The Insurance Buying Guide: Other Consumer Protections
Riders or endorsements that reduce or eliminate benefits usually require the signed acceptance of the policyholder (unless otherwise requested by the policyholder). You also must agree in writing to riders or endorsements that increase benefits and increase the premium, unless the change is required by law.
Many states provide protection against unintentional lapse of LTC insurance, due to a covered cognitive impairment. Applicants usually are asked to designate an additional person who will receive notice of any impending lapse or termination of coverage due to nonpayment of premium. Also, the policies must include a provision allowing such person to reinstate terminated coverage within five months, as long as the person submits proof of cognitive impairment and pays past-due premiums.
Insurance companies also must make "every reasonable effort" to discover whether you already have accident and sickness or LTC insurance, and the types and amounts of such insurance.
In recommending the purchase or replacement of an LTC policy, an agent must make reasonable efforts to determine the appropriateness of the recommended purchase or replacement. Many states have incorporated language to this effect into their insurance laws.
Laws prohibit insurance companies, brokers and agents from persuading anyone to replace an LTC insurance policy unnecessarily, especially when the replacement causes a decrease in benefits and an increase in premiums. To this end, LTC insurance application forms must include a question about whether the proposed insurance is intended to replace any other LTC insurance presently in force. Upon determining that a sale will involve replacement, the insurance company is required to furnish the applicant with a Notice Regarding Replacement.
If a group LTC policy is replaced by another group LTC policy, the replacing insurance company must:
- provide benefits identical or substantially equivalent to the terminating coverage;
- calculate premiums based on the policyholder's age at the time of issue of the original coverage (however, if the replacement coverage offers new or increased benefits, the premium for those benefits may be calculated based on the policyholder's age at the time of replacement);
- offer coverage to all persons covered under the replaced policy;
- not exclude coverage for pre-existing conditions that would have been covered under the terminating coverage;
- not require new waiting periods, elimination periods, probationary periods or similar preconditions;
- not vary the benefits or premiums based on the policyholder's health, disability status, claims experience or use of LTC services.
If existing coverage is converted to or replaced by a new form of LTC insurance with the same company, the insurance company may not establish any new waiting periods -- except for an increase in benefits voluntarily selected by the policyholder.
