Many consumers wonder what the underwriting process for long-term care insurance is about and how it all works. Let’s discuss that for a few minutes in this article.

Why is underwriting necessary?

The answer to this question has to do with how insurance functions. Essentially, it is a pool of money into which several people have made deposits. These funds can then be used to pay for financial losses for some of those individual depositors due to an unforeseen circumstance that may arise. In the case of long-term care the funds could be used to pay for custodial care for individual policyholders should it become necessary.

The amount that each policyholder has to pay in premiums will be directly affected by how much money the insurance carrier expects to have to pay out for claims. This means that the insurance company has to manage the risk that they will have to pay money out of that central pool of funds. The more they have to pay out, the higher the cost of the insurance.

To manage the payout risk each insurance carrier employs underwriting procedures to make sure that those with high risk medical histories are not allowed into the insurance pool and thereby drive up the cost for everyone else.

What underwriting procedures are employed?

The first step of underwriting that all carriers use is the application form where the applicant lists their relevant personal health history and authorizes the insurance company to examine their medical records as well.

Often the carrier will schedule a phone health interview that lasts for about 15 – 20 minutes. One of the main purposes of this telephone call is to assure the carrier that the applicant does not already have any cognitive problems that would become evident in the way the phone conversation is conducted.

Afterward the carrier will often request a copy of the medical records from the primary care physician of each applicant to verify the overall health of each person seeking insurance. If specialists have treated the applicant for any serious illness in recent years, a copy of those medical records may be requested as well.

This is where the whole process can sometimes bog down for a few weeks if the doctor’s office does not process the record request quickly. However, once the medical records are received at the carrier a final underwriting decision is usually forthcoming very quickly.