With all of the money insurance companies spend on advertising, you might guess that obtaining long-term care insurance coverage would be a piece of cake. Guess again.
Jump ahead to these sections:
- Can You Be Denied Long-Term Care Insurance Coverage?
- Reasons You May Be Rejected for Long-Term Care Insurance
- What Can You Do If You’re Denied Long-Term Care Coverage?
- Popular Alternatives to Long-Term Care Insurance
According to statistics published by the American Association for Long-Term Care Insurance, being approved for long-term care coverage is impossible for many people. Below, you’ll notice that as your age increases, your chances of being denied coverage also increase:
- Applicants between the age of 50 and 59 are declined 13.9% of the time.
- Applicants between the age of 60 and 99 are declined 22.9% of the time.
- Applicants between the age of 70 and 79 are declined 44.8% of the time.
- Applicants aged 80 and older are declined 69.8% of the time.
The good news is reserved for those under age 50. They’re denied coverage only 7.3% of the time. Those who are younger and do some pre-planning for long-term care have a distinct advantage.
What is it that causes so many people to be rejected when they apply for coverage? Let’s take a look at 15 reasons people get rejected for long-term care insurance and see if coverage for you or long-term care insurance for parents is feasible.
Can You Be Denied Long-Term Care Insurance Coverage?
As you can tell from the statistics above, you certainly can be denied long-term care insurance coverage, just as you can for just about every other type of insurance. It all comes down to risk.
For obvious reasons, insurance companies detest paying claims. They expect to, but they know every claim paid lowers their profit margins, which they watch very carefully.
There are four types of insurance for which insurance companies are very selective about who they approve coverage for:
- Life insurance
- Health insurance
- Disability insurance
- Long-term care insurance
Insurance companies employ teams of actuaries to determine the amount of risk a particular class of people will pose and for whom claims will most likely be paid. They also use their calculations to determine what the premiums should be to ensure profitability to the insurer.
Each type of coverage has its own particular percentage of risk and likelihood of claims being submitted. But they all have one thing in common: the older you get, the more expensive the coverage is, and the more challenging it is to get approved.
If you’re wondering who ultimately decides on whether or not you’ll be approved, it’s a person called an “underwriter.” An underwriter is given parameters to follow by the actuaries, but it’s ultimately their decision, and too many wrong decisions can cost them their career.
Reasons You May Be Rejected for Long-Term Care Insurance
It’s unfortunate that so many people are denied long-term care insurance coverage. So what are the “deal-killers” for the underwriters assessing your insurability? What causes an underwriter to reject an applicant? Here are 15 reasons your application might be denied.
1. Age
As mentioned previously, age is a significant factor in deciding who is approved or denied coverage. Like all kinds of insurance, the older you get, the greater the odds are that you’ll be submitting a claim and costing the insurance company money.
2. Education
Statistically speaking, people with a college education have a higher approval rate than those without a degree.
3. Job status
Another factor in the insurer's decision concerns your employment status. If you’re unemployed, you have a greater chance of being denied coverage.
4. History of diabetes
Again, the numbers tell the story, and the numbers concerning people with diabetes filing long-term care claims aren’t favorable. For the insurance company, the risks outweigh the benefits.
5. Stroke
People who have suffered a stroke may have suffered permanent damage or can be prone to another stroke. Unfortunately, it’s just about impossible for them to get approved for coverage.
6. Heart problems
Also facing very low odds of being approved are people whose medical history includes heart problems. Insurers are concerned about the percentage of claims filed by those who have had a heart attack or series of heart attacks.
7. Back pain
Many people in our population experience some level of back pain, but you’ll find that a high percentage of those who apply for coverage get denied. Insurers may request your medical records to find out the severity of your back pain.
8. Arthritis
Arthritis is another common ailment experienced by aging adults. Arthritis can become so severe that a senior can’t perform the activities of daily living, such as bathing and dressing, which is why applications for arthritis suffers are often declined.
9. Smoker status
Whether you currently smoke or smoked in the past and quit, it’s a major no-no on your application. As life insurance companies do, companies that issue long-term care insurance are concerned about lung cancer or other respiratory problems. Yes, cigars and pipes count, too.
10. Memory problems
Just about everyone’s memory isn’t quite as good as it once was as they age, so why is this such a big concern for insurance companies? It’s because of the increased risk of getting dementia or Alzheimer’s disease, which means expensive long-term claims paid by the insurer.
11. Mental health history
With the presence or history of having a psychiatric disorder or condition, including the prevalent cases of depression or anxiety, insurers are quite likely to decline an applicant
12. Cancer
If you currently have cancer or have a medical history that includes cancer, the odds are heavily against you getting approved for long-term care insurance coverage. Insurers are concerned not only about recurrences but also about new tumors and related health issues stemming from your cancer.
13. Problems with taking medication
Many seniors have difficulty with medication management. For example, some forget when to take their meds or how much to take. This can also indicate that someone has memory issues or is unable to safely care for themselves, which can mean large long-term claims for the insurer.
14. Weight
Being either overweight or underweight can lead to other health complications either now or later in life. This diminishes your chance of getting long-term care insurance coverage.
15. Activities of daily living
If you can’t perform any two of these activities of daily living, you’re very likely not to be approved for coverage:
- Bathing
- Dressing
- Eating
- Toileting
- Continence
- Transferring (from a bed to chair and back again)
Insurance companies have experienced many significant claims because of this, leading to an insured being permanently relocated to a nursing home or requiring home health care for the rest of their lives.
As you can see, there are many reasons why you can be denied long-term care coverage, some of which you may disagree with.
What Can You Do If You’re Denied Long-Term Care Coverage?
If you’re denied long-term care coverage, it’s very likely the insurance company or your agent will let you know the reason for it. There are several avenues you can pursue to get their decision overturned.
Appeal to the insurance company. Sometimes, insurance companies will reverse their decision if new evidence comes their way.
For example, if the reason given for the denial was that you have arthritis in your hands, you could get the insurance company a copy of your medical records and a statement from your doctor explaining the long-term prognosis. This may or may not influence the insurer's decision, but it may be worth a try.
Appeal to the insurance commissioner in your state. You’ll want to provide their office with a detailed explanation of why you feel that the denial wasn’t a reasonable decision. By doing this, many insurance commissioners will contact the insurance company and have the company take a second look at your application.
Hire an attorney. If you feel you were unjustly denied coverage based on any type of discrimination, there are attorneys that specialize in such cases.
It never hurts to appeal. You might be pleasantly surprised at the results.
Popular Alternatives to Long-Term Care Insurance
If you’re denied coverage, there are several ways you can pay for any care you receive in the future.
Personal pay
Many people have had to pay long-term care expenses out-of-pocket. Any asset, including investment accounts, that can be liquidated counts with this option.
Retirement accounts
Another alternative is making withdrawals from a 401(k), 403(b), Individual Retirement Account (IRA), or other retirement accounts you might have.
Family care
Sometimes family members can pitch in and help a loved one with their care needs. It’s certainly not easy to do, but it may be a way to get started until you use an alternative method.
Medicaid
Many families use Medicaid to pay for nursing home expenses or home care expenses from professional caregivers. To be eligible for Medicaid benefits, you will need to have almost zero net worth. It’s an option that’s the last resort for some people who have gone to great lengths to avoid by selling everything they own, including their residence.
Enroll Now if You Can
Many financial advisors recommend that you buy long-term care insurance in your late 40s or early 50s. They do this because statistically, you’re much more likely to get approved because you’re younger and probably in good health. You’ll be able to locate insurance companies that offer long-term care options through a financial advisor or online search.