By Linda M. Toga, Esq.
THE FACTS: My father purchased long-term care (LTC) insurance decades ago. Since he had been widowed at a relatively early age, he felt it was important that he have coverage in the event he ever needed skilled nursing care or in-home care.
Recently it has become obvious that my father’s ability to handle his affairs is somewhat impaired. In addition, his health is failing and I believe he needs help with activities of daily living.
Since I am not in a position to assist my father on a daily basis, I decided that the time had come to file a claim for benefits under my father’s LTC policy to cover the cost of his care. When I filed a claim, I was shocked to learn that my father’s policy had lapsed two years ago based upon failure to pay the premium.
THE QUESTION: What are our options with respect to coverage for my father’s LTC insurance?
THE ANSWER: Unfortunately you don’t have any options when it comes to your father’s LTC insurance. When a payment is missed on such policies, companies sometimes give the insured a grace period during which the policy can be reinstated if payment is received. However, if your father failed to pay premiums for two years, I seriously doubt that reinstatement is an option.
Although it is too late to address the non-payment of the LTC insurance premium, you and your father should go through all of the paperwork relating to other insurance he may have, as well as accounts, contracts and recurring obligations, to be sure he has not missed any payments or failed to take whatever action may be needed to avoid penalties.
Most insurance companies allow customers to name a third party who will automatically receive notification if a premium is not paid. If your father had designated you as the person to receive notification of any nonpayment, you could have taken the necessary steps to pay the premium in a timely manner and his LTC policy would not have lapsed. Like insurance carriers, utility companies generally offer customers the option to name a third party to receive important notices regarding nonpayment. Your father should take advantage of these arrangements.
If he has recurring bills that need to be paid and is not able to designate a third party to receive late notices, he may want to consider arranging with his bank to automatically make those payments directly from his checking account. If automatic payments are set up, he will not have to worry about missing a payment because he misplaces the bill, is away when the payment is supposed to be made or simply forgets to send the check.
In addition to working out a system to ensure that your father’s bills are timely paid, you may want to talk to him about an arrangement to ensure that he takes the necessary steps each year to receive his minimum required distributions from any qualified retirement accounts he may have. If your father is unsure of whether he has accounts that require minimum distributions, you may want to ask him if you can speak with his financial adviser and/or accountant. These individuals should be able to assist you.
Assuming such accounts exist, you can ensure that the necessary steps are taken each year by simply making a notation on your own calendar of your father’s obligation to notify his plan administrator. Even if your father does not need the money, it is important that he take the minimum distribution every year since failing to do so can result in significant penalties.
When discussing with your father the lapse of his LTC insurance and suggestions for avoiding similar problems in the future, you may want to suggest to him that he retain an attorney with experience in estate planning to prepare for him a comprehensive power of attorney. The agent named in such a power of attorney will have the authority to handle your father’s affairs and will be in a position to ensure that he does not experience the types of problems discussed above.
Linda M. Toga provides legal services in the areas of estate planning/elder law, probate and estate administration, real estate, small business service and litigation from her East Setauket office.