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What Did You Really Buy With Your Long-Term Care Policy?

When you purchase a long-term care insurance policy, you are buying peace of mind. You know that the cost of various assisted-care living options range from expensive to astronomical.

Even if you have a reasonably large portfolio of assets, and potentially could afford to the monthy costs of an assisted living or nursing home, you are uneasy with the prospect of draining a lifetime of earnings away in the space of a year or two.

You also do not want to leave your spouse with nothing should your health deteriorate to such a degree. So you both accept the cost of long-term care insurance premiums and purchase a policy.

But do you understand what it is that you have purchased?

When you purchase a long-term care insurance policy, you are buying peace of mind. You know that the cost of various assisted-care living options range from expensive to astronomical.

Even if you have a reasonably large portfolio of assets, and potentially could afford to the monthy costs of an assisted living or nursing home, you are uneasy with the prospect of draining a lifetime of earnings away in the space of a year or two.

You also do not want to leave your spouse with nothing should your health deteriorate to such a degree. So you both accept the cost of long-term care insurance premiums and purchase a policy.

But do you understand what it is that you have purchased?

This is an insurance contract. It is written by teams of attorneys at large insurance companies. This is not akin to agreeing to meet someone for dinner on the weekend at a vaguely described time. This contract for insurance is very specific, and it is very likely that the insurer has carefully vetted practically every word in the sometimes exceedingly long document.

There will be sections dealing with your eligibility to receive benefits. They are likely very specific, and the terms used to describe the elements of eligibility may be "terms of art" or specially defined within a definitions section of the document.

When you are sold this policy, you need to fully understand exactly what your coverage is, what makes you eligible, the types of facilities you are entitled to and what exactly your daily benefit payment will cover.

The difficulty with these policies is that they are often purchased years or decades in advance, when the prospect of a debilitating medical condition that requires 24/7 assistance in a skilled nursing facility is an abstraction. You "sort of" understand the types of situations that may be covered, but that could lead to problems down the road.

Claims are often denied, and to the average policyholder who is not a long-term care insurance lawyer much of the details of a denial letter may be unintelligible. The difference between a valid denial and a bad faith denial may be difficult to discern at first glance.

In such a circumstance, you may need to discuss the issue with an attorney who understands these types of insurance contracts and is familiar with the operations of these insurance companies.

With a rapidly aging population, disputes with LTC policies are likely to become more common.

Source: wtae.com, "Long-term care insurance dispute depleting 86-year-old woman's life savings," Paul Van Osdol, March 10, 2016

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