Lapse Rates and Dementia


A study by the Center for Retirement Research found that most people do not lapse long term care policies once they own them – the lapse rate is under 5%.

The shocking bit of news, though, is that the lapse rates for folks over 65 is 35% to 38%.  Further, of those who lapse the policy, the vast majority go into care for cognitive impairment shortly thereafter.

What this tells us is that as people get mild to moderate dementia they often do not recognize the bill for this coverage and/or simply forget to pay it.  Of course, this is just about the time they actually need it to pay.

There is a very simple solution:  put down a contact person to protect against accidental lapse.  Every good carrier has this as an option.  If a policy owner does not pay their premium, a letter (and sometimes phone call) is triggered to the person listed as the protection against lapse.  That way this person has a chance to recover the long term care policy before it lapses by dint of this scenario.

Check your existing policy:  do you have a lapse person designated?  If not add someone.

If you are shopping now:  ask to put someone down.

It is a “bare minimum” thing to do to protect yourself against this unfortunate and all-too-common problem.

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