Insurance: Don't Set It & Forget It
Updated: Sep 16, 2022
2022 has certainly been a rollercoaster of a year. Inflation has been incessantly in the headlines and causing pain for almost every American. Making adjustments for how we spend our hard earned dollars and how we see the value of our dollars tends to be talked about in terms of cost at the pump, groceries or even the cost of your daily Starbucks. Let's also consider the value of your dollar in terms of the insurance policies that are supposed to help you sleep well at night.
Just this week, the harsh truth of a policy's value became relevant in my own family. With failing eye sight and a broken hip, my 93 year old grandmother, whom we lovingly refer to as Nana, will be making the transition to assisted living. Time to pull the old Long Term Care Policy out of the filing cabinet. (Insert applause that she had the forethought to take out a policy in the first place!) Beginning in 1991, Nana began writing her quarterly premium checks for $1,000.00 and then ramping up to $3,700.00 over the years. Money spent for peace of mind that when the time came, her care in the appropriate facility would be covered and her precious & hard earned financial resources wouldn't be decimated by the cost of care.
Well, if it were only that simple. In the 31 years since she took out that policy, the value of a healthcare dollar has changed drastically and the market for Long Term Care policies has morphed considerably.
Inflation Riders:
First, a very avoidable mistake. Actually, let's call it an omission. When Nana took out the policy, she didn't opt in for the additional Inflation Rider that would have helped protect against the rising costs of long-term care (LTC) services. There are inflation riders that can increase benefits up to 5% every year. So, the continued & complete assurance that her care would be covered is automatically diminished based on how far 2022's dollar will get you in the healthcare world. That was a blow.
Upgrading/Updating Policies:
The next item created panic. 1991's healthcare landscape was relatively limited to what we have today for senior care/living. With that, Nana's Long Term Care policy was labeled as a Nursing Care Policy with the exclusions of facilities of mental health, drug counseling/rehabilitation or retirement homes. The vernacular and levels of care have expanded over the ensuing decades.
When my mother called the insurance company to begin Nana's claim, she was told that "this is a very old policy" (so what?) and that it wouldn't cover Assisted Living. It's a nursing care policy. Well, here we go!
Sadly, we're now going to have to employ an attorney to write a letter on Nana's behalf advocating that her policy is enforceable based on a similar caselaw in which a U.S. district court in California denies summary judgment to a long-term care insurance company that refused to provide nursing home benefits to a claimant who was residing in an assisted living facility. Time, emotion and money spent in an already emotional & stressful process.
So, being that hindsight is 20/20, how could this pain point been avoided? With regular review & upgrade/change of her policy. We are so apt to do an annual review of our investments and spending but ignore our insurance policies.
The value added for clients by reinforcing the appropriateness of their coverage or finding them a better alternative addresses their life changes and reinforces your relationship with them as their comprehensive source for financial guidance.
Without a doubt, insurance policies should be reviewed annually to optimize coverage, minimize spending and check for legality. On the flip side of this coin is a loss of opportunity. Given the expansion of care in the senior living market, what new benefits or coverage levels may have been available to Nana over the years had she or her financial advisor reviewed the policy?
The good news is that Nana will move into her new apartment at the Assisted Living community of her choice in a few days. The paperwork and bickering over definitions is in the rearview and we can focus on her emotional and physical health.