Non-Forfeiture Benefits in a Long-Term Care Insurance Policy

Though buying long-term care insurance can be a valuable investment, the high cost of the insurance causes many consumers to be unable to make the premium payments at some time. If a consumer is unable to make the premium payment, a policy which offers a non-forfeiture benefit which will provide the consumer with some protection. Whether a consumer is shopping for coverage or has existing coverage, it is important for the consumer to understand how these benefits work.

Explanation

• A nonforfeiture benefit provides some coverage to a consumer after the consumer makes the premium payments for a specific period time. For example, after making the premium payments for five years, a policy may provide a consumer with benefits even if the consumer stops making the premium payments. Policy specifics vary as to how long a consumer must make payments before receiving a guaranteed benefit. Without a nonforfeiture benefit, a consumer may make payments for a number of years and end up without any coverage at all.

Shorter Duration

• Many long-term care insurance policies with non-forfeiture benefits provide benefits for a shorter period of time than the original policy. For example, if a consumer makes all of the premium payments, a policy may provide the consumer with $150 per day of coverage for five years. However, under the nonforfeiture clause, the policy may only provide $150 per day of coverage for six months. The reduction in the amount of time that the policy will provide coverage will vary depending on how long the consumer made the premium payments.

Other Benefits

• Though many policies provide shorter duration benefits, there are other options. Rather than reducing the length of benefits, some policies will provide a reduced benefit amount. For example, a policy providing $150 per day of coverage for five years may offer a consumer using the nonforfeiture benefit only $40 per day for five years. Another option is a return of premium benefit. In this case, a consumer who is unable to make the premium payments would receive the return of some percentage of the premiums paid up to that point.

Other Information

• Policies that provide nonforfeiture benefits generally cost more than policies that do not provide these benefits. When comparing long-term care insurance policies, a consumer should determine whether or not each specific policy offers a non-forfeiture benefit. The consumer should also determiner how the company calculates the nonforfeiture benefits. Some states require that those companies selling long term insurance policies to consumers in that state provide nonforfeiture benefits. To determine the legal requirements regarding non-forfeiture benefits in a specific state, a consumer should contact the state's Insurance Commission for information.