Wondering if life insurance with long term care rider is worth it? Adding a long term rider (LTC) to your life insurance policy can really help lessen your concerns about getting extra help down the road.
The average costs of a long term care facility is around $75,000 to $140,000 per year depending on the the type you choose. You may also want to know that approximately over 52% of individuals turning age 65 will need some long term care in their life.
Today we’re going to help you understand the different types of long term coverage that’s available to you. We’ll look at the pros and cons of long term care to see if it will meet your goals for coverage.
Long Term Care Rider Definition
The long term care rider pays for long term care by taking cash out of your life insurance death benefit to pay for nursing services, nursing homes and other qualified services. This is not the same as an Accelerated Death benefit rider as you qualify for these riders in a different way.
Related: Life insurance riders
How do you qualify for the long term care rider benefit?
Long term care riders can be activated once you qualify for a chronic illness and are not able to care for yourself any longer. With an Accelerated Death Benefit, you need to have a qualified medical professional diagnose you with a terminal illness before you can access your death benefit.
More specifically, a doctor can qualify you when the insured can’t perform 2 out of 6 ADLs (activities of daily living) for at least 90 days. This also includes cognitive impairment.
Long Term Care Rider Types
There are typically three approaches to buying long term care coverage that include
- Standalone: Long Term Care Policy (Standalone LTC product). This can be more expensive and harder to qualify for.
- Life Insurance: Life insurance with a long term care rider added on when you apply for coverage. This is also known as a Hybrid or Combination policy.
- Annuity: Long Term Care benefits can be purchased with an Annuity.
Let’s look into these more closely and see their advantages and disadvantages.
Long Term Care Standalone policy
Buying a standalone long term policy is pretty risky due to the high cost, premium increases and lengthy underwriting. Most people that qualify for a standalone LTC policy are quite healthy, so if you have any health conditions– you may not want to pursue one.
Perhaps the biggest drawback is that if you stop paying for your LTC policy and cancel it- your money is gone. That’s correct. All your premiums paid will be wasted. Since this product is expensive and difficulty to qualify for, many companies have made alternative options.
Life Insurance with Long Term Care rider
Depending on the carrier, you may have an option to purchase a long term care rider when you apply for a life insurance policy. For an additional cost, your life insurance policy will come with long term care benefits that are written into the policy.
Permanent or Term Life?
Most long term care riders are not available with term life insurance policies. For the most part, permanent life insurance is the type of policy you’ll need to buy in order to get an LTC rider. There are several permanent life insurance products available such as:
Again, it will depend on the specific company and if they offer the LTC rider.
Long Term Care Rider Tips
Choosing the right long term rider will often be based on the differences of each company offering the rider as well as their fine print. Here are some things to think about when shopping for your rider:
- Payout: Will your benefit be paid out as a lump sum or monthly?
- Fees: Are there any fees waived when a claim is made?
- Care Provider: Will your plan require you to have a care provider that’s licensed?
- Recertification: Is certification required and how often?
- Elimination Period: Is your elimination period in service days or in calendar days?
- Lapse protection: Does your policy have lapse protection?
- Benefit adjustment: Can your benefits be adjusted and how often?
- Death Benefit Reduction: Your death benefit will be reduced when the LTC is triggered. Understand that this may affect the planned income for your survivors.
Long Term Care Rider – Final thoughts
Buying a standalone long term care policy can be very expensive and complicated. Adding an LTC rider can provide you a cheaper way to pay for nursing home and long term expenses. If you’re in the planning stages for retirement and shopping for life insurance- you may want to think about adding a long term care rider.
Contact us today and we’d be happy to help you find the best type of life insurance with LTC coverage. We have access to over 40 top life insurance carriers in order to find you the best one for your specific needs. We’ll work around your budget and listen to your goals to find the ideal solution to your needs. There is no cost for our service and you can even get started right now by comparing instant life insurance quotes.