisted living facility for a period in excess of 60 days. Policy reinstatement shall be subject to payment of overdue premiums. The standard of proof of cognitive impairment or loss of functional capacity shall not be more stringent than the benefit eligibility criteria for cognitive impairment or the loss of functional capacity, if any, contained in the policy and certificate. The insurer may require payment of an interest charge not in excess of 8 percent per year for the number of days elapsing before the payment of the premium, during which period the policy shall continue in force if the demonstration of cognitive impairment is made. If the policy becomes a claim during the 180-day period before the overdue premium is paid, the amount of the premium or premiums with interest not in excess of 8 percent per year may be deducted in any settlement under the policy.

• If a policy has lapsed and you have a dispute with the insurance company, contact the Florida State Insurance Commissioner to investigate your claim at 1-877-693-5236. To prevent this kind of situation from occurring in the first place, it's a good idea for one or more adult children to be copied on any lapse notices and other communications from the carrier.

• Think ahead: If you are healthy now, create a durable property power of attorney to authorize an adult child or another trusted individual to handle your financial affairs, so that he/she can deal with the insurance company on your behalf. At a minimum, the policyholder should have a signed statement authorizing another party to handle insurance-related claims. To avoid future problems, submit your power of attorney or the signed statement to the insurance company to make sure it will be honored. Don't wait. Once you are incapacitated, it's too late to give someone else the authorization to handle these matters for you.

• If you hire a home health aide for mom or dad, make sure the employee maintains a daily log, referred to as "daily care notes." Many insurance companies require this documentation. Contact the insurance company before you hire an aide, or as soon after as is practical, to determine what type of information the carrier requires, and if there is a specific form that needs to be completed.

• When you file a claim for your loved one, the insurance carrier will send a representative to asses the health of the insured. It is possible that mom or dad will be too embarrassed, too proud or just too forgetful to accurately report his/her limitations. An adult child or someone else familiar with the insured should be present at the assessment, to make sure the representative gets a true picture of the situation.

 You can read the original Forbes article here.

In my next post, I will tell you about several new types of "hybrid" policies that the insurance industry is offering. Whether you currently have no insurance or have a traditional long-term care insurance policy, these new products are worth a look.