There’s nothing worse than watching your favorite sports team self-destruct in the final seconds of a game, paving the way to defeat with one avoidable error after another. Unfortunately, such scenarios are not limited to the arena of professional sports. These kinds of last-minute, self-inflicted wounds can happen in the world of Long Term Care Insurance (LTCI), too.
To a certain extent, this isn’t altogether surprising. LTCI is complex, and no one can accurately predict the future 100% of the time. However, when wise decisions are made, LTCI can be a very robust financial safety net.
Often, it’s very avoidable errors that cause lapses in coverage or insufficient benefit payouts. By examining two of the most common such errors, you can make sure all of your bases are covered, avoiding self-inflicted wounds with your LTCI policy that might impact your long term care plans. So how do you know what to look for–and what to avoid? These two case studies provide real-life examples and real-life lessons.
Case Study #1: Make Sure You Have a Third Party Designee
You never know when you’re going to need long term care or how much care you’ll need. Which means you never know when you’ll need to activate your LTCI. One Gordon Associates client purchased her policy at age 60. It was a robust policy with a compound inflation rider and no elimination period. It should have served her well without any issues!
This client paid her monthly premiums steadily for decades. Unfortunately, around age 80, cognitive decline started to set in. Through no fault of her own, she missed enough payments that her policy lapsed due to non-payment. When her cognitive decline grew worse and she needed to activate her policy, it was no longer readily available to her.
In order to receive any benefits, this client’s family had to go through a complicated process to get her policy reactivated. This included asking her physician to write a letter to the insurance carrier stating that her symptoms began before her policy was cancelled. This type of interaction can be a headache–and it’s not always guaranteed to work. The situation itself could have been avoided by including a third party designee on the original policy.
While it may sound complicated, a third party designee is simply someone who you have authorized the insurance carrier to contact regarding your policy if you are late paying your premium. That way, when a payment is missed, the carrier can contact that person in an attempt to keep the policy valid. You can even assign more than one designee or change them in the future. A third party designee in this case may have prevented the client’s policy from lapsing.
The team at Gordon Associates helped this client access her benefits–but most people would rather avoid the hassle in the first place.
Case Study #2: Know Your Family Member’s Medical History (and Likely Medical Needs)
This second case study looks at another client who seemed like she had a strong policy that would be there to protect her when she needed it. She paid on her policy from 1998-2019. It was at this point that, for various reasons, one of her adult children took over the payments on the policy. Then the insurance carrier announced they’d be increasing premiums. In the process of doing this, they made an offer to the adult child of the client: they’d consider the policy paid up in full but the benefit payout would be capped at $67,000, which is the total amount of premiums she paid in.
Unfortunately, this payout was much smaller than what was on the original policy. We advised the paying party against taking the offer, as we knew enough about the client’s medical history to predict a significant amount of possible long term care needs in her future. Despite this advice–and possibly because the client’s medical history had not been communicated within the family–the client’s adult child took the offer.
When the client then needed care, her LTCI payout was insufficient to cover all of her needs. As a result, she ended up dipping significantly into her savings, diminishing the legacy she had planned to leave to her children.
This is another situation that could have been prevented with a little bit of communication. If the family had a better understanding of the client’s medical history and potential healthcare needs, they may have made a different choice. Those kinds of conversations aren’t always easy for families to have–but they can save a lot of heartache when the time comes.
Get the Most Information You Can
Everyone’s long term care is going to look a little bit different. After all, we’re all unique individuals. That’s why it’s important to make sure your LTCI policy is anticipating any complications that might arise over the long term. That’s why working with professional planners like the ones at Gordon Associates can be a huge benefit. Our team can help you find the right policy for today–and for tomorrow.
If you have questions about your LTCI policy–and how to make sure all of your bases are covered–contact Gordon Associates today!
To help determine if long-term care (LTC) insurance is right for you, we are offering a FREE informational guide. This is a comprehensive booklet that will answer many of your questions about LTC and assist you with your health care planning.
To help determine if long-term care (LTC) insurance is right for you, we are offering a FREE informational guide. This is a comprehensive booklet that will answer many of your questions about tax breaks and incentives for LTCI for federal and state taxes.