Do you have an elaborate life planning strategy? If you do, then you probably invested or planned to invest in a long-term care insurance policy. Depending on your choice, your annual premium prices can range from affordable to more costly policies. The goal here is simple. Financial protection even when you are no longer able to take care of yourself.

However, you might have heard that insurers often refuse to pay long-term care insurance benefits. Why does it happen? There could be many reasons for long-term care insurance rejection. It’s important that you understand them to prevent insurance rejection and get the money when you most need it.

Below, you will find out why your long-term care insurance can get rejected.

Yes, there are legitimate reasons for companies to deny long-term care insurance claims

Before we give you the reasons for long-term insurance rejection, there is one crucial thing to understand. Insurance companies are in the market to make a profit.

Long-term care insurance claims are pretty expensive. They can affect the bottom line of an insurance company and make it less profitable.

Therefore, insurance companies don’t particularly enjoy taking certain risks because they are profit-based. It’s in their best interest to deny certain long-term care insurance claims. It improves their bottom-line and makes shareholders happy. And so certain conditions must be met in order for your long term insurance claim to be approved.

However, no matter how diverse the contracts and policies insurance companies come up with, a pattern emerges. There are some issues that most of the cases share. Here are the most common ones.

The Most Common Reasons for Long Term Insurance Rejection

You don’t have to be a lawyer with decades of experience in the insurance niche to be able to understand why your long-term insurance claim is rejected or denied. The reasons are quite easy to understand. Here is the complete list so that you identify the potential risks in your specific case.

Loose assessment of the ability to live independently

Every insurance company clearly defines the circumstances in which you are eligible to make long-term care coverage claims. Most often, these circumstances revolve around one thing — the inability to perform activities of daily living. These activities range from making food and eating to being able to walk independently and use the toilet on your own.

In other words, you are not eligible for benefits approval if you can do the things we’ve just mentioned (or a few other activities of daily living). There is one problem, though. Often, people who can perform activities of daily living are still unable to live independently. It’s simply not safe enough for them to live alone and they require some type of personal care services or hands-on assistance from a third party.

Insurance companies may not see it this way, and they may reject long-term care insurance claims in some instances. As an example, you want the claims process to conclude successfully if this becomes the case when you get a long term care policy for your parents.

Missed or Late Payment

Since long-term care costs can amount to a substantial sum, an insurance company will try to find a legitimate cause to render you ineligible for benefits. To be more precise, the approximate cost of a private room in a nursing home was $105,850 in 2021, and the average cost of a home health aid was $54,912

Most often, the insurer will look for a missed or late payment. This is a cause for the insurance company to argue the validity of your policy and thus your claims for the costs of care.

If your policy lapses, you will no longer be eligible to receive any benefits for long-term care services. However, when you and the insurance company representative put the signatures on that piece of paper, you are both legally required to abide by all the clauses.

There is a part in the contract that specifies what the insurance company must do when you miss a payment. In a case where they didn’t follow the procedure, your claims can still go through, and you can be eligible for any disability benefits.

Cognitive impairment and late payments

While we are talking about missed or late payments, we have to address one particular scenario. Let’s say your family member or a loved one is cognitively impaired. Cognitive impairment can easily cause them to forget to pay a long care insurance premium. Unfortunately, the insurance company can use this to reject your claims, deny you the benefits, or lapse your entire policy.

Yes, you are probably aware that it takes months before an insurance company can legitimately lapse your policy. Nevertheless, if you aren’t making sure that your family member pays insurance premiums on time, it can happen, and a policy can lapse.

You can do one thing here to prevent the company from nullifying your family member’s policy. You should consider scheduling an appointment with a physician. A statement that clearly demonstrates your family member is cognitively impaired (known as a cognitive impairment trigger) is typically what you will need to get their long-term care insurance policy reinstated.

Limited benefits for personal care

You can never know in advance, with certainty, what your health status will be when you grow old or when the onset of disability will begin. You might be healthy and in good physical and mental shape. You can do everything around your house and even be able to care for your garden or a lawn. While some people are blessed with this kind of health as they grow older, others are not.

Some people may end with chronic conditions that render them incapable of doing “simple” things, including running errands and doing light housekeeping. For some, even personal care is out of the question as they need assistance with bathing. Unfortunately, some of these people can end up being denied the benefits even if they’ve never missed paying a premium.

As we said earlier, insurance companies want to minimize the amount and number of benefits they have to pay out. They might decline to pay benefits to an applicant because they see it as the caregiver’s obligation to do it for the policyholder.

There is no record of prior hospitalization

Some long-term care insurance companies will go the extra mile to ensure profits by rejecting long-term care insurance claims. One of the most common reasons for long-term care insurance claim rejection is no record of prior hospitalization. While this is a very common underwriting criteria for older policies, you should definitely be aware of this risk.

The insurance company can reject your claims if you don’t meet the requirements of the underwriting decisions of the policy. And they would make the criteria to be that history of a nursing home stay or hospitalization confinement exists. It narrows down the number of scenarios in which your claim would be eligible, making the benefits only available if there is a record of a stay in a nursing home or in a hospital.

