Life Insurance With A Long-Term Care Rider: What You Should Know

Learn about long-term care riders with our guide to life insurance coverage.
By Mike Parker
Updated Oct 14, 2022
A lady signing up for Life Insurance with a Long Term Care Rider.
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A long-term care rider is a great way of adding additional coverage to your life insurance to protect you in case your health deteriorates as you age.

While these additions to life insurance traditionally have been expensive, they do offer people a way to cover the rising costs of their assisted care.

Read our guide to understand long-term care riders, what they are, how they work, and what you should consider before you get one added to your life insurance policy.

What Is Long-term Care Insurance?

While this may not be at the top of most people’s minds, it’s estimated that more than 70% of people will need long-term care at some point in their lives. 

This means that getting long-term care (LTC) coverage is an important part of supplementing your overall insurance profile.

Long-term care insurance is an insurance policy that helps to cover the cost of long-term care. 

It is any care that takes place for an extended period of time and can include services such as home health care, assisted living, and nursing home care.

It can include nonmedical services such as help with daily living activities, like bathing, dressing, and eating. It can also be for medical reasons such as full-time assisted living or an at-home nurse for those with chronic illnesses.

An elderly person with Long-term care insurance.

Source: Pixabay

How Do You Determine Whether Someone Needs Long-term Care?

In order for a person to be committed to a long-term care facility such as a nursing home or assisted living facility, they will need to be examined by a licensed health care professional.

According to the Pennsylvania Health Care Association signs include:

  • Isolation and depression.

  • Bruises and falls.

  • Increased medical needs.

  • Cognitive Impairment.

  • The inability to run a household.

There are two ways you can get long-term care insurance, either from an insurance company or through an employer-sponsored group plan. 

LTC plans have traditionally been expensive and people often think that Medicare or their private health care will be able to cover them in the event of them needing long-term care. But this isn’t always the case. 

In recent years, LTC plans have become generally more affordable, and one alternative that people can look into is adding a long-term care rider to their current life insurance plan.

A stair lift that is covered by Life Insurance.

Source: Pixabay

What Is a Long-term Care Rider?

A long-term care rider is an additional clause you can add to your life insurance policy that will provide coverage for long-term care services if you ever need them.

They are a living benefit that life insurance policyholders can use while they are alive and offer an added level of financial protection to people if they ever need long-term care and cannot pay for it out of their own pocket.

The amount of money used for a policyholder’s long-term care is deducted from their policy’s death benefit. 

A woman whose long-term care is covered by Life Insurance.

Source: Pixabay

For example, let’s say a person has a permanent life insurance policy worth $350,000 and uses their long-term care rider for three years and then passes away. 

Their total long-term care costs amounted to $155,000 during this period. Their new death benefit amount would be $195,000.

If the person takes out a long-term care insurance rider but doesn’t use it in their lifetime, their beneficiaries will receive the full death benefit of their life insurance policy.

What Is a Rider?

A rider is an additional coverage term that policyholders can add to their life insurance contracts.

There are multiple types of insurance riders that can be used to customize the coverage and offer specific benefits in the event of illness, accidents, and other life-changing events.

Some examples of riders include:

  • Child rider. 
  • AD&D rider. 
  • Critical illness rider.
  • Disability rider.
  • Accelerated death benefit rider.

It’s important to note that while long-term care riders may offer additional coverage for long-term care, they won’t be able to cover costs indefinitely.

A long-term care insurance rider also has what’s known as an elimination period which is the length of time that the policyholder must pay for long-term care expenses before the policy’s coverage begins. 

For example, a long-term care rider with a 90-day elimination period will pay for long-term care services after the policyholder has paid for 90 days of long-term care out of their own pocket.

Some long-term care riders also have benefit periods, which set out the length of coverage time they will provide to the policyholder for long-term care.

For example, a long-term care rider with a two-year benefit period will pay benefits for up to two years. After the benefit period ends, the policyholder is responsible for paying all long-term care costs.

The Different Types of Long-term Care

Assisted living facilities: These are residential care homes that provide assistance with activities of daily living such as bathing, dressing, and using the restroom.

Home-based services: A variety of services that can be provided in the home setting, such as homemaker services, personal care, home health aide, and skilled nursing care.

Nursing homes: Facilities that provide 24-hour skilled nursing care and assistance with activities of daily living.

Hospice: This is a type of care that is typically provided in the home, but can also be provided in a nursing home or hospital setting. Hospice care is focused on providing comfort to those who are terminally ill.

