Policy Riders: Lapse Rider, Contingent Benefits and Contingent Nonforfeiture Coverage

POLICY RIDERS: Lapse Rider, Contingent Benefits and Contingent Nonforfeiture Coverage

Contingent Benefits Upon Lapse Rider

The provisions in the sample long term care insurance policy clearly state the specific conditions under which benefits will not be paid. Most policies contain provisions similar to those outlined below.

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This rider provides limited coverage if your policy ends because of nonpayment of premiums or because your written request to cancel Your Policy following a Substantial Premium Increase.

This Rider is part of the Policy to which it is attached if it is referred to on the Schedule of Benefits page of the Policy. This Rider provides coverage as described below.

Definitions

“Initial Annual Premium” means the Gross Annual Premium on the Original Coverage Effective Date as shown on the Schedule of Benefits page of the Policy. In determining the Initial Annual Premium and any changes thereto, We will not take into account any premium payment mode factors or any discounts.

Any premium increase which results from a change in benefits as provided under the terms of Your Policy, will be added to and become part of the Initial Annual Premium. If You decrease Your benefits, the Initial Annual Premium will be reduced by the amount of the decrease in Your premium.

“Substantial Premium Increase” means a cumulative increase in Your Initial Annual Premium which equals or exceeds a given percentage increase over Your Initial Annual Premium, as shown in the following table. Any premium increase which results from a change in Benefits requested by you, or as a result of an increase in Benefit amounts as provided under the terms of Your Policy, is not an increase for the purpose of determining a Substantial Premium Increase.

Substantial Premium Increase Table

*Original Issue Age means Your age as shown on the Schedule of Benefits page of the Policy.

Eligibility for Contingent Benefits Upon Lapse

We will provide You with written notice of a Substantial Premium Increase at least forty-five (45) days prior to the date on which such premium increase will take effect. In this notice, We will:

1. Offer to reduce Your Benefits, without You providing proof of good health, so that your premium will not increase;
2. Offer You the ability to receive Contingent Nonforfeiture Coverage as defined below, and
3. Advise You that a Lapse at any time during the 120-day period following the due date of the increased premium will be deemed to be an election to receive Contingent Nonforfeiture Coverage.

Contingent Nonforfeiture Coverage

If Contingent Nonforfeiture Coverage takes effect, the same Benefit amounts as those payable in effect under the Policy immediately prior to the Contingent Nonforfeiture Date will be payable under Contingent Nonforfeiture Coverage, except that the Total Lifetime Benefit will be the greater of:

1. the sum of all premiums paid or waived under the terms of the Policy; or
2. thirty (30) times either the Nursing Home Maximum Daily Benefit Amount or Assisted Living Facility Maximum Daily Benefit Amount (whichever is shown on the Schedule of Benefits page of the Policy) in effect immediately prior to the Contingent Nonforfeiture Date.

The total Benefits available under the Policy after the Contingent Nonforfeiture Date will not be more than the remaining Total Lifetime Benefit when Your Policy ended because of nonpayment of premiums or Your written request to cancel the Policy.

When Contingent Nonforfeiture Coverage Begins

Contingent Nonforfeiture Coverage takes effect on the Contingent Nonforfeiture Date. “Contingent Nonforfeiture Date” means:

1. the first day after the end of the period covered by Your last paid premium; or
2. the last day of the Policy month in which We receive Your written request to cancel Your Policy, if it is received within 120 days after the first premium due date following a Substantial Premium Increase.

Limitations

Once Contingent Nonforfeiture Coverage becomes effective: (1) You cannot make any changes to Your Policy; and (2) all Riders under Your policy end.

Effective Date

This Rider takes effect on the Rider Effective Date as shown below.

Termination of This Rider

This Rider will end on the earlier of:

1. the date the Policy ends; or
2. the date Contingent Nonforfeiture Coverage becomes effective under this Rider.

In all other respects, the provisions and conditions of the Policy remain the same. This Rider is subject to the provisions of the Policy which are consistent with this Rider.

Rider Effective Date: 00/00/00

Case Studies: Policy Riders in Long-Term Care Insurance

Case Study 1: John’s Lapse Rider

John faces financial difficulties and struggles to pay his long-term care insurance premiums. His policy includes a Lapse Rider, which offers limited coverage if the policy ends due to nonpayment or cancellation following a substantial premium increase. John explores options to reduce benefits or elect Contingent Nonforfeiture Coverage.

Case Study 2: Sarah’s Contingent Benefits

Sarah receives a notice of a substantial premium increase on her long-term care insurance policy. With a Contingent Benefits rider, she can make changes to her policy benefits to avoid the increase or opt for Contingent Nonforfeiture Coverage, which provides limited benefits based on premiums paid or waived.

Case Study 3: Mark’s Contingent Nonforfeiture

Mark’s long-term care insurance policy enters the Contingent Nonforfeiture Coverage phase due to nonpayment of premiums. Despite financial difficulties, his policy remains active, and he becomes eligible for benefits. The coverage guarantees benefits based on either premiums paid or waived or 30 times the Facility Maximum Daily Benefit Amount.