Wednesday, July 29, 2020

Timing & LTCi

A few years back, I ran into a colleague at the grocery. She had recently been licensed to sell Long Term Care insurance, and wanted to "talk shop."

Okay, I’m all ears.

Turns out, she had been trained (??) to advise her clients to put off filing a claim for as long as possible, on the theory that using their own funds would allow the insurance dollars to last longer.

I nodded and said "well, that’s interesting," and we went our separate ways.

It was not, in fact, "interesting,” it was stupid.

Whoa there, Henry them's sharp words. Care to 'splain’ yourself?


Last Fall, my mother-in-law was in a pretty nasty car wreck, and ended up in a very nice  Assisted Living facility. She had long ago bought a Long Term Care insurance policy through an affiliate program that her husband's employer offered. Since she had multiple physical issues as a result of the accident, she qualified for benefits under the policy, and they began rolling in a few months later.

Unfortunately, she passed away recently, which is what prompted this post.

The most important aspect of the claims issue is that we don't know how long that person will live, and had we listened to my colleague's advice, we may well have left significant "money on the table." Here's why:

She needed help with activities of daily living, and part of the claims process is an evaluation by a company representative (usually a nurse or service that they contract with) to make that assessment. If we had waited, there would have been no way for that evaluation to have taken place, and the claims process would have been very messy (or just straight-out declined). There was absolutely no upside to waiting, but significant potential (more likely, probable) downside.

Alternatively, had she been cleared for claims up-front and we had simply waited before filing the claim (which is another way to have interpreted my colleague's idea), we would not have been reimbursed until later. Yes, we would likely have still received the funds (this was a reimbursement-type plan) but why would we have given up the interest (this was a fairly decent amount)? After all, money is fungible, and using the carrier's funds instead of Mom's meant her money was able to keep earning interest.

Take heed.
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