Why Do People Lapse On Their Long Term Care Insurance?

            Long-term insurance care is a major risk of finance whether provided at domestic locations or at the nursing homes (Meyer, 2016).  Very few individuals however purchases  long-term insurance care and those that do buy a third of them with the long term insurance care will let the insurance care policies to lapse at the age of 65 years forgetting the benefits that they are bound to leap soon as they will highly required the money they invested in the premiums.

            Additionally those that are at very high risks of  requiring the care continue with the care while those will least risks allows their coverage to lapse. According to the recent findings those that utilizes the care services more   have the high probability of allowing their coverage to lapse despite them having a better  understanding of the associated risks  that they have in regard to their high need to  care (Meyer, 2016).  The latest study by the retirement research center concluded that individuals allow their coverage to lapse because of three major reasons which includes financial, strategic lapsing and forgetful lapsing.  The financial lapser’s reason thus indicates that those individuals who have lower incomes and are thus associated with less well are thus likely to allow their care coverage to lapse because of the individual burden of financially sustaining the insurance premiums.  This is mainly because in the first place he premiums were high at the beginning because off the household financial situation which may have worsened due to changes in the economy. This is facilitated by the decreased planned wealth which has thus made the more attractive which then changes when the individual has to continuously struggle to sustain the premium (Meyer, 2016). 

            On the other side those individuals that have higher level of wealth and higher generation of income have a reduced probability of allowing their care coverage to lapse.  This is because even with economic and financial changes their financial status permits them to continuously commit to the premium as there are no struggles with the payments since they can comfortably handle the premiums even when the payments are raised (Meyer, 2016).  The cost of living also affected individuals because since the cost f living and that of medical care is rapidly aising because of the advanced technology most individuals are therefore unable to handle because of the financial instability.  Those that take long term care coverage are thus bound to be suffering from chronic diseases which are expensive when acquiring treatments. Therefore the individuals are therefore required to pay to expensive premiums which may not be comfortable for them (Meyer, 2016).

            Another reason why individuals allow their care coverage to lapse is because of the strategic reasons. This is because the strategic lapsers  are those individuals who drop their premium payments commitment because  they exist in good health and therefore they draw the perception that they hold lower risks levels in requiring medical care than they had previously expected (Meyer, 2016). Mostly of the individuals acquires the care coverage’s with the view that they will require the assistance in the future because of the fact that as an individual grows old they are bound to be attacked by instinct diseases which may require a he amount of fiancés to sustain (Meyer, 2016). With time the individuals then realizes that they still exist in good health and therefore their premiums payment would therefore not help them much because they believe that they will not be requiring much services. This perception therefore makes the individuals to allow their coverage to lapse even if they are financially able of committing to the premiums payment (Meyer, 2016).

            The other reason is that most individuals fail in evaluating whether their coverage choices are affordable. This is essential because when coverage is affordable an individual is fully able to commit to it without allowing it to lapse because from the beginning they designed their premiums in ways which they would comfortably handle (Meyer, 2016).  This is essential I preventing losses of the benefits associated with the coverage’s.  In addition most of the lapsers fill in planning for how they be accomplishing their payments. In that they fail to develop and individual plan that will help them in ensuring that they do not delay their payments which makes it hard when the premium balances piles up totaling to large amounts (Meyer, 2016). This can this be accomplished by paying lump sum for those that are financially stable  instead of the monthly payments which may be hard to sustain because of the different payments that an individual is required t accomplish in a month.  This is therefore crucial in elimination unintended lapses in the core coverage as this would result to financial losses (Meyer, 2016).

            The other reason is that some individuals are forgetful lapsers (Scott, 2011).  According to the study an establishment was made that the forgetful lapsers are mainly influenced by the impairment of the cognitive. Most of the individuals do this unintentionally because their fiancés are held up in other activities. This can thus be termed as the lack of plan in which they individual fail to plan for their income distribution where they give some activities more financial priority than others (Scott, 2011).  This therefore results to poor decision making where they fail to make beneficial decisions o their covers as they focus more on the current activities that ignoring the future.  These individuals are therefore forced to forget to cooperate in paying their premiums because the value o their policy has been forgotten (Scott, 2011).

            Moreover individuals find themselves lapsing heir care coverage’s because they lack backups (Scott, 2011).  It is important to have an adult back up who can stand for the payments in case one is unable to fulfill the payments. This could be a son or adult who has the potential of taking care of the care premium. The lack of a back up leaves the payments uncovered for as there is no one to make the payments.  Having a back up is therefore crucial in ensuring that the policy lapse likelihood are eliminated and that the intended benefits will be achieved when required (Scott, 2011).

            According to various studies individuals who allow their care coverage’s to lapse are in high need of the long-term care especially those individuals with cognitive impairment (Scott, 2011).  For several individuals they buy the premiums when they have lower risks of requiring medical care and drop it at the time when the need is almost arising. This is therefore a disadvantage to tem because they not only forget the associated benefits but them also but also they may be forced to spend their retirement assets aggressively in order to be able their coverage’s (Scott, 2011).

 

 

            References

Meyer, D. J. (2016). The economics of health.

Harstad, Scott. (2011). Live It Up!: But Don't Outlive Your Income. W & A Pub.