Know Your Policy…

Basic 101 in LTCI policyholder (PH) management. Sounding pedantic in this piece, yet still important since there is a certain Play By Rules in effect. Without a base of knowledge of essential policy info in discussions with others — mere “noise”.

If you’re the PH (the Insured) or acting on behalf of (e.g. Power of Attorney, Estate Administrator, or otherwise given right to act): find the policy and especially note the cover page that lists essential information:

  • policy number & plan number;
  • covered services & benefits at the time policy was taken;
  • inflation protection;
  • whether the plan is a Partnership policy or not;
  • elimination period, expressed in days normally no greater than 100 days
  • Riders, many types of
  • Marketing material

Additional correspondence with your carrier since policy was taken, such as benefit upgrades / downgrades; premium change notifications; claim activity (acceptance or denial).

Updated contact information is vital. Carrier phone numbers found within the contract may have changed. Call your carrier once in awhile to see who answers & how well they handle a key question. What’s a key question? Hmmm.

Have there been or are there currently any actions taken against your carrier that can affect your status or outlook on your LTCI? Presently, there is one pending v. GE / Genworth for those PHs to note and a case of general interest to any PH.

Having this information readily available enables one to Act. Without essential information it is very difficult to communicate to carriers, DOI, advisors, or any other participant on an issue. For examples, an official complaint about your contract to CT DOI requires the Policy number.

I have personally found the interaction to go smoothly with (my) carrier once this information is available & I have familiarized myself with its contents. I have reached 3rd level support successfully on a matter of some complexity.

One of the more difficult aspects in LTCI is your plan’s design. You may recall when you took LTCI out in the beginning (maybe some 20 years ago), there were many design choices, such as : Maximum Daily Benefit (choices different for nursing home v. home care); % inflation protection (compound, simple, none); elimination period; years of coverage (affecting the Lifetime Benefit max). Are the design parameters are still relevant given your current health & financial state? It may be that your plan is over-configured and you are paying excess premium & are too exposed to rate increases. You can potentially downgrade coverage but you should seek advice first. Does the carrier have an LTCI agent that can help explain options, whether or not a trusted source for advice?

One of the more curious changes that has occurred relates to (CT) Partnership minimum contract specifications – the % compound inflation of benefits. For most reading this, yours is probably 5% but now Partnership is 3% and has had stops in-between (e.g. 3.5%). Something squirrely about the reduced % since these values are intended to represent fixed long-term % rise in LTC costs. If your contract is 5%, does the current 3% suggest your plan is over-configured because the 5% overstates the long-term LTC cost of services inflation? Take my opinion as a salt-grain: I don’t think so. Flipping the question — is a contract with a 3% compound inflation potentially under-configured long-term? I would like an expert opinion to justify the reduction of 5 to 3% since the 20 year average still remains ~5% despite recent 5-year period where it is close to 3%.

What options can you exercise with respect to your policy? The contract should specify these and are important to know.

Here’s a link that seems relevant to all PHs but requires significant reading & interpretation. There’s more underlining than not so it takes some effort to dissect that meaning.

The key question for most on this blog — this was signed off June 24, 2009, does the non-forfeiture benefit (incl. CBUL) apply to policies prior to that date? If the answer were yes, is the wording so clear as to determine how it would apply in your case? If the answer were no, why are pre-2009 policies excluded? What precipitated CBUL in 2009 and not before?

What is my LTC 1.0 policy worth?

This is a vital question as it underlies what actions one might take in view of numerous factors. This one has no easy answer and requires a series of posts over time. This post is for “starters” and some of the discussion is admittedly sublime. Cases to start.

Case 1: A policyholder (PH) has been diagnosed with 2 Activities of Daily Living (ADLs) to trigger a claim. That would seem to suggest the policy might be worth as high as its Benefit Maximum, but no greater. There are factors to reduce the actual benefit paid out, contract factors such as: Elimination Period, rate of benefit payout, whether mortality may precede payout of the benefit maximum. Another factor is cost of LTC care in one’s locality. Note even this simple case is probabilistic & so requires a bit of quantitative skill to determine expected benefit payout. Despite this case’s potentially high financial value, no one hopes for 2+ ADLs so a PH is not really striving to maximize his or her policy worth.

Case 2: A PH has been diagnosed with 1 ADL. The question might be: Given 1 ADL, what is the likelihood of 1 more ADL (in some subsequent time period – let’s use “years”) to trigger a claim assuming the PH does not pass first? Here there is the notion of paying premiums while “waiting” for the 2nd ADL. Given that we have discovered the product is not level premium, other considerations would be carrier rate increase requests and Dept. of Insurance policies to grant those requests. Then there is the notion of Net Present Value (“NPV”, an alternate term to “worth”) to “discount” future premium payments and benefits to current (2019) dollars to determine your policy’s current NPV. Clearly, the mathematical model to determine NPV is much fuzzier & more difficult than Case 1.

Case 3: No ADLs, typically a younger PH but not necessarily. A much fuzzier model still. This model might even consider a probabilistic behavioral model: carriers’ ability & willingness to pay claims in some distant future. How about a change in DOI regulations or behavior as it relates to rate request grants? Can such a model be developed? Such, why not? This is well within today’s computational arts & sciences.

Who has such models today? Very unlikely, Consumers. Very likely, insurance actuaries. You would hope actuaries are fully up to speed with computational arts & sciences to manage their business risk exposure. Are they good models? Who really knows, but how did the industry get to where it is now? They claim not to have predicted LTC claims & costs, but other factors as well (some of which do not pertain to a consumer model).

Shifting to a different topic & point-of-view:

Question, a bit sublime: Nationwide, is the sum of all LTC 1.0 policyholders NPV greater, less than, or equal to $0?

Answer: Well, if I were to believe Industry statements, I would say greater (disagree if you’d like).


Speaking broadly about the industry (not individual PH cases as the issue of one PH’s NPV depends on several situational factors – such as the insured’s age, health, financial state), the liability on carriers’ books (broadly, a -NPV) is an asset on PHs’ books (broadly, a +NPV).

One might say the carriers’ are claiming an NPV imbalance that currently favors PHs though they might express that using terms more familiar to the Industry. (Note: I would submit the Consumer side can use terminology / vocabulary it considers relevant & applicable.)

The carriers’ have claimed LTC premiums were underpriced originally and now must reduce their liability to shift the NPV imbalance more to their favor by taking actions, one that is very visible — raising premiums. One should be on the lookout for other actions to reduce PHs NPV (aka a “loss of worth”).


If a PH were to blindly surrender their policy (simply out of fear of rising premiums), that would likely constitute a loss not knowing their policy’s worth. Not recommended.

This may seem counter-intuitive: A small, sustained increase in premium does not necessarily mean a reduced PH NPV over time. Yes, this may not be what was bargained for or understood at the time of signing, but if your contract’s NPV >> $0, you may be holding a contract which is a very good deal, way too good in carrier’s eyes. Requires a more comprehensive model to make an assessment.

More often it is the case where a deservedly angry PH witnesses the current LTC 1.0 debacle, wants out, and wants a full return on all premiums paid to date with interest. Now that settlement calculation is an easy Excel NPV exercise for a “Quant”. But whether that is a better deal than an alternate action (staying put; downgrade policy benefits) with a different NPV result — that’s a tough question to answer without that more elaborate model yet to surface on the Consumer side.

More on this complex subject. Later.

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