Tuesday, February 4, 2014

The Long Term Care Insurance Con Game


"The Conjurer," painted by Hieronymus Bosch.  Can you find the "con" in this game?

Consider this scenario:

You are getting older, and are concerned about the costs of nursing homes and long term care.  So, you decide to get expensive long term care insurance to protect your family from these costs.  The policy will pay some of the cost of long term care if you develop cognitive or physical disability.  All you have to do is keep making payments on the policy until you have a need for services.  But make sure you make the payments.  If you don't, your policy gets cancelled, you lose all the money you put into premiums, and you get nothing when you need the services you thought you were paying for.

But wait, there is a catch.  One of the first problems that happens in persons who are developing the very cognitive problems that lead to the need for long term care services is trouble managing finances.  One of the first signs that someone needs their long term care insurance is that they can't keep track of bills, forget to make payments, and make bad financial decisions.

But guess what?  Since you were having memory problems, you forgot to pay your long term care insurance premium.  Since you missed payments, the insurance company will claim your policy is lapsed.

Ain't that a nice deal for the insurer!  The very fact that you have developed a need for their services becomes an excuse to keep all your premiums and never pay you a dime.

In a compelling post that will make your blood boil with anger, Paula Span describes such a horrendous situation on the New Old Age Blog.  A Virginia couple, David and Anne Pirron, diligently planned for their needs by purchasing a long term care policy from John Hancock.  Over 10 years, they paid $50,000 to John Hancock.  But then they developed cognitive problems.  These cognitive problems should have triggered payment from Hancock for long term care services.  But, because of their cognitive problems, they forgot to pay their premiums.  So, instead, Hancock cancelled their policy, paid them nothing, and kept the Pirron's premiums.

The irony is that if the Pirron's had filed a claim when they were developing memory problems, Hancock probably would have had to pay up.  But like most people developing these type of problems, it took them time to ask for the help they needed.  So, instead, Hancock used their need for help as a way to get out of paying.

A good deal for the insurers, but an awful deal for those who think they are paying to protect themselves and their families.

by: Ken Covinsky

5 comments:

Miriam Zucker, LMSW said...

Most of the long term care policies provide for a person within or beyond the family to be notified when a payment has not been received.

If this had been an option for the husband and wife perhaps they would not be faced with this situation.

Miriam Zucker, LMSW, C-ASWCM
www.directionsinaging.com

Anonymous said...


John Hancock has more than one trick in their bag! I am at the opposite end of the spectrum and look what happened to me:

Being a hospice doc, I advised families about long term care insurance. So I wanted to do the responsible thing and get one for myself.. against my husband advice who thought I was too young.
But that was the idea: you start paying a fixed premium when you are young, but 35 years later you are covered...
So here I was at age 42, healthy, athletic and having written my ‘’Do nothing please’’ advance directives, paying an expensive ‘premium’ policy , just for the peace of mind it gave me …

After the 15 years , John Hancock found a loop in the contract and began raising outrageously the premium every year !
I was outraged:
“ It was a fixed premium policy !
“ That policy is no longer offered
“ Your representative told me it would never change
“ Sorry , he was misinformed

But how do you fight a big company? your ‘agent’ has left the company , and you are put on hold for hours before being transferred to someone polite , that reads the same sentence -from her customer service manual - , over and over again …
I had to cancel! .. Lost over 15 years of premium, and have no coverage now..

D.Sara MD,MPH

Paula Span said...

Actually, the Pirrons' scenario is even worse. Their son recognized the danger of nonpayment, set up a bank auto-payment and was designated the third party to receive notices about policy changes or nonpayment. He did everything right.

Then his cognitively-impaired father inadvertently cancelled the auto-payment. The son says he never got the third-party notice that the policy was about to lapse for nonpayment. John Hancock says its records show it did notify him and it refused to reinstate the policy.

Now the son is trying to get Virginia to require insurers to send third-party notices by certified mail. AARP is backing this effort. Legislation didn't get out of committee this session, but the insurance commissioner may take action. Stay tuned.

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Jessie Parker said...

Sad to hear the negative experiences you guys have here.
For those who are having a dilemma of getting long term care insurance, I suggest that you read reviews and gather lots of information about different companies.
Do not hesitate to ask questions and voice out your concerns to your agent, to make things clear and sure. Long term care insurance can be very complicated to understand, good knowledge before getting one is highly recommended.