The many uses of life insurance - Part 5 – Long Term Care and other Living Benefits
Alan J. Mendlowitz, RICP, CRES
As we age, our health needs can change, and we may require long-term care to help us with daily activities or medical needs. Long-term care can be expensive, and it's important to plan for these costs in advance. One way to do this is through a specialized type of life insurance policy that includes riders which can help cover the cost of long-term care expenses.
Long Term Care Insurance
LTCI is a type of insurance that helps cover the cost of care in a nursing home, assisted living facility, or home health care. However, not everyone qualifies for long-term care insurance, and it can be expensive. This is where life insurance policies with long-term care riders can be helpful.
Long Term Care and Chronic Illness Riders
LTC or Chronic Illness Riders are additional features that can be added to a life insurance policy. These riders allow policyholders to access a portion of their death benefit while they are still alive to help pay for long-term care expenses. The amount of the benefit varies depending on the policy and the specific rider.
There are two types of long-term care riders: Chronic Illness (CI) riders and long-term care (LTC) riders. CI riders and LTC riders are similar, but the LTC riders are usually slightly more comprehensive and/or easier to claim.
Critical Injury and Illness Riