I recently gave a presentation to a group of approximately 30 professional advisors at a “lunch and learn” offered by our local Community Foundation.

One of the attorneys present asked about options for her client who developed dementia and had not been paying bills in a timely fashion. By the time the family got involved, her long term care insurance policy had lapsed because the premium had not been paid.

I explained that there are two provisions in a long term care policy set up to hopefully prevent this from happening. The first is to identify on the application a third party who is to be notified if the policy is in danger of lapsing because the premium has not been paid.

A premium might not get paid because the notice got lost in the mail, the policyholder moved and forgot to change their address, because the policyholder was sick (as in the example above) or for any reason.

I ask applicants to choose a person that they would always be in touch with—NOT someone who would be willing or able to pay the bill. It simply needs to be someone who, if necessary, would reach out and offer a reminder that the premium is due.

You can change the identified person at any time through a simple call to your agent or to your insurance company.

The second provision to avoid having a policy lapse has the very creative name of “Unintentional Lapse Provision”. Go figure. This provision, included by law in all policies being sold today, states that if you are already chronically ill and the policy lapses due to nonpayment of premiums, you may request reinstatement of the policy within five months of the date of the lapse.

To have the policy reinstated, you must obtain a certification that you were chronically ill on or before the date that the policy lapsed. You will need to pay any back premiums that are overdue.

Just to be clear, you can’t just decide to drop your policy and then five months later reinstate it when suddenly you become concerned that you may need it. Rather, you must already be chronically ill at the time the lapse occurred.

The goal of the insurance companies is to take care of their policyholders; however, if a policy has lapsed and it is after the five month window, there is no recourse.
When you apply for a policy, make sure that you have identified a person who will be notified if the policy is in danger of lapsing. That is the only time that the individual would be contacted by the insurance company.

When we at Doll & Associates Long Term Care Insurance Services (www.LTCOnly.com) deliver a policy to our clients, we always provide copies of the policy benefits to give to a family member, friend, and/or other trusted advisor. We want to make sure that if you need the benefits from the policy, someone else knows that you have this important coverage.