LTCI is much like layaway. Wikipedia can help here. ‘…the layaway customer does not receive the item until it is completely paid for…There is sometimes a fee associated, since the seller must “lay” the item “away” in storage until the payments are completed…If the transaction is not completed, the item is returned to stock; the customer’s money may be returned in whole, returned less a fee, or forfeited entirely’.
The item being referred to, of course, is the LTCI contractual benefit(s) once on claim. If you don’t complete the transaction, you might get a tiny bit of your money back subject to “conditions”.
LTCI is much different than layaway. ‘The main advantage of layaway is that no interest is charged…In addition, the price is fixed.’
In LTCI, after having paid many installments, you may discover the price has changed and that you are responsible for your installment underpayments from inception. You might be saddened to learn you are responsible for interest payments of your underpayments too.
It gets worse. You are also responsible for your pro-rata share of under-payments of those who are long gone, bought the same item, eventually paid for the item on an installment plan, took it home and used it. You are also responsible for a pro-rata share of the interest rates of their under-payments. Pro-rata refers to those others who remain in the installment program for the same item.
Gets even worse. You are responsible for the under-payment of perceptive ones who simply left town early, never fully paid or received the item. With interest, but only your pro-rata share.
Ultimate insult. Same idea, but the class of those that fully paid for the item but they haven’t picked up or used the item yet. They will simply hang around until the item is needed. They seem to have made a really smart decision. Or maybe not, according to Wiki: “…consumers face potential financial loss in the case where a retailer declares bankruptcy prior to collecting the item”.
Finally, one more class. One prescient group cut a different payment deal with the store. They agreed to pay slightly more than others for the first few installments with reduced payments thereafter. In some cases this group is immune from price changes, so you are also responsible for their alleged underpayment plus interest too.
Another way to look at this
You buy an item and agree to installment purchase plan. You have not been told that you have taken out a loan at ~4.5%. Initially, the principal of your hidden loan is $0, so no problem. At some point after you have paid many installments, someone from the store calls you and says, “we are sorry, but we underpriced the item a long time ago, so we need to triple the price of your item. Oh, by the way, you agreed to a 4.5% loan, so we are charging you both the outstanding underpricing balance plus the interest from the time you bought”. Neat. The store forgets to tell you that your new loan balance is also increased to reflect your pro-rata share of the other classes described above. But, don’t worry — you can pay this hidden loan off if you agree to increased future installments payments, otherwise the store says,”get lost”!
“How could it be”?
E. Benes: “Oh, it be”.