Missed Premiums=Cancelled Long Term Care Insurance Policies?

Paula Span wrote an incredibly important post for the January 31, 2014 New Old Age Blog in the New York Times.  Titled The Policy Lapsed, but No One Knew, the post tells the story of one couple who had purchased long term care insurance well over 10 years ago, named their son agent under a POA, had auto-pay of premiums and a third-party (the son) notification option.  When it came time for the parents to use their policy, the son was told it had lapsed almost 8 months earlier, for non-payment of premiums. The dad had gone to the bank to stop the auto-pay on another policy, but mistakenly had it stopped for this one. And although the insurance company insisted that it had sent the son the 3rd party notice letter, he didn’t receive it.  The couple didn’t understand the lapse notices, so those were just put in a drawer somewhere.  The company refused to reinstate the policy, so the parents sold their home, and now live in an apartment, with the mother receiving care through PACE.

A state legislator introduced a bill that “would require insurers to send lapse or termination notices to both policyholders and third parties via certified mail or commercial services like FedEx or UPS. That would provide proof that companies notify customers, or don’t.” An update to the story notes that the house subcommittee handling the bill ended up with a tie vote; thus the bill will not move forward at this time.

Ms. Span offers the following advice to families:

In the meantime, cases like this demonstrate anew how vigilant families need to be. If your older relative has a long-term care policy, photocopy the page listing the company, policy number and claims contact information. Keep the insurance company updated on new addresses, yours (if you are the third-party designee) and your relative’s. It wouldn’t hurt, if the policyholder is becoming forgetful, to check bank statements or call the company to be sure premiums are paid.