Ch 7: LTC products

Question 1

What is long term care?

Answer 1

• Defined as including all forms of continuing personal or nursing care and associated domestic services, for elderly people who are unable to look after themselves without some degree of support.
• It is aboutcare for those whose health is not expected to improve

Question 2

Costs of care divided into five groups

Answer 2

• Living costs - food, clothing, heating and amenities
• Housing costs - rent, mortgage payments, tax
• Personal care - additional costs of being looked after arising from frailty or disability
• Nursing care - the narrowest form of long-term care and defined as care that requires specific knowledge or skills of a qualified nurse.
• Intermediate care - focuses on recuperative services following an acute event in order to reduce avoidable hospital admission and minimise dependence on ongoing long term care. (Intensive therapy and support services)

Question 3

Informal care

Answer 3

• Normally provided by spouse or children
• Indirect cost in terms of lost economic activity
• They do not receive wages but there will be extra expenses connected with their caring that should be met from a LTCI policy with cash benefits.
• Extent and availability of informal care is influenced by cultural and relgious traditions in community - directly affects formal care costs and demand for insurance products.

Question 4

LTCI meeting needs of consumers

Answer 4

• Provides financial protection when a person becomes unable to look after themselves.
• Individuals may be concerned that they will not have sufficient funds to pay their care in old age and that state care will be inadequate
• LTCI can be bought to avoid dependence on unpaid care from frinds and family
• Policies may also be purchased by people who wish to fund care for elderlt relatives and friends - their concern is that they may not have enough money or time to take of those they feel responsible for

Question 5

Product features of LTCI

Answer 5

• Can be indemnity or cash benefits
• Pre-funded or immediate needs
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Question 6

How pre-funded LTCI can be sold

Answer 6

• Added to CI policy: many common causes of LTC are already covered by CI policies (blindness, Alzheimers…)
• Rider on whole of life policy: Pays sum assured on death or accelerates the benefit (say 2% of sum assured per month) when LTC criteria is satisfied. Policy needs a very large sum assured on death in order to provide a large enough LTC benefit
• Added to IP policy: cover continues beyond normal retirement age. At end of IP term, definition of disability would switch from being occupation related to activity related (ADLs)