Guide to Life Insurance with a Long-Term Care Rider

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There are plenty of different life insurance policies that tend to have an additional segment inserted into the contract that’s usually referred to as a long-term care rider or even an LTC rider. These types of contract additions are there to make sure that the policy owner will be able to receive a chunk of their policy’s death benefits while still alive. This is intended for them to be able to pay for long-term care expenses.

Most of the time, the reason why people have doubts about investing in long-term insurance policies is that they fear they’ll be spending a lot of their hard-earned money without getting any advantages from it in the end. So a lot of people see them as impractical insurance products. However, when it comes to long-term care riders, even though in most cases the death benefits will be decreasing, the addition of a rider might end up making premium payments more affordable.

And to be able to get those benefits from the addition of a long-term care rider from their life insurance company, policyholders have to consult with a healthcare professional. The health care professional makes sure that the policyholder is unable to do two different activities of daily living – also known as ADLs – at minimum or have a severe cognitive impairment. If the insured isn’t able to do these tasks,  and is in need of a caretaker who can help protect their health and safety, then the long-term care rider can be activated.

You should also know that LTC riders fall into the category of living benefits, because you’ll receive a payout from your insurance company before you pass away. Finally, you’ll also be able to add various things to your rider, such as in-home care, skilled nursing, assisted living, nursing home care, home health aide, or anything else you believe can help caregivers.

And in case you’re looking to add an LTC rider to your insurance policy, if you don’t use the LTC benefits, your loved ones will end up with the total death benefits once you pass away.

Additionally, if you’re looking to ease the cost of any long-term care needs you might have later in life, then you can add the long-term care rider to your insurance contract with your insurer.

How Long-Term Care Riders Work

If you end up becoming ill, injured, or are in need of any long-term care later in life, then you’ll receive a payout from a long-term care rider on a life insurance policy. This  sum is essentially a percentage of the death benefits of your life insurance policy. Plenty of life insurance companies have very precise eligibility requirements that need to be met before you can receive a payout.

In case you become eligible for that payout, the payment method and amount will depend on the contract you signed beforehand. For example, with an indemnity plan, you’ll be getting a lump sum in an annuity. And for reimbursement plans, you’ll have to detail all of the costs for your care, and then get reimbursements for them from the insurance company.

Next, you should be checking if you’ll have to wait a period of time before you’re able to receive the cash value payout from your insurance company. Many LTC riders also have a maximum monthly benefit, which means the insurance company will be giving you a percentage of the monthly death benefits from your policy, thereby decreasing their amount.

You should also check if you can add an LTC rider to your life insurance policy in the first place, because there are some insurance companies that don’t offer this  feature. Additionally, riders are usually available for policy owners of variable universal life insurance, indexed universal life insurance, term life insurance, permanent life insurance, and whole life insurance policies.

And finally, you should also talk to your insurance company if you can get a LTC rider that doesn’t need you to submit receipts for the long-term care costs before you get the payout from the long-term care benefits.

Long-Term Care Rider Benefits

The US Department of Health and Human Services has estimated that over half of all citizens in the United States that are going to be turning 65, will, at some point, need long-term care services. Not only that, but about one in six that do need long-term care generally end up spending sums of over $100,000 out of their own pockets on it. This can quickly dwindle savings, which results in loved ones not receiving much  once the family member passes away.

And while LTC riders can be a bit expensive because they tend to increase the policy’s premium payments, at the end of the day they’re a lot less expensive compared to long-term care policies outside of life insurance. Finally, with LTC riders, you’re also able to ask for inflation protection from your insurance provider so that the premium payments don’t increase every year.

With a long-term care rider, you can get great financial assistance support, and with that you can cover the various types of long-term care you might need. And the people who are able to plan for these things beforehand can get more benefits, especially in terms of getting what they’re looking for instead of settling for care that’s less than what they need.

Alternatives to Long-Term Care Riders

There are a few other types of policies that you can get and receive long-term care through in case you’re not sure about adding a long-term care rider to your life insurance policy.

Chronic Illness Rider

One alternative option is the chronic illness rider, which is similar to the regular long-term care riders as they’re both add-ons to insurance policies and are viewed as living benefits. This option allows you to access some of the policy’s death benefits while you’re still alive, just like the LTC rider. 

A  lot of the eligibility requirements are also similar to LTCs.

The disadvantage with a chronic illness rider is that the insurance provider tends to pay out the lump sum only if the insurance agent from your insurer gets confirmation that you have a terminal illness.

Long-Term Care Insurance

With traditional long-term care insurance, you’ll be able to cover any costs from long-term care services. That includes things like health aides, assisted living facilities, or nursing homes. 

And you can also customize your long-term care insurance policy to make sure it covers things you need, as well as connect them to your Medicare or Medicaid. Connecting them to these health care programs to your insurance means you’ll be able to protect any assets if you have to apply for any assistance later in life.

However, the disadvantage with long-term care insurance is that it’s a lot more expensive compared to long-term care riders, and these insurance policies also come with a very strict underwriting process.


And finally, you can get healthcare costs covered with the help of Medicaid– if you’re not concerned with leaving finances for your loved ones. The program can cover different long-term care expenses, including skilled nursing, assisted living, and more.

The disadvantage with Medicaid is that in order to join the program, which has rigorous eligibility guidelines, you might have to pay down some of the assets you already have beforehand. That means your family members might end up with less money after you pass away.

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Frequently Asked Questions for Long-Term Care Riders

What is an indemnity plan?

If you have a long-term care rider that comes with an indemnity plan, it means that once you become eligible for the long-term care benefits, you’ll automatically receive the precise benefit amount every month according to the contract, regardless of how much your long-term care ends up costing you.

Are long-term care benefits taxed?

Any cost of long-term care that’s covered by the LTC benefits is tax-free, as they don’t fall in the category of income tax.

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