If I find myself unable to pay my premiums at a later point, what alternatives do I have to avoid lapsing my policy?

Most insurance carriers allow policyholders to reduce their coverage, and thereby lower their premiums. For example, if you originally purchased a $6,000 monthly nursing facility benefit with lifetime benefits, you might reduce the monthly benefit amount to $5,000 or shorten the benefit period to 6 years.

Most newer LTC policies include “contingent nonforfeiture,” a feature that is designed to protect you if the policy is subject to a significant rate increase. If rates increase over the life of the policy by more than a specified percentage, then you have the option to exercise this contingent nonforfeiture option, by stopping paying premiums but retaining a reduced lifetime benefit equal to the total premiums you paid over the life of the policy. The specified percentage increase varies depending on your age when you purchased the policy. While this feature is nice to have, it is one that offers little value, because the nonforfeiture benefit is so small and because the specified increase percentages are relatively high.

All policies also offer a “nonforfeiture option,” which guarantees you a certain level of coverage, even if you stop paying premiums entirely. However, such options typically raise premiums significantly and typically are not cost-justified. For an additional price, if, after at least three years, the insured stops paying premiums, he or she will receive a nonforfeiture benefit equal to the monthly benefit under the long term care insurance policy, but limited to the amount of premiums paid to the insurance company over the life of the policy. Because LTC insurance premiums are usually minimal in comparison to the cost of care, this benefit is likely to be negligible.

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