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Can the Insurance Company Cancel My Long-Term Care Policy?

Quick Answer

The last thing you want is to own a Long-Term Care policy, start to have your health decline, and then have the company cancel the policy. Luckily, this can't happen. There are many rules and consumer protections in place which will give you and your family peace of mind.
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Detailed Answer

Some people wonder, can the insurance company cancel your Long-Term Care Insurance policy? Many people ask the question - you pay for a policy for years and, just before you need it, the insurance company cancels it. Can they do that?

The answer is simple - no. Long-Term Care Insurance is guaranteed renewable, which means the insurance company can NEVER cancel the policy as long as you have paid the premium.

It is that simple. It doesn't matter how old you get. It doesn't matter what happens to your health. It doesn't matter if your spouse starts receiving benefits. The insurance company can never cancel the policy, period.

The only way an insurance company can cancel a Long-Term Care policy is if you stop paying the premium.

That is a lot of peace of mind.

Premium Increases

Can an insurance company increase your premium to get you to stop paying so they can cancel the policy?

No. That is illegal. 

Long-Term Care Insurance is not only guaranteed renewable - by law - but the premiums are intended to remain level. The insurance company cannot change your premium unless they get approval to raise everyone in a specific class by your state's insurance department. 

There are several consumer protections in place as well. Today's policies are priced under rate stabilization rules that are in force in most states. In addition, today's plans are also priced based on the extreme low-interest rate environment - Will Long-Term Care Insurance Premiums Go Up? | LTC News.

What if You Forget to Pay Your Premium?

Every Long-Term Care Insurance policy has a "grace period" that gives you extra time to pay the premium before the policy lapses. Many top companies give policyholders as much as 65 days following the due date.

All tax-qualified Long-Term Care Insurance allows you to name a third party that the insurance company must inform if you ever fail to pay a premium. 

The company will send a letter to this person you name informing them you have the policy and failed to pay the premium. This third party is not responsible for paying the bill but can check on you to make sure you are ok.

If you failed to pay a premium because you became physically or mentally unable to do so, an insurance company would reinstate the policy up to six months after the policy lapses upon proof of your impairment. 

You will still be responsible for paying the premium; however, most insurance companies waive the premium once you start receiving benefits from the policy.

Be Careful - Don't Allow Someone to Talk You Into Cancelling Your Policy

Some insurance agents or financial advisors may suggest you cancel the policy and invest the money instead. Generally, this is unethical, and most times, it would not be in your best interest to do so unless you are replacing the policy. 

Often, if you owned your policy for several years or more, it would be unwise to replace the policy as premiums are based on your age and health when you apply.

If an agent or advisor suggests you cancel an in-force policy, be sure to get that advice in writing. If they refuse to put it in writing, then do not consider it.

The last thing you want is to own a Long-Term Care policy, start to have your health decline, and then have the company cancel the policy. Luckily, this can't happen. There are many rules and consumer protections in place which will give you and your family peace of mind.

 

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