7. Long Term Care Insurance

Question 1

Definition

Answer 1

• LTCI includes all forms of continuing personal nursing care and associated domestic services …
  *… for elderly people who are unable to look after themselves without some dgree of support
• It’s about care for those whose health isn’t expected to improve

Question 2

Customer needs met by LTCI

Answer 2

*Main concern is having insufficient funds to pay for care in old age and that …
* … care from State (or informal) will be inadequate. (Worry ,ay come from relatives or friends)
* Need will depend on level of state or informal care
* Events are usually triggered in terms of ADLs, which need to be explained to applicant

Question 3

Examples of care needs in old age

Answer 3

• Domestic support
• Live-in care
• Residential care
• Medical care

Question 4

3 components of cost of care

Answer 4

• Living costs
• Housing costs
• Personal care

Question 5

Types of LTC

Answer 5

• Pre-funded plans
• Immediate needs plans

Question 6

Pre-funded plans definition

Answer 6

• Single premium at outset or regular premium …
• … during period where no care is needed
• Benefit payments will be made after that period

Question 7

Immediate needs plans definition

Answer 7

• Single premium and care is funded immediately

Question 8

When do benefits start to be paid for pre-funded plans?

Answer 8

• Require trigger
• Usually defined as not being able yo do certain ADLS…
  *… with overriding trigger of severe mental impairment

Question 9

Benefits on pre-funded plans

Answer 9

Could be:
* Indemnity basis
* Indemnity basis subject to max payments in a given period
* Fixed pre-specified cash amounts

Question 10

Premiums on pre-funded plans

Answer 10

• Guaranteed or reviewable
• Large contingency loading on guaranteed
• PH on fixed retirement income, may be hard to meet premium
• Reviewable most common

Question 11

Structure of pre-funded LTCI

Answer 11

• Standalone or rider

Question 12

Pre-funded unit linked investment plans

Answer 12

• Has savings component on top of protection
• Part or all of investment can remain as part of insured’s estate after death
• More expensive than pure protection

Question 13

Immediate needs LTCI

Answer 13

• Part of purchase may be returned on death
• Mostly provide cash benefits
• Not indemnity contracts

Question 14

Pensions

Answer 14

• Could be added to pension
• Increase would be by age or impairment trigger
• Can be pre-funded
  
  • use LS from occ pension at retirement
  • regular premium from pension annuity

Question 15

Risks of writing LTCI to insurer

Answer 15

• Claim inception and transfer probabilities incl anti-selection
• Investment and expenses
• Selective and normal withdrawals
• Marketing risk
• Capital requirements extensive