Don’t Let That Long-Term Care Policy Lapse!

I have posted many articles about the Baby Boomers and their increasing responsibilities for aging parents.

Our friends at the Center for Retirement Research at Boston College have issued another interesting article about the problems of cognitive decline and poor decision making (of the elderly). The article is titled: “Why Do People Lapse Their Long-Term Care Insurance?” by Wenliang Hou, Wei Sun, and Anthony Webb.

In brief the article discusses that older people, who are in most need of their long term care insurance, often allow their policy to lapse. The article refers to such individuals as “lapsers”.

According to the research: Two types of lapsing are “financial lapsing” and “cognitive lapsing”. Financial lapsing may be due to lack of funds to continue the premium payments and cognitive lapsing may be due to ‘forgetfulness’ (forgetting to continue premiums) or deterioration of financial decision- making skills.  Some persons might think that even if they do not continue to pay premiums the policy will continue ( a matter of poor decision making.)

The article states: “The consequences of lapsing are significant, as lapsers are actually more likely than non-lapsers to use care in the future…”

In addition, all premiums are forfeited when policies lapse and no benefit has accrued.

According to the statistics: “At current lapse rates, men and women age 65 have, respectively, a 32- and 38-percent chance of lapsing prior to death”… (that is approximately one-third of long-term care policies)

A suggestion from the article…,”One way of eliminating lapses would be to pay premiums in a lump sum…” “Most likely candidates for long-term care insurance have accumulated significant financial wealth by retirement…”

My suggestion is that such an approach requires careful analysis by a qualified financial advisor to assist the decision surrounding long term care policies.

There are mechanisms for families of the elderly to assist in financial decisions. For example, many banks (with appropriate authorization) will send duplicate copies of statements to concerned family members or enable a family member to track statements on line.

Mechanisms are also available to establish ‘auto pay’ on critical accounts, like utilities, mortgages, HOA fees, etc. And there are overdraft privileges available so that checking accounts do not become depleted.

Whatever the solution, a discussion with elderly loved ones is best done sooner rather than later so that financial issues can be dealt with and loved ones remain financially solvent and critical medical/long term care insurance does not lapse. Refer to my other postings about family and aging on my website.

Read the entire Center for Retirement Research article at  and access more interesting studies on the website.

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About Attorney Barbara Ann Dalvano

Attorney in Denver, Colorado with extensive practice experience in the areas of Estate Planning, Wills and Trusts, Business Succession Planning, Probate, Contract Law.

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