Whenevcr we think about writing a blog on life, health or long term care insurance, we think about how many policies may be lapsing at that very moment because the policyholder has the beginnings of some cognitive disorder which affects the ability to remember to pay premiums.
One would think that an insurance company which deals with older persons would be aware of the fact that advancing age sometimes brings on Alzheimers or some other functional disorder that affects a person’s ability to take care of their business. If the insurer were a friend, or even neutral, one would expect that the insurer would make inquiry about the failure to pay premiums before canceling a long term care or life policy.
However, the insurer is anything but a neutral, vis-à-vis the policyholder, and is plainly and simply, an adversary. So, when it comes time to pay premiums on the policy, the insurance company gains nothing by spending a lot of time and money trying to ascertain why the insured has stopped paying the premium after many years of payment. After all, if the company cancels the policy for nonpayment of premium it has the best of both worlds – it keeps the premiums it has and sheds the obligation of ever paying money out. What could be better?
That’s why every state should have a law requiring the insurance company to follow a specified procedure to try to make certain that the policyholder hasn’t defaulted because of cognitive failure. This procedure might involve absolutely requiring a check of Social Security’s
Master List of Deaths to see if the person has died. If the person has not, further inquiry requirements should be set forth before the policy could be legally canceled.
As an example of making a start on the problem, New Jersey has a statute, N.J.S.A. 17:29C-1-2, requiring that every senior citizen (a person over 62) be permitted to designate a third party who shall receive notices of cancellation, nonrenewal or conditional renewal before those policy changes can be effective. Although this statute doesn’t shut the door on cognitive policy loss, it should help to cut these losses.
But, let’s be real. No matter what the requirements of the law, insurance companies will do the minimum required to meet the law and that may not be enough. There will be nobody at the company working on the insured’s behalf when it decides to cancel the policy.
Every policyholder should protect against losing his or her insurance coverage because of a lapse caused by cognitive dysfunction, by making certain immediately that their policy requires at least a 30-day notice, not only to the owner, but to a close relative or friend, of the insurer’s right to cancel or substantially alter the terms of the policy.
In this way, a policyholder will have someone in his or her corner when the company decides to cancel because of nonpayment of premium or some other reason related to a cognitive failure.
If you are such a policyholder, and while you are thinking of it, just notify the company of the names and addresses of those besides yourself to whom you want notice of cancellation sent, so you will know you are protected if things start to go downhill mentally for you.
After all, when things start to go downhill for you after years of paying premiums, that’s the worst time for you to lose your coverage.
From the insurance company’s point of view, it’s the very best time.