Long-Term Care Insurance Policy Reinstated

A recent case involved a husband and wife who purchased long-term care insurance policies in 2001.  Each policy provided a daily benefit of $270, and a lifetime maximum benefit of $300,000.  When benefits are exhausted under one policy, that spouse can avail of benefits under the other spouse’s policy.   Husband faithfully paid the policy premiums each year. 

In 2015, wife was diagnosed with Alzheimer’s disease, and a claim was made under her long-term care insurance policy.  After a 60-day elimination period, the insurance company began paying benefits under the policy.  At first wife received care three days a week in her home by a visiting nurse.  Then wife began attending adult day care daily.   The insurance company paid for all of this care under the terms of wife’s long-term care insurance policy.  Under terms of the policy, premiums are waived while there is a claim in pay status.

From April, 2016 to November, 2017, wife’s family failed to submit invoices for her care to the long-term care insurance company.  The insurance company concluded from this that wife’s claim must have resolved, and cancelled the waiver of premium on the policy.   This was preposterous.  Wife was then many years into an Alzheimer’s diagnosis.  Alzheimer’s is a progressive disease.  It does not “resolve.” 

Husband, also elderly, had no reason to believe that premiums were again payable on wife’s long-term care insurance policy.  When premium payments did not resume on wife’s long-term care insurance policy, the insurance company cancelled the policy for premium lapse.  This notwithstanding a policy provision that the policy could not lapse for nonpayment of premium while the insured is suffering cognitive impairment.  Oh, that’s right, the claim must have “resolved.” 

By 2017, wife needed inpatient care for her advanced Alzheimer’s. On November 1, 2017, as a soon as a room was available, she was moved into a memory care facility.  Husband has been paying for wife’s inpatient care out of their savings.  Husband was despairing at the failure of the long-term care insurance policy he had purchased for wife.  This was the status of the case when it came to my attention in 2020.

I reviewed husband’s files concerning the long-term care insurance policies and correspondence with the insurance company.  I called wife’s long-term care insurance carrier.  The claims representative I spoke with reviewed wife’s policy file, and was disturbed by what had occurred. The representative gave me an address at the insurance company to which I could write requesting reinstatement of wife’s long-term care insurance policy. 

In my letter to the insurance company, I explained that wife’s long-term care insurance policy had a provision waiving premiums in the event a claim was made under the policy.  I also mentioned the provision that the policy could not be cancelled for premium lapse while the insured (wife) was under a cognitive disability.  Wife could not have consented to cancellation of her long-term care insurance policy.  I demanded reinstatement of wife’s long-term care insurance policy.

The insurance company responded saying that wife’s long-term care insurance policy has been reinstated, retroactive to April, 2018.  The insurance company last paid benefits under the policy for the month of March, 2018.  At a monthly cost of $8,000 for wife’s inpatient care, reinstatement of her long-term care insurance policy is worth over $200,000. 

Wife’s long-term care insurance policy should not have been cancelled.  At least the insurance policy is reinstating the policy, retroactively, without a fight.  We will talk with the insurance company about reimbursing the family for its attorney fees in the matter.

Financial abuse of elders is a serious problem.  I have seen much of it in my career.  Unlike the case recounted above, financial abuse often is perpetrated by someone close to the victim—a family member, a friend, an attorney.  You should never rely upon others to do what is right, especially when they are motivated by self-interest.  Vulnerable elderly need a trustworthy person to monitor their financial affairs.

At this point I am focusing my practice on redressing financial abuse of elders.

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Stephen J. Dunn

Tax and Estate Planning Attorney and Author