Chapter 3 Long-term care insurance Flashcards
Describe the main types of health and care insurance contracts. -lng-term care insurance -main example variations of contracts issued.
What is Long-term care insurance?
- Long-term care might be defined as all forms of continuing personal or nursing care and associated domestic services for people who are unable to look after themselves without some degree of support. Whether provided in their own homes or in a State-sponsored or care home setting.
- It is essentially for people who are not going to get better.
- It is distinct from acute medical care, as it is not principally concerned with curing or alleviating particular medical conditions.
- The care is designed to treat the results of the condition rather than the condition itself.
- Eg reduced ability to going to bed, washing, personal care, cooking meals.
Needs covered by Long-term care insurance:
- Long-term care covers a wide variety of needs.
- An optimal long-term care programme helps people regain as much independence as possible, slow down the rate of deterioration and provide necessary care support and environment to maintain wellbeing.
The costs of care can be divided into the following categories:
- Living costs - food, clothing, heating and amenities, etc.
- housing costs - rent, mortgage payments and council tax.
- personal care - the additional costs of being looked after, arising from frailty or disability.
- Personal care includes all forms of care directly involving touching a person’s body, incorporating intimacy, personal dignity & other confidentiality.
Nursing care
- This is the narrowest form of long-term care and can be defined as care that requires the specific knowledge or skills of a qualified nurse.
- At its most restrictive this would require technical assessment of healthcare needs and specific interventions that require technical competence and knowledge of disease states, which only a nurse could provide.
- Broader definition might cover costs of registered nurse in providing or supervising care in any setting.
What intermediate care?
- This focuses on recuperative services following an acute event (eg heart attack, a stroke or an accident) in order to reduce avoidable hospital admission & minimise on going long-term care.
- The services should incorporate intensive therapy and support.
What is informal care?
- Care may be given either formally or informally.
- Informal care may be limited to no more than 4 hours a week, a smaller group provides substantial levels of personal care and practical help.
- It should be noted that many of those provisioning substantial levels of care are themselves over age 60.
- Informal care has an indirect cost in terms of either lost economic activity or price of replacing the care support should it no longer be provided.
- If the informal care sector shrinks then the demand for insurance products may increase.
What is long-term care insurance?
List types of long-term care insurance:
- Long-term care is a product that aims to indemnify the insured for the additional costs of day-to-day living when they need long-term care that qualifies for payment under terms and conditions of their policy.
- In order to control costs there may be limits on payments. In this case the policy does not provide full-indemnity.
- Pre-funded
- Immediate needs plan
Pre-funded long-term care
Pre-funded, are purchased by relatively healthy people to protect them against the risk of future disability. Usually secure by a single premium at the outset or by level annual premiums throughout life time
-or until a specified age, normal retirement age, with a premium waiver when a claim is being paid.
———————- from lecture: features ——————
- ADLs/cognitive impairment trigger: Need for assessment and strict claims dfn
- Tiered: based on degree of support needed
- Rider to WoL,CI or PMI
- Benefit : Indemnity(very risky if for unknown period) OR indemnity with cash limits OR defined in money terms (hybrid - benefit esc, indemnity with cap)
- Deferred periods - need: leave time to stabilise+generally have money to support yourself? - Claims UW delay
- Length of payment period - implications?
- Surrender(4 comp prod) and death benefits - impact on viability?
- Premium payment: regular or single (waiver of premium) , rate of esc in line with benefit esc & fixed retirement income discussion
- Guarantees: reserving implications (cost vs benefit)
Immediate needs cash plan
- This protects the insured against uncertain survival duration.
- These contracts are in effect impaired life-annuities secured by a single premium paid at the start of the contract when the insured needs care as a result of failing health.
- Insurers seek to offer cover for as many applicants as possible.
——————- from lecture ———————
Guaranteed lifetime income on the payment of a single pmt (impaired life annuity?)
Nursing home agreements (risk mgmt)
Rate of esc- where should this sit?
Death benefit Pg 16 Q 3.14
Pre-funded products: Claim definition
- The benefit payment is dependent upon the claim definition, which may be triggered by a single event or by a multiple set of events.
- The single event may be dependent on the level of disability and its continuation for a specified period.
Activities of daily activity used as claims triggers:
- washing - ability to maintain adequate level of cleanliness.
- dressing
- feeding
- toileting - ability to manage bowel and bladder function.
- mobility - ability to move indoors/outdoors.
- transferring
- in addition there may be an overriding mental impairment trigger.
- The claim trigger requires the policyholder to be incapable of performing a number of these activities alone and without endangering the health of the policyholder or others.
- Some restrictive plans may require all of the events to be triggered before a payout.
How long term care cover can be provided/sold?
- Benefits can be provided as an optional addition to another policy eg PMI, CI, Whole life or disability policy. I.e optional rider
- Added to CI policy by structuring product thru TPD i.e, the TPD definition may change from occupation related to loss of independent existence i.e. failure of ADL. NB: many causes of LTC incl. in main CI. (Alzheimer’s,stroke, Parkinson’s rheumatoid arthritis)
- As PMI rider, PMI covers cost of medical treatment for acute condition and LTC covers the cost of care for disabling chronic conditions. LTC is usually restricted to e.g x hours a day
- Long-term care may be provided as an accelerator to whole life assurance eg 2% of sum insured monthly
Long-term care : Benefit types
The type of benefit could be selected from a range of alternatives, including:
- a single lump sum payment,
- an annuity certain,
- a lifetime benefit subject to on-going disability, or
- a restricted benefit subject to ongoing disability.
Standard benefit of Long-term care
- The length of deferred period, normally 3 or 12 months.
- the rate of benefit escalation: normally level, a fixed rate or inflation linked.
- the length of payment period:normally lifetime or fixed period like 3 years.
- The plans often provide a fixed number of monthly benefits to cover cost of any assistive devices like:grab rails, personal alarms, stair lifts, bathing seats, etc.
- Other plans provide cash benefits.
- Provision independent care advice at claim stage.
- The most basic regular premium products do not provide a death benefit.
- Basic single premium products may amortise this premium over 5 years and pay back remaining premium upon death.
- Most products do not offer surrender benefits.
- There is risk of windfall benefits with such a design, as insurance may make payments without any financial loss being incurred.
Premiums: Methods of funding
- Single payments
- Regular payments
- restricted regular payments that either stop: at certain age or during defined level of disability.
- retrospective payment, from the equity released after sale of the home.
Regular premiums will usually escalate in line with the chosen benefit escalation rate and will include waiver of premiums on triggering the disability benefit.
