The great majority of agents selling long-term care insurance strive to always conduct themselves with honesty, integrity, fairness, and professionalism, and with a sense of duty to those they serve. In doing so they are guided by their own sense of right and wrong. An LTCI professional has the obligation to recommend a product that is suitable for his client. Suitability means that the policy design, benefit amounts, selected options, and costs match the circumstances, needs, goals, and financial resources of the purchaser.
To ensure that a policy is suitable, a salesperson must exercise diligence and competence. He must make a systematic effort to obtain all pertinent information about a client's personal and financial situation and his concerns and goals. He must then use her knowledge of LTCI products and other approaches to find the best solution for the client. A salesperson must not simply get a general sense of a client's situation and recommend a product that "seems about right."
And of course, a salesperson must not knowingly and deliberately recommend a product that does not meet a client's needs. He must not sell long-term care insurance to a person for whom it is not appropriate, and he must not recommend a policy with more or fewer benefits than the purchaser needs.
He must also not engage in churning or twisting. Churning and twisting occur when a salesperson, simply to earn a commission, sells a new policy to someone who already has perfectly suitable coverage.
The laws and regulations that govern the sale of insurance in general, and long-term care insurance in particular, vary from state to state. But as we’ve learned, the NAIC Long-Term Care Insurance Model Law and Model Regulation have been adopted, in whole or in part, by most states, so the market conduct provisions of these models provide a good sense of the rules that generally apply. Some of these provisions have been mentioned above, but we will summarize the main ones here:
· A salesperson must give a prospect an outline of coverage and a shopper's guide to long-term care insurance, either the one developed by the NAIC or one issued by the state.
· The application for insurance must be clear and understandable by the consumer.
· The application must disclose the insurer's right to contest the policy if the applicant makes false statements on the application. (The DRA imposes incontestability requirements for PQ policies.)
· The policy must include a 30-day free look provision.
· The insurer must have procedures that ensure fair and accurate policy comparisons (to prevent churning and twisting) and prohibit the sale of excessive coverage.
In addition, many states have regulations intended to prevent the use of misleading advertising in the sale of LTCI. Some states require that certain guidelines be followed in the design of advertising materials, and many require that such materials be reviewed and approved by the state insurance department before use.
Some states also require all salespeople to complete training in ethical market conduct.
Benefits of LTC Insurance
In this course we have studied long-term care and the ways people expect to pay for it, and we have learned why, for many, long-term care insurance is the best funding method. Let us review here why buying an LTCI policy is usually a better approach than planning to pay for care out of one's savings and assets or relying on Medicaid.
· The individual has greater assurance that there will be sufficient funds to pay for needed care. Although most LTCI policies do not pay unlimited benefits, a purchaser can select benefit amounts that will cover most of the services he is likely to require.
· The individual can be certain that there will be funds to pay for care when it is needed. Because he is not relying on his own financial resources to pay for care, he does not have to worry about needing care at a time when he does not have sufficient assets (such as when he is still young and has not saved enough or during a period when his finances are at a low point because of some unforeseen event).
· The individual reduces financial uncertainty. Instead of bearing the risk of long-term care costs, the amount and timing of which are unpredictable, he regularly makes premium payments of a preset amount.
· The individual can protect against inflation. He can choose an optional provision that increases benefit amounts over time, so that inflation in the cost of long-term care services does not render the benefits inadequate in the future.
· The individual greatly reduces the risk of depleting assets.
Receiving insurance benefits to help pay for care makes it much less likely that savings and assets will be spent to cover costs. Instead, those assets can be used to maintain a comfortable standard of living during retirement, and when the insured dies, he will be able to leave his spouse well provided for and pass assets on to heirs.
· The insured can maintain financial independence and will not become dependent on relatives or the government.
· When the individual needs long-term care services, he can receive high-quality care, choose among many care providers, and have a range of care options so that he can receive the type of care that best meets his needs. The choices will not be limited, like those of Medicaid recipients or individuals relying on limited personal funds.
· The individual will not be a burden on his spouse, children, other family members, or friends. Insurance benefits will help pay for needed services, and family members will not have to sacrifice to provide care themselves, nor will they have to jeopardize their own financial security by paying for his care.
· The individual can provide for long-term care in a way that takes into account his particular needs, goals, circumstances, and financial status. An LTCI policy can be tailored to the situation of each individual insured.
· By purchasing a partnership LTCI policy, an individual can protect some of his assets in the event he needs care for a very long time, exhausts his insurance benefits, and is forced to apply for Medicaid.
However, long-term care insurance is not right for everybody. If a person has limited income such that paying premiums will be difficult, LTCI coverage is not normally the best approach. Nor should those with few assets buy an LTCI policy; such people will often have to rely on Medicaid, despite its drawbacks. But every situation is different, and each person must consider his own circumstances, take into account his own concerns and preferences, and weigh the costs and benefits of an LTCI policy.
Chapter 5 Contents
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