7 Long-Term Care Insurance Scams

As posted on November 19, 2014 on www.scambusters.org

It's a worrisome fact that most Americans aged 65 or more will need long-term care at some point in their remaining years. 

Yet, at the same time, most Americans have made no provision for meeting the huge cost of this care, which is already more than $100,000 a year in some states.

That makes for a lot of potential scam victims.

Long-term care (LTC), which is generally not covered by Medicare, is care provided in nursing homes and other units, as well as in individuals' own homes, when they are unable to perform certain tasks -- known as activities of daily living (ADLs).

According to the U.S. Administration on Aging, a person turning 65 today has a 70% chance of needing LTC. Yet, the National Bureau of Economic Research says only 10% of older folk have insurance protection.

Whether people actually should get LTC coverage or not obviously depends on their individual situation -- and it's the subject of an ongoing debate.

But what is beyond doubt is that scammers are manning the phone lines, knocking on doors and sending out mail and email messages trying to trick people into getting coverage they don't need, pay for coverage they're not going to get, or pay inflated premiums for inadequate coverage.

Frequently, scammers prey on people's fears that LTC costs could be financially ruinous or create a burden for other family members, to force them into making hasty decisions.

The Coalition Against Insurance Fraud lists 7 LTC scams to be on the lookout for:

1. Unsuitable policies. Overpriced policies that don't meet buyers' needs.

2. Overlapping policies. Victims are wrongly told they need more than one policy to be fully protected.

3. Trading up. People who already have LTC coverage are persuaded to switch to a new policy, which is often more expensive and covers less. They also lose the value of all the premiums they've already paid.

4. Watered down coverage. To clinch a sale, unscrupulous agents and other sellers eliminate or reduce key features of a policy so they can offer it at a low price. But they don't tell their victims what has been cut out.

5. Exaggerating benefits. Scammers may claim a policy covers everything, when, in reality, it might exclude key features such as inflation protection or extended stay protection.

6. Making deliberate misstatements on applications. Rogue agents or even applicants make false statements in order to gain coverage or lower premiums. If discovered, the policy could be void, and the perpetrators could face criminal charges.

7. Fake policies. Simply that -- victims are sold worthless policies, especially ones supposedly offering in-home care.


How to Avoid a Long-Term Care Scam

What's really worrying is that in most cases, LTC scam victims don't find out they've been conned until they need the very care they thought they'd paid for.

 So, if you're contemplating buying coverage, or already have a policy, here's what you should do:

 * Ask friends and relatives for the names of reliable brokers.

 * Speak to multiple brokers to establish their expertise.

 * Know in advance the sort of coverage you need and get several quotes that you can compare.

 * Be clear on the benefits. Get them in writing. Don't rely on TV ads and mailshots.

 * Research the credentials and reputations of brokers and insurers. Are they licensed? 

 Find out from your state insurance department. This map will connect you: http://www.naic.org/state_web_map.htm 

 * Request a policy document before signing and check both what's covered and what's excluded.

 * Review it with a trusted friend or financial advisor.

 Furthermore, observe these no-nos:

 * Don't buy a policy on the basis of a solicitation without speaking to a reputable broker.

 * Don't allow yourself to be talked into buying a second policy. You don't need one.

 * Don't be tempted to "trade-up" to a better policy without talking to a reputable broker and understanding the financial and benefit implications.

 * Don't permit inaccuracies in your application. Complete it honestly and check that the broker's entries are also correct.

 * Don't pay premiums in cash. Use a check or credit card.

Two other important things:

First, in most states, you have the right to cancel a policy within 30 days of signing it, for a full refund.  Remember, it's the policy that will ultimately dictate your coverage and benefits -- not something a salesman or insurance broker told you.  Check this provision with your state insurance department (see link above) and use it to fully vet the policy.

And second, if you suspect you're being scammed or have been scammed, contact your state insurance department immediately.

It's unsettling enough to think that one day most of us will likely need long-term care, but don't make things tougher by falling for these scams.