Non-Forfeiture Options in Long-Term Care Insurance: What You Need to Know

A nonforfeiture provision protects policyholders who stop paying premiums after a specified period (often 3 years). It guarantees a reduced benefit instead of total loss of coverage.

How It Works

• Trigger: Policy lapse due to nonpayment or voluntary cancellation after the required duration.
• Benefit Calculation: Typically the lesser of:
  • Total premiums paid
  • A percentage of premiums paid (20%–100%, per policy)
  • Cash surrender value
• Benefit Form: Usually a shortened benefit period (e.g., daily benefit remains same but maximum lifetime benefit is reduced) or a paid-up policy with reduced daily benefit.

Common Nonforfeiture Types

• Shortened Benefit Period (Most Common): Coverage continues at original daily benefit but for a reduced maximum lifetime amount.
• Reduced Paid-Up Benefit: Policy becomes paid-up with a lower daily benefit.
• Cash Surrender Value: Lump-sum payout (less common in LTC; more typical in life insurance).

Key Considerations

• Not all policies include nonforfeiture; it may be an optional rider adding 10–30% to premium.
• State regulations (e.g., NAIC model) may mandate minimum standards.
• Inflation protection riders may not apply to nonforfeiture benefits.
• Compare the cost of the rider vs. likelihood of lapse and value of retained benefit.

Understanding your policy's specific nonforfeiture terms is essential before deciding to stop premium payments.