Long Term Care Insurance continued
Nonforfeiture benefits
An insurer that offers a long-term care policy must offer a nonforfeiture protection provision. "Nonforfeiture" means that the premium that has been paid into the policy can not be forfeited if the policy lapses because the insured person is unable to pay due to confinement in a hospital. If you think about it, this makes good sense. The majority of people who buy this insurance are seniors and it would be unfair to lose all coverage and all premiums from an accidental lapse like that. So Florida law says that the insurance company can offer the following as nonforfeiture benefits:
- reduced paid-up insurance,
- extended term,
- shortened benefit period if all or part of a premium is not paid.
- The nonforfeiture protection provision providing a shortened benefit period must, at a minimum, provide the same benefits, amounts, and frequency in effect at the time of lapse be payable for a qualifying claim, but the lifetime maximum dollars or days of benefits are determined by the following:
- The standard nonforfeiture credit must be equal to at least 100% of the sum of all premiums paid, but the minimum nonforfeiture credit must not be less than 30 times the daily nursing home benefit at the time of lapse.
- At the time of lapse the insurer must disclose the insured's then-accrued nonforfeiture values. At the time the policy is issued, the insurer must provide to the policyholder schedules demonstrating estimated values of nonforfeiture benefits; however, such schedules must state that the estimated values are not to be construed as guaranteed nonforfeiture values.
Contingent benefit on lapse
If the offer to purchase nonforfeiture benefits is rejected the insurer must include in the policy the contingent benefit upon lapse. On or before the effective date of a substantial premium increase, the insurer must:
- offer to reduce policy benefits provided by the current coverage so that required premium payment are not increased; or
- offer to convert the coverage to a paid-up status with a shortened benefit period.
Grace period and unintentional lapse *****
***** 30 days grace period, 5 months to reinstate *******
All long-term care policies in Florida must allow for a minimum of 30 days' grace period during which premium may be paid without the policy lapsing. If the policy becomes a claim during the grace period before the overdue premium is paid, the amount of such premium or premiums with interest not in excess of 8% per year may be deducted from the claim.
Unintentional lapse. As part of the application process, the applicant must be allowed to designate a secondary addressee who is to receive a notice of lapse for nonpayment of premium along with the policyowner. If a policy is canceled due to nonpayment of premium, the insurance company has to allow at least 5 months for the insured to reinstate if the policyholder or secondary addressee demonstrates that the failure to pay the premium was unintentional and due to the policyholder's:
- cognitive impairment,
- loss of functional capacity, or
- continuous confinement in a hospital, skilled nursing facility, or assisted living facility for a period in excess of 60 days.
Policy reinstatement is subject to payment of overdue premiums.
Conditions determining benefit payment *****
A long-term care insurance policy may condition the payment of benefits based on the insured's ability to perform activities of daily living and on cognitive impairment. Most insurance companies require that the insured be unable to do at least two ADLs, and Florida law says the most the insurance company can require is that the person can not do three activities. If the person can do the activities then cognitive impairment will be sufficient to get a benefit paid. ADLs include:
- Bathing
- Continence
- Dressing
- Eating
- Toileting
- Transferring
Loss of functional capacity or cognitive impairment must not be more restrictive than:
- requiring the hands-on assistance of another person to perform activities of daily living; or
- due to the presence of a cognitive impairment, requiring supervision to protect the insured or others.
Assessment of activities of daily living and cognitive impairment must be performed by licensed or certified professionals, such as physicians, nurses, or social workers. Long-term care insurance policies must include a clear description of the process for appealing and resolving the benefit determinations.