Life Insurance with Long-Term Care Rider: Protecting Your Future, Today
Before we dive into why this type of policy is becoming increasingly popular, let’s first break down what exactly a life insurance policy with a long-term care rider is.
A long-term care rider is an addition (or “rider”) to a life insurance policy that provides benefits for long-term care expenses. These expenses are typically associated with the need for personal care assistance due to a chronic illness, disability, or aging, such as help with daily activities like bathing, dressing, or eating.
Most traditional life insurance policies pay out a death benefit when the policyholder passes away, which helps to provide financial protection for loved ones. However, a life insurance policy with an LTC rider allows policyholders to access a portion of their death benefit while they’re still alive to cover long-term care expenses if they are diagnosed with a qualifying condition (e.g., dementia, Alzheimer’s, or a debilitating stroke).
This type of life insurance is typically a permanent life insurance policy, such as whole life or universal life insurance, and includes the option to add a long-term care rider to the policy. It provides both a death benefit for beneficiaries and access to funds to help with long-term care needs.
How Does Life Insurance with a Long-Term Care Rider Work?
Life insurance policies with long-term care riders combine the benefits of traditional life insurance with the features of long-term care insurance. Here's how they typically work:
Premiums: You pay regular premiums on your life insurance policy. The base premium covers the death benefit, while the rider will come with its own additional cost. The cost of the rider may depend on factors like your age, health, and the amount of coverage you want for long-term care.
Access to Long-Term Care Benefits: If you are diagnosed with a qualifying condition that requires long-term care, you can use a portion of your life insurance death benefit to help cover the cost of care. The specific conditions for receiving these benefits vary from policy to policy, but generally, you must need assistance with activities of daily living (ADLs) such as eating, bathing, dressing, toileting, and mobility.
Death Benefit: If you don’t need to use the long-term care benefit, the policy will still pay out the death benefit to your beneficiaries when you pass away. If you do use the long-term care benefit, the amount you access will reduce the death benefit accordingly, but there will still be a payout left to your family after your death.
Flexibility: Some policies also offer inflation protection for long-term care benefits, meaning the rider’s payout amount can increase over time to keep pace with rising care costs.
Why is Life Insurance with a Long-Term Care Rider Important?
Dual Protection for Your Family and Your Future Care Needs
A life insurance policy with a long-term care rider provides protection in two essential ways: by ensuring your family receives financial support when you pass away and by helping you cover the potentially overwhelming costs of long-term care while you’re still alive.
The average cost of long-term care in the United States is significant. According to the Genworth 2020 Cost of Care Survey, the median annual cost for a private room in a nursing home was over $105,000 in 2020. These costs are expected to rise steadily, making it crucial to plan ahead for long-term care needs. With a life insurance policy that includes an LTC rider, you ensure that you can access the funds you need without depleting your personal savings or relying solely on Medicaid, which has strict eligibility requirements.
A Smart Way to Protect Against Future Health Risks
As we age, the likelihood of needing long-term care increases. According to the Department of Health and Human Services, approximately 70% of people over age 65 will need some form of long-term care in their lifetime. The costs can be astronomical, especially when considering the increasing price of care services.
Long-term care insurance can help mitigate these costs, but traditional LTC insurance often requires you to pay premiums for years without knowing if or when you’ll need care. Life insurance with a long-term care rider solves this dilemma by combining the benefits of life insurance and long-term care insurance. You can still leave behind a death benefit for your beneficiaries, but you also have the ability to tap into your policy’s funds if you need long-term care.
Avoid the Burden of Paying Out-of-Pocket
Long-term care can be one of the most expensive and financially draining aspects of retirement. Without proper planning, individuals often find themselves relying on savings, family members, or even Medicaid to cover the costs of care. This can put a significant financial burden on both you and your loved ones.
Having a life insurance policy with a long-term care rider can help reduce that burden by providing access to the funds you need without tapping into your savings or relying on external sources of support.
Peace of Mind for You and Your Family
Ultimately, having life insurance with a long-term care rider gives you peace of mind. You can rest easy knowing that, should the need for long-term care arise, you won’t have to worry about how to pay for it. Additionally, your family members won’t be left with the financial responsibility of covering those costs or the costs associated with your funeral.
The Cost of Life Insurance with a Long-Term Care Rider
While the benefits of combining life insurance with a long-term care rider are clear, you may be wondering about the cost. Life insurance with a long-term care rider typically has higher premiums than a traditional life insurance policy without a rider. This is because the rider provides additional coverage, which increases the potential payout.
The cost of the rider itself can depend on several factors, such as:
Your age: The younger you are when you add the rider, the less expensive it tends to be.
Your health: Those in good health will generally pay lower premiums.
The amount of long-term care coverage: More coverage means higher premiums.
It’s important to balance the cost of the rider with your long-term financial goals. If you are relatively healthy and in your 40s or 50s, adding an LTC rider may be an affordable and smart way to secure both your future care and your family’s financial future.
Comparing Life Insurance with Long-Term Care Riders to Other Options
While life insurance with a long-term care rider provides clear benefits, there are other ways to protect yourself against long-term care costs. Traditional long-term care insurance is one option, but these policies often come with high premiums and limited coverage. Additionally, they do not provide a death benefit, which means if you don’t need long-term care, you’ve paid for something you didn’t use.
Alternatively, some people might choose to set aside funds in a retirement account or use savings, but these options are risky. Market volatility, unexpected medical expenses, and inflation can easily erode your savings.
By combining life insurance and long-term care, you get the best of both worlds: guaranteed life insurance coverage and access to long-term care funds should you need them.
Secure Your Future with Life Insurance and a Long-Term Care Rider
Life insurance with a long-term care rider is a comprehensive solution that provides financial protection for both the unexpected need for long-term care and the eventuality of your death. It’s an excellent way to ensure your family’s financial security while giving you the peace of mind that you’ll have the resources to cover your own care needs if the time comes.
At Everwell Financial Group, we understand how important it is to plan for both your retirement and the potential challenges of aging. Our team is here to help you explore the right life insurance policies with long-term care riders to protect your future. Contact us today to learn more about how this combination can benefit you and your loved ones.