It’s not an eligible care provider

Imagine ending up in an assisted living facility, having a long-term care insurance policy, and still not getting your expenses covered by the insurer. Yes, this is a possible outcome, and it can happen to people who are in a full-blown nursing home receiving skilled care and not only in an assisted living facility. Why does it happen?

Well, the insurance company can use specific wording when defining care providers. They can simply add “eligible” in front of the care provider to make claims more challenging. It means that not every institution is seen as equal in the eyes of the insurance company.

For an operator to charge the insurance company, it has to prove that it is an eligible care provider. There are two possible outcomes here. First, your claim can be delayed. You have no control whatsoever over the nursing home operator and the insurance company when it comes to their settlement. Or secondly, your claim can end up rejected because you stayed in a nursing home run by an illegible operator.

One of the exclusions applies to you

Exclusions are as old as insurance policies.

You can find them across different policies, including long-term care ones. Exclusions are also among the common reasons for long-term care insurance rejection. An exclusion defines in great detail under which circumstances a claim will be rejected or under which circumstances you will be denied all benefits despite paying every premium on time.

Every insurance policy will make long-term care in the underwriting process and add them to a policy. Also, two policies under the same insurance company can have different exclusions. However, a couple of long-term care insurance exclusions are commonly found across policies.

For instance, the chances you’ll find exclusions such as injuries related to substance use, self-inflicted injuries, or pre-existing conditions in your policy are pretty high. If you fall into an exclusion, the insurer will reject your claim. At first, it may be delayed until the insurer completes the research phase and looks into your medical history. If they determine you fall into a single one of the exclusions on your policy, you won’t be able to claim benefits.

You can get better, and your benefits can be terminated

In case you are unable to live independently, you will have to place your health and life into the hands of a caregiver. Whether you end up in an assisted living facility or nursing home, the professionals will care for your health and overall well-being. This is where your long-term care insurance policy kicks in. You make a claim, and the insurer covers your expenses. After all, you cannot live on your own, and you need all the help you are getting.

However, the situation can quickly change. The insurer may decide to check up on you. Given that professionals are taking care of you and receiving the best drugs and therapy, your condition will most likely improve. The insurer can see this improvement as a legitimate reason to terminate your benefits.

On the other hand, while your condition has improved and you’ve stabilized, it doesn’t necessarily mean that you can live independently. But if your long-term care benefits are terminated, you have no other option but to try and live independently.

Your physician’s opinion is not the same as the insurer’s one

Your physician’s opinion is one of the most important documents that you can provide to the insurer to claim long-term care benefits. For instance, it can include your health history information from your medical records to justify your need for care in an assisted living facility or nursing home.

Unfortunately, in most cases, your insurer won’t necessarily place trust in your physician. Instead, they will seek a second opinion. And for a second opinion, they have a reviewing physician of their own. This physician typically won’t contact you to examine you. Instead, they will simply review your medical history. They will use the information available to them to declare you eligible or illegible.

You should know that insurance companies value the opinion of their reviewing physicians more than the opinion of your own physician. So, if the medical opinions are conflicting, they will most often follow the opinion of their reviewing physician, thus rejecting your claim.

As you can see, there are many different reasons for long care insurance rejection. Each one of these reasons is unique. The good news is that you can prevent many of them. For instance, you can ensure that you read the fine print on the policy before signing it. Or you can consult a professional to analyze it for you and see whether it is something that can benefit you in the long run.

If your long-term care insurance claim is delayed or rejected, you are far from being done. There are a dozen practical steps you can take to avoid rejection and get access to your benefits

If you have any concerns regarding a long-term care insurance policy, feel free to contact us, and we will do everything in our power to help you avoid rejection and access those life-saving benefits from your policy when you’ll need them. And of course if we help you get a long term care policy, this will be something we will talk to you about and make sure you fully understand.

Sources:

Barbara, M. (2022). Long-Term Care Insurance Explained. Retrieved from NerdWallet: https://www.nerdwallet.com/blog/insurance/long-term-care-insurance/

Samantha, S. (2021). Long-Term Care (LTC) Insurance. Retrieved from Investopedia: https://www.investopedia.com/terms/l/ltcinsurance.asp

Brian, O. (2019). How Do Insurance Companies Make Money?. Retrieved from Thestreet: https://www.thestreet.com/how-to/how-do-insurance-companies-make-money-14971728

Jonathan, M. (2021). Reasons Long-Term Care Benefits Are Delayed or Denied. Retrieved from Erisaattorneys: https://erisaattorneys.com/reasons-long-term-care-benefits-are-delayed-or-denied/

New York State, Department of Financial Services (2022). Comparing LTC Policies. Retrieved from DFS NY: https://www.dfs.ny.gov/consumers/health_insurance/long_term_care_insurance/comparing_policies#:~:text=Some%20of%20the%20more%20common,Alcoholism%20and%20drug%20addiction.