Community-based services: There are a variety of services that can be provided by the community, such as adult day care, transportation, and Meals on Wheels.

Outpatient services: These are services that are provided on an outpatient basis, such as physical therapy, occupational therapy, and speech therapy.

Retirement communities: These are residential communities that offer a variety of services and amenities for seniors, such as fitness centers, social activities, and housekeeping.

An elderly man with assisted living that is covered by Life Insurance.

Source: Pixabay

Types of Long-term Coverage Riders

There are two types of long-term care riders that can be added to a life insurance policy. Each rider has different benefits and coverage periods.

Reimbursement long-term care riders: With this option, people will pay for the costs of long-term care out of their own pocket and then claim back from their life insurance policy. 

This may be a good option for some people with enough cash in the bank to pay for long-term care costs upfront. However, for people with a limited cash flow, this option may not be ideal. 

Indemnity long-term care riders: This option is a lump-sum payment that is paid out to the policyholder once their policy rider is activated. 

The benefit of this option is that policyholders won’t have to subsidize their costs and claim back expenses. 

The downside is that managing a large sum of money can be difficult over an extended period and once the money is spent, policyholders will have to finance their care from their own pocket.

If you want to learn more about long-term care riders, reach out on 1-888-912-2132 or to talk to one of our expert life insurance agents. 

Not only can we answer your coverage-related questions, we can also help you find the best life insurance policies in your state.

When Will a LTC Rider Be Activated?

Each insurance company will have its own specific requirements for a long-term care rider to be activated. However, in general, the insurance company will look at how many activities of daily living (ADL) the person can perform.

If a person cannot perform two of the six ADLs required to lead an independent life, they will qualify for long-term care and be eligible for their long-term care benefit through their life insurance company.

A person who qualifies for a Long-Term Care Rider.

Source: Pixabay

Other Ways to Pay for Long-term Care

There are multiple ways for people to cover the costs of paying for long-term care with their life insurance or other insurance coverage:

1) Use the accelerated death benefit of your life insurance policy: Some term life insurance policies allow policyholders to access a portion of their death benefit if they become terminally ill. Remember that your accelerated death benefit amount is taxed; however, it can be used to pay for long-term care if the policyholder needs it.

2) Sell your life insurance policy: If you own a permanent life insurance plan, you may be able to sell it to pay for your long-term care. If you’d like to learn more about this, read our article on selling your life insurance policy.

3) Use your life insurance cash value: If you have a whole life or universal life insurance policy, you can borrow money against the cash value of the policy and use it to pay for long-term care expenses. The amount you’ve borrowed will be deducted from your policy’s death benefit if it is not repaid before you die.

4) Buy a long term care insurance plan: If you have the money, buying a long-term care insurance plan might be a good way to ensure you are covered. However, keep in mind that these policies are expensive and that there’s a chance you might never use them.

Stand-alone Vs. Hybrid Long-term Care Plans

There are two types of long-term care policies you can buy. They can be either stand-alone policies or part of a hybrid policy.

Stand-alone long-term care policies are specifically designed to cover long-term care costs, while hybrid policies combine long-term-care coverage with life insurance or annuity benefits.

When choosing a long-term care policy, it's important to consider your needs and budget. If you think you're likely to need long-term care services in the future, a stand-alone policy may be the best option for you.

However, if you're looking for more comprehensive coverage, a hybrid policy may be a better choice.

5) Health insurance: Medicare Advantage Plans can also be used to cover the costs of long-term health care.

They offer benefits such as access to community-based fitness centers, and outpatient services which can go a long way in helping with long-term care needs. However, you shouldn’t rely on your Medicare Advantage coverage to pay for all of your costs.

If you or your loved one might be in need of living assistance or long-term care, there may be a Medicare Advantage Plan that can help cover costs and assist you as you age.

Reach out to one of our agents to discuss your options or visit our Medicare hub to learn more.

An elderly lady whose long-term care is covered by her Life Insurance.

Source: Pexels

Where Can I Learn More about Life Insurance?

Long-term care riders are a good addition to your life insurance, but make sure that you can afford the costs before you get one. There are other options out there which you can consider if adding a long term care rider in unaffordable. 

If you’re interested in learning more about life insurance riders, benefits, costs, and coverage, visit our life insurance hub to read our latest articles.

If you’re looking for long-term care cover or want to buy a life insurance plan that will provide coverage for your long-term care needs, speak to a life insurance agent. 

Contact us today at 1-888-912-2132 or to get quotes and advice on your long-term care coverage needs.