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What happens if you miss a long-term care insurance payment?

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As we've discussed here before, purchasing a long-term care insurance policy can be a prudent move. It can help cover the costs of care in your later years. However, it's essential to pay your premiums on time. Even one missed payment can result in cancellation.

One Glendale, California, woman learned that the hard way. She and her husband had an LTC policy with Transamerica for 16 years. They'd paid some $60,000 in premiums, and had never missed a payment. Then the husband died of heart failure after over a half-century of marriage.

In the midst of her grief, the Thanksgiving and Christmas holidays and family events, she neglected a bill from Transamerica. The following month, she received a letter from the company notifying her that no more payments were due. Transamerica had cancelled the couple's policy based on one missed payment.

The woman is working to get her policy reinstated. She is also helping to educate other LTC policy holders so that they don't find themselves in the same situation. That situation, according to one insurance agent and certified family planner, is not unusual, particularly for seniors.

How can you prevent this from happening? One way is to set up automatic payments with the insurance company so that the money is deducted from your account. Just be sure to factor that payment in when balancing your checkbook to make sure you have sufficient funds to cover it. You can also designate a third party to receive a notice if you are behind on your payments. This should be a responsible person on whom you can depend to contact you or make the payment themselves.

There are also hybrid life insurance/long term care policies that you might want to consider instead. These can be used for LTC if needed, but if not, the funds in the policy can be paid to your beneficiaries on your death.

Trying to reapply for LTC insurance after having your policy cancelled can be difficult, if not impossible. The older you are, the more expensive it is. Further, you may no longer be able to pass the underwriting requirements for getting a policy at all. If your policy has been cancelled due to a missed payment, you may want to seek legal guidance to find out what your options are.

Source: ABC 7, "Long-Term Care Insurance Can Be Axed With Just One Missed Payment," Ric Romero, June 29, 2015

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