Long-term care insurance is crucial to cover the high financial risk associated with senior care, whether provided at home or in a nursing facility. However, many people who purchase long-term care insurance let their policies lapse, ultimately losing the benefits they may need in the future.
A recent study by the Center for Retirement Research at Boston College delved into the reasons why this happens and found three main conclusions:
Financial Lapsers: Individuals with lower incomes and less wealth are more likely to let their coverage lapse because of the financial burden of insurance premiums. Conversely, people with higher wealth and income are less likely to let their coverage lapse.
Strategic Lapsers: There is no evidence of people letting their policies lapse for strategic reasons. Individuals in good health who believe their risk of requiring care is low are more likely to let their coverage lapse.
Forgetful Lapsers: The study found that many policy lapses occur among cognitively impaired individuals due to poor financial decision-making. They may forget to pay the premium or no longer understand the policy’s value.
Unfortunately, those who let their policies lapse are more likely to need long-term care, particularly those who are cognitively impaired. Some may have spent their assets more aggressively based on the false premise that they would retain coverage.
To prevent unintentional lapses in coverage, paying the premium in one lump sum or having a backup, such as an adult child, who will be notified of missed payments can be helpful. It’s also crucial to ensure that the policy is affordable when purchased, and coverage can be reduced to lower the cost of the premium.
Our office can help you put safeguards in place to reduce the risk of your or a family member’s long-term care insurance lapsing. Contact us today to learn more.
If you would like to learn more or have questions about anything you have read, please feel free to request a consultation today at 888-748-5464 (KING).
King Law offers elder law and estate planning services across Western North Carolina and throughout South Carolina.
