Picking the right carrier for your Long Term Care Insurance needs is of utmost importance. While the premiums are paid initially, the care is required afterwards. The carrier should be financially sound and should be a company, which is more likely to be around for a long time. One should consider the following factors choosing a carrier:
The financial strength of a company is partly represented by its assets. While a big company would have higher assets, it is does not automatically follow that a big company is financially sound. The financial strength comes from what is called the solvency ratio . This ratio tells you how much assets the carrier has for each $100 in liabilities. Higher this ratio, the higher is the financial strength. This is because the liabilities (and these are the benefits they will provide to you) will come from the assets of the company. If assets are higher, you are safer since even if assets go down a little, they would still cover the liabilities. Another factor to look for is called Surplus Funds . This is given per $100 of Policy Reserves and indicates the ability of a carrier to take care of emergencies. The policy premium is generally based on actuarial valuation, but sometimes there could be more claims coming in than anticipated. A higher surplus ratio helps the carrier in such situations.
The credit rating gives an indication of the overall financial health of the carrier. Higher the rating, the better the financial health. There are various credit rating agencies in the US and they give different ratings. One should be clear of what a particular rating given by a rating agency means. The most widely followed ratings in the insurance industry are by A.M. Best
This can be ascertained from the number of offices the carrier has, and the number of agents. What is the carrier’s record in claim servicing? How much time does the carrier take in servicing a claim? What is the ratio of claims pending to total claims? These parameters would give you an idea of the efficiency of a carrier. When it is required, fast claim processing is of utmost importance; therefore ease of service should also be an important criterion in selecting a carrier.
You should select a carrier who gives coverage as per your needs and the costs involved. The carrier should give only coverage for the required needs. The carrier should not load premium for requirements, which you have not asked for. Read the policy carefully to see that it provides for only the coverage needed. The question to ask is: Does the carrier customize the policy to satisfy your requirements?
Does the carrier have various options available for you in making your periodic payments? This gives you greater flexibility in managing your cash flows.
Insurance policies by nature are complex, with a number of clauses and exclusions. You should choose a carrier who explains in simple language what the policy is all about and details of what is excluded and what is included. If possible get this documentation separately so that there are no delays in claim settlement.
