There are essentially two reasons that people stop paying their insurance premiums and cause their policy to lapse: they consciously decide to stop paying them, or they inadvertently forget to pay them.
Let us address the latter.
As many people age and start to lose some of their mental faculties, they forget to pay their premiums, rendering a policy lapse. Additionally, a person may become physically incapacitated and simply cannot make the payments. Ironically, the time when people start forgetting to pay their premiums (threatening to forfeit their benefits) or have become functionally impaired, is usually when they need to start using their policy benefits most.
This type of policy lapse results in a potentially devastating loss of critically important insurance coverage for three crucial reasons:
- First, the insured person has paid premiums for many years only to discover that now, when their benefits are needed, the reason for the need is the very thing that caused the lapse.
- Second, because of age and infirmity, this valuable coverage is no longer available.
- Finally, because of the exorbitant cost of care, losing insurance coverage will create a huge financial strain on them and their families.
Fortunately, most states have a law in place to “protect” insured people that may have inadvertently lapsed their policy. Unfortunately, many people don’t know that this law exists. In Florida, for example, there is a law that allows policy reinstatement in the event that the insured person proves that non-payment was accidental, and proves this within a specific ‘grace period.’ Also, the law requires the insurer to advise the insured that premium and other important notices be sent, upon request, to a secondary addressee. Other states have similar laws, while the specific time frame and/or specific criteria for re-instating the policy varies.
That is why it is essential that insured people, their loved ones, and their professional caregivers are aware of these state-specific laws, so that they are equipped to preserve their benefits or know how to reclaim them after a policy lapse.
I have seen this occur countless times throughout my time as a long-term care insurance attorney, and my team and I have helped countless people get their policies reinstated. If you or a family member have suffered the lapse of a Long Term Care Policy, you may qualify for reinstatement. We can help.