Life Insurance With Long-Term Care Riders

Adding a long-term care (LTC) rider to your life insurance policy gives you access to your death benefit while you’re still alive, offering you coverage for long-term care services not covered by Medicare. Learning how to qualify for a LTC rider and the benefits it offers can help you decide if this rider best suits your health needs.

Lindsey Crossmier, writer for RetireGuide
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APA Crossmier, L. (2022, April 25). Life Insurance With Long-Term Care Riders. RetireGuide.com. Retrieved May 19, 2022, from https://www.retireguide.com/life-insurance/riders/long-term-care/

MLA Crossmier, Lindsey. "Life Insurance With Long-Term Care Riders." RetireGuide.com, 25 Apr 2022, https://www.retireguide.com/life-insurance/riders/long-term-care/.

Chicago Crossmier, Lindsey. "Life Insurance With Long-Term Care Riders." RetireGuide.com. Last modified April 25, 2022. https://www.retireguide.com/life-insurance/riders/long-term-care/.

What Are Long-Term Care Riders?

A long-term care (LTC) rider allows you to tap into your life insurance death benefits to help cover long-term care expenses. This is one of the many rider options available to help tailor your life insurance plan to your specific needs.

Policyholders can use long-term care riders to cover adult day care services, home health care services and a long-term care facility with 24-hour nursing services.

If you think you may need heavy medical assistance in the future and worry about the financial burden of health care expenses, then a long-term care rider might be right for you.

How Do Long-Term Care Riders Work?

LTC riders give you access to a percent of your death benefit while you’re alive to cover long-term care expenses. The percentage you’re allowed access to vary by insurance company. The more you take out of your death benefit while living, the less your beneficiary will receive when you pass away.

Adding an LTC rider to your life insurance policy will increase your premium price. The premium price for this rider does not have a set amount, meaning it could increase each year.

Most insurance companies have a waiting period of 90 days before you can access LTC rider benefits. Once you surpass the waiting period and begin coverage, you can choose your payment preference.

Confirm with your insurance provider how much you can take from your death benefit and if your premium price is locked in before purchasing an LTC rider. You will also need to confirm if you are eligible for this rider before taking it into consideration.

Qualifications

To qualify for an LTC rider, you must be medically diagnosed as chronically ill, unable to perform at least two daily living activities and have a well-documented plan of care in place.

Daily living activities include
  • Walking and moving independently
  • Feeding yourself
  • Dressing yourself
  • Personal hygiene duties
  • The ability to control your bladder and bowel
  • The ability to go to the restroom independently
Source: U.S. National Library of Medicine

If you’ve been diagnosed as chronically ill by a medical professional and cannot do at least two of the daily living activities listed above, you likely qualify for an LTC rider benefits. Make sure you have all your necessary documents to send to your insurance provider to begin coverage.

Documents Required for Access to Benefits
  • Certification form that confirms you are chronically ill from a licensed health care provider
  • Completed claim forms
  • Medical records
  • Your plan of care
Source: Long-Term Care Rider of SEC Annual Report

Payout Types

Payout amount varies by insurance company, but typically you can access 2% of the life insurance’s face value for long-term care per month. For example, if your policy has a face value of $500,000 you could receive $10,000 per month. Where you choose to receive long-term care treatment can also fluctuate the price.

There are two payout types — indemnity and reimbursement.

Indemnity payments give you a set amount of money every month that you can use for your care expenses.

Reimbursement payments, on the other hand, require you to send your health care receipts to your insurance company for reimbursement of care expenses.

Why Should You Buy a Long-Term Care Rider?

Long-term care riders can help cover expenses for common medical conditions such as Parkinson’s disease, strokes, cancer, arthritis and Alzheimer’s. If you’re at risk for a serious condition, an LTC rider can help provide coverage for services not included in Medicare.

Did you know?
More than 7.5 million Americans have some form of long-term care life insurance.
Source: American Association for Long-Term Care Insurance

Long-term care facilities and services can be very expensive. An LTC rider add-on is a cheaper option to help you cover such costs.

Average Costs of Long-Term Care Facilities
Type of Long-Term Care FacilityMonthly Cost
Adult Day Care Center$2,100
Home Health Care Services$17,472*
Long-Term Care Facility$3,600 - $6,900**
Source:

*Monthly price based on 24-hour care. Cost will vary based on length of service.
**Price varies based on type of facility and whether you have your own room or share a room.

Alternatives to Long-Term Care Riders

If a long-term care rider isn’t an option for you, there are other alternatives such as short-term care insurance and long-term care annuities.

Alternatives
Short-term care life insurance
Short term policies will cover you for a year or less with roughly $150 of coverage per day. This would be enough to cover your stay at an adult day care center, which typically costs $70 per day. Premiums are much lower in comparison to a long-term care rider since you would be given coverage for less time.
Long-term care annuity
An annuity pays out in intervals for the rest of your life once you pay a lump sum amount. Long-term care annuities offer special benefits to help pay for long-term care costs.
Long-term care within a group plan
Many jobs offer group plans with life insurance coverage specifically tailored to long-term care. As a group plan, you’ll likely be enrolled regardless of your health history. Some jobs even allow you to keep the group plan if you decide to leave the company.
Last Modified: April 25, 2022

8 Cited Research Articles

  1. U.S. National Library of Medicine. (2022, February 17). Activities of Daily Living. Retrieved from https://www.ncbi.nlm.nih.gov/books/NBK470404/
  2. Wisconsin Office of the Commissioner of Insurance. (2021, September). Consumer’s Guide to Long-Term Care. Retrieved from https://oci.wi.gov/Documents/Consumers/PI-047.pdf
  3. Holmes, T. (2021, April 14). How to Pay for Long-Term Care When You Are Not in Perfect Health. Retrieved from https://www.aarp.org/caregiving/financial-legal/info-2021/long-term-care-insurance-alternatives.html
  4. U.S. Department of Health & Human Services. (2020, February 18). Costs of Care. Retrieved from https://acl.gov/ltc/costs-and-who-pays/costs-of-care
  5. U.S. Department of Health & Human Services. (2020, February 18). Using Life Insurance to Pay for Long-Term Care. Retrieved from https://acl.gov/ltc/costs-and-who-pays/who-pays-long-term-care/using-life-insurance-to-pay-for-long-term-care
  6. American Association for Long-Term Care Insurance. (2020). Long-Term Care Insurance Facts - Data - Statistics - 2020 Reports. Retrieved from https://www.aaltci.org/long-term-care-insurance/learning-center/ltcfacts-2020.php
  7. Long-Term Care Rider of SEC Annual Report. (n.d.). Long-Term Care Rider. Retrieved from https://www.sec.gov/Archives/edgar/data/1041357/000119312515008957/d851192dex99d1.htm
  8. Home Care. (n.d.). How Much Does 24/7 In-Home Care Cost? Retrieved from https://www.homecare.org/the-cost-of-24-7-in-home-care/