From 24/7 Wall St. · Gerelyn Terzo · · 1m 50s
Long-Term Care Premium Jump Triggers 21-Year Coverage Cancellation
An 81-year-old woman cancels 21 years of long-term care insurance after premiums climb 70% by age 81, but a hidden benefit may offset the cost.
In brief
An 81-year-old woman cancels 21 years of long-term care insurance after premiums climb 70% by age 81, but a hidden benefit may offset the cost. An 81-year-old woman cancels 21 years of long-term care insurance after premiums climb 70% by age 81, but a hidden benefit may offset the cost. Originally reported by 24/7…
Policyholder at 81
An 81-year-old woman bought long-term care insurance at 60 and has paid 21 years of premiums with zero claims.
70% Premium Increase
Her long-term care insurance premium has climbed 70% above the original premium after 21 years of payments.
Contingent Nonforfeiture Benefit
A hidden benefit allows her to stop paying premiums and keep a pool of coverage worth up to every premium dollar she ever sent.
NAIC Model Regulation
The National Association of Insurance Commissioners’ long-term care insurance model regulation requires a 70% cumulative increase to trigger this benefit for policies bought at age 60.
Washington State Rule
Washington uses the same 70% threshold for policies bought at age 60 and ties the contingent benefit to the insured’s issue age and cumulative increase.
Paid-Up Credit Value
The paid-up credit can equal 100% of the premiums paid, subject to the policy’s remaining benefit limit and state rules.
Medicaid Coverage Gap
Medicare doesn’t cover long-term custodial care, and Medicaid generally steps in only after savings are largely spent.
Consumer Advocate Warning
Consumer advocate Clark Howard warns that premiums are not guaranteed and insurers may raise rates to encourage policy cancellations.
Timing for Benefit
The policy must lapse within 120 days of the increased premium’s due date to trigger the contingent nonforfeiture benefit.
Three Options at Age 81
She can absorb the higher premium, reduce benefits, or take the contingent paid-up benefit to stop paying and keep a smaller pool of coverage.
What it means
An 81-year-old woman cancels 21 years of long-term care insurance after premiums climb 70% by age 81, but a hidden benefit may offset the cost.
