We strongly encourage you to pay your long-term care (LTC) premiums automatically. Long-term care policies are intended to be held for decades. The risk is that just when you need the policy you might miss the premium and it is cancelled. For example, you are in the hospital for unscheduled surgery during the month the premium is due, and you miss paying the premium. Most states require a 30-to-31-day minimum grace period. While it is a key consumer protection feature to prevent immediate cancellation of coverage, 30 days can fly by quickly.
The Third-Party Notice, if you set that up typically when you applied for the insurance policy, will be mailed to your loved one to the address you listed on when you applied. Your third-party loved one might think the letter is junk mail and not open it, they may have moved and you didn’t update their address with the insurance company, etc. Setting up and updating your Third-Party Notice is important, but it is often useless to help you keep your policy.
It’s the perfect LTC policy cancelling storm, you have paid your LTC premium for years and when it is cancelled you forfeit all LTC benefits or drastically reduced coverage if you have a nonforfeiture benefit. The insurance company will not refund your premiums. When a policy is in jeopardy of being cancelled due to nonpayment, insurance companies typically provide the communication required by law but nothing more.
If your policy is cancelled due to nonpayment, you might be able to reinstate your policy within a short window. Generally, you must prove you had a qualifying impairment before your policy lapsed, pay outstanding premiums and meet certain health criteria. Counting on reinstatement is not a wise strategy.
There are three ways to set up automatic payments and vastly reduce your risk of cancellation due to nonpayment:
- You can set up automatic payments from your bank account with some insurance companies. Call your LTC insurance carrier and ask how you can enroll in their autopay program. Make sure this is in on your “most important bills to keep paid” list by updating your autopay as needed. This method has the advantage of automatically adjusting the payment if your premium changes.
- We can setup automatic payments of your premiums from your LPL account. Let your investments pay your premiums! If you are interested in this method, please contact one of us. You will need to notify us if your premium changes.
- You could do a combinate of 1 and 2 above and pay the premium automatically to your insurance company and direct us to reimburse you from your investment account.
You own your LTC insurance policy for important personal, family and financial reasons. We believe it is an essential part of many people’s financial security. Paying your premiums automatically helps you keep your policy, so you’ll have it if, and when you need it.