Designating someone to receive secondary notice under your (or your loved one's) long-term care insurance policy could mean the difference between losing a valuable insurance benefit or keeping it in force. Some long-term care insurance policies and even some state statutes allow an insured the right to designate a third party to receive a copy of certain notices also sent to the insured. The importance of having such a proper designation on file with the insurance company cannot be understated.
Possibly the most important situation that such a proper designation protects against is a cancellation or lapse of an insurance policy due to non-payment of premiums. In most states, long-term care policies must provide the insured with a 30-day grace period for payment of a premium. Many state laws take this further, and require that a long-term care insurance policy cannot be cancelled by an insurance company for nonpayment of premiums unless the 30-day (or longer) grace period has expired AND proper notice has been provided to the insured following the grace period expiring which advises the insured that the policy may lapse (i.e., be cancelled) if the outstanding premiums are not paid. An insurance policy or state law may actually provide for the right to designate a third party to also receive a copy of this notice. This could be critical to keeping a long-term care insurance policy in force in a situation where the insured is not otherwise able to ensure that premiums are paid current. For example, an insured may begin to experience the onset of symptoms of Alzheimer's or Dementia for a period of time before the person obtains a diagnosis or before a family member or friend notices. Such conditions often result in a person being unable to manage bills. Or, the insured may have become very ill quickly and was unable to keep up with bills. Or, an aging individual (who is the most likely to have an need long-term care insurance) gradually becomes unable to manage personal affairs such as making sure premium payments are current, or overlooks a premium payment. Persons in these situations may not receive or may not realize they received a notification that their policy will lapse or be cancelled if premiums are not paid current, and no one else may be aware that the person has a long-term care insurance policy which needs to be paid current in order for the policy to remain in force.
In the case where a third party has been properly designated to receive notice that a long-term care policy will lapse if premiums are not paid current, the third party can receive notice of the nonpayment of premiums before it is too late and hopefully prevent the long-term care insurance policy from lapsing. The loss of this insurance coverage could result in huge financial loss.
Some state statutes allow for even additional protection for an insured in this situation where the failure to pay premiums was unintentional and due to cognitive impairment, loss of functional capacity, or hospitalization, and require the insurance company to be reinstated within a certain period of time if all premiums are paid current upon discovery of the situation. However, the law varies by state, and insurance companies do not always properly apply the state law. Thus, a seemingly simple situation can become complicated very quickly, and insurance company representatives do not always properly apply the law or accurately interpret policy terms.
When designating a third party, it is important to follow the insurance company's procedures and meticulously complete all necessary paperwork to ensure that the designation is properly made. Keep copies of all documentation, and keep a detailed log of all telephone calls supporting the designation of the third party - do things in writing where possible. Additionally, it is important to remember that an insurance company's obligation to notify the third party only extends so far. Normally, an insurance company must only mail the notice to the third party's last known address on file with the insurance company. Thus, it is very important that all contact information for the third party designee is kept current, and that any updated contact information is made in writing and follows the proper procedures of the insurance company. It is critical to keep copies of all information submitted in providing updated contact information, and to keep a log of any telephone calls regarding these issues as well. The situation does arise where an insurance company takes the position that it mailed the third party notice to the last known address that it had on file for the person, but the insurance company actually mailed the notice to an old address that was not updated in its files for whatever reason. Documentation to refute the insurer's position that it properly mailed notice to the last known address on file for the person is crucial.
If you are uncertain as to whether your long-term care insurance policy or insurance company allows for such a designation, you could contact your insurance agent or insurance company to inquire as to whether it is possible, or you could contact an experienced long-term care insurance attorney to have your policy reviewed or better understand the law governing your policy.
Also, do not "take your insurance company's word for it" when it takes the position that your (or your loved one's) long-term care insurance policy has lapsed for nonpayment of premiums. There are many requirements that an insurance company must strictly follow before a long-term care insurance policy may be cancelled for nonpayment of premiums, and there are also exceptions under the law when such cancellation can occur. If you are facing a situation involving cancellation of a long-term care insurance policy due to nonpayment of premiums, contact one of our experienced attorneys today for a free consultation.