I have a client that is proposing purchasing multiple (3) policies, each at a lesser daily benefit amount, but with a view that because each of these policies represent independent contracts, he will be able to 'stack' these policies and claim against each in the event of a LTC event. Can independent policies be stacked and each collected on independent of each other. For example, client has $100/day benefit on each of three (3) reimbursement policies. Client incurs LTC event and has $100/day costs. Can client file a claim against each policy for $100/day as well as trigger elimination period clock? If not, what in a typical policy restricts cliams? Thanks.
Effect of Multiple Policies
- Thread starter rbrown04
- Start date
Why not just buy one policy with a cash benefit or an indemnity rider which would pay the $300 per day regardless of how much the care actually costs? That's a lot easier and it wouldn't be bordering on insurance fraud.
nadm
- 657
It is my understanding that it is perfectly fine to stack multiple policies. I have sold several polices as second policies to go with older polices that were now inadequate.
It is also my understanding that the benefit combination of all coverages need not exceed the total cost of care because you can't profit from this insurance, but you can get reimbursed up to your total cost of care by all policies combined.
On the other hand, as never_a_dull_moment suggested, buy a cash indemnity policy, and that will solve the problem and be legal too. The only problem is, they cost a lot more.
It is also my understanding that the benefit combination of all coverages need not exceed the total cost of care because you can't profit from this insurance, but you can get reimbursed up to your total cost of care by all policies combined.
On the other hand, as never_a_dull_moment suggested, buy a cash indemnity policy, and that will solve the problem and be legal too. The only problem is, they cost a lot more.
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As I understand it, there is no way for a LTC carrier to know that the client has more than one policy, unless it is with the same carrier. The client can argue that if he/she wants to pay two companies for $100/day plans and submits the claims to both of them at the same time, he is only getting what he paid for.....else, one is potentially a waste of money if the costs incurred do not exceed the benefit limit of one plan.
When you apply for LTC insurance, there is always a question as to whether you have other policies in place or applied for and whether this is a replacement or not......but maybe someone would neglect to list them. MIB???
I am not condoning doing this, but you would have to look into the contract language to see if it a violation of any sort. I do not recall seeing language that would indicate that this is considered fraud in any way.....but it would be if you were being reimbursed for something that Medicare is paying for.
Maybe it is more like life insurance.......as many as you like.
Fortunately, I do not have to worry that much about clients who want to buy more than one policy....as it is hard enough to get them to purchase one!!!
When you apply for LTC insurance, there is always a question as to whether you have other policies in place or applied for and whether this is a replacement or not......but maybe someone would neglect to list them. MIB???
I am not condoning doing this, but you would have to look into the contract language to see if it a violation of any sort. I do not recall seeing language that would indicate that this is considered fraud in any way.....but it would be if you were being reimbursed for something that Medicare is paying for.
Maybe it is more like life insurance.......as many as you like.
Fortunately, I do not have to worry that much about clients who want to buy more than one policy....as it is hard enough to get them to purchase one!!!
Arthur Rudnick
Guru
- 1,652
I believe that technically it is against the law to collect on mutiple policies and wind up receiving more in benefits than the actual cost of care.
If there are 3, $100/day polcies and the cost of care is $100, you cannot collect $300.
Now..........
Who puts 2 & 2 together? I have no idea. Unless the IRS smells something funny when they look at the 3, separate 1099 forms from the insurance companies.
I'm certain that the extra $200/day would be considered taxable income.
If there are 3, $100/day polcies and the cost of care is $100, you cannot collect $300.
Now..........
Who puts 2 & 2 together? I have no idea. Unless the IRS smells something funny when they look at the 3, separate 1099 forms from the insurance companies.
I'm certain that the extra $200/day would be considered taxable income.
- 657
There's the spot. The 1099's are all sent to the IRS. Better not mess around with this stuff folks. Those folks can get nasty.
The extra $200 would not be taxable. The tax-free per diem allowed by the IRS right now is $290 (and that figure usually increases each year). So, in your example, only $10 would be considerable taxable income.
The real issue is the insurance fraud.
But, again, the simplest and best thing to do is to just by a policy with an indemnity rider (they are cheaper than "cash policies".)
nadm
But,
I've never read a long term care policy for this, but most policies include some sort of co-insurance clause, meaning if you have a $100/day benefit from 3 companies and the bill is $100/day, each company is responsible for $33 per day, not $100. My guess is this type of statement is in any LTC policy as well, but again, I don't sell LTC and haven't read the polcies.
There are reasons they do this, which are very obvious.
Dan
There are reasons they do this, which are very obvious.
Dan
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