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Jun 13th, 2015

Good news for Long Term Care Insurance policyholders in Virginia: the chances of having your policy lapse without your knowledge just got a whole lot lower. After months of back and forth between state regulators, policy makers, and consumers, a new rule has been created to help protect consumers from accidental lapses in their policies.

The Situation of the Cancelled Policy

Following the situation of Michael Pirron, a man who only found out his parents' Long Term Care Insurance policy was cancelled once it was too late, an attempt to change the system has been in the works. Pirron joined forces with state organizations like AARP to help modify the way policyholders and their designees are notified of a lapse. Although he was listed as the third party designee on the policy, he never received notice of the cancellation in the mail, despite the insurance company saying they had sent it. His parents, both whom were suffering cognitive issues, had accidentally cancelled payments to the insurance company and ignored the notification of their policy cancellation in the mail, much to their detriment.

By the time Pirron realized what had happened, it was too late to reinstate the policy. His parents had spent thousands of dollars on premiums for a policy they can no longer use. His mother, who is now receiving long term care, was forced to spend down her assets to qualify for Medicaid long term care benefits. His father, who will eventually need care, as well, will have to do the same when the time comes. Try as he did, there was nothing Pirron could do to get his parents' coverage back, so he worked hard to prevent the same thing from happening to other unsuspecting families.

Changing the Rules

After a bill meant to address this problem died in committee in the Virginia legislature, the Virginia Bureau of Insurance took it upon themselves to implement the new stipulation. The new rule now requires Long Term Care Insurance carriers to notify policyholders of a policy cancellation 30 days in advance by using one of three different methods.

Before, they had to alert policyholders 30 days in advance, but they were only required to use first class mail to do so. Now, they must do so using either certified mail, commercial delivery, or first class mail with a mailing receipt. Essentially, there must be proof that the notice has been sent and that proof must be kept on record for three years after it was mailed. The American Council of Life Insurers was against the new regulation, calling it unnecessary and pointing out that insurance companies would be forced to reorganize how they manage notices and accept the costs of the more expensive notices. The Bureau of Insurance, though, called the regulation, "both reasonable and necessary."

“I’m pretty excited about it,” Mr. Pirron said in an interview with Paula Span of the New York Times New Old Age blog.

Keeping Track of Insurance

The new regulation will take effect on January 1, 2015 in Virginia. Pirron is doing his best to see that the same regulation takes effect nationwide, but that battle will take much longer. Until then, it's important that policyholders do their best to keep up with their insurance policies.

If your parents have a Long Term Care Insurance policy and you are listed as the designee, we recommend implementing your own fail-safe. That could mean penciling it into your calendar twice a year to call the insurance company and check on the status of the policy. Bottom line is, you need to ensure you don't miss out on important information that could have a huge impact on either yours or your family's finances.

Long Term Care Insurance benefits can provide immeasurable financial and emotional relief and to pay for years of premiums just to eventually lose coverage is a nightmare for any one. Keeping track of your insurance policies regularly can help you avoid that situation and make certain that when the need for care arises, you can receive the benefits that the policy offers.

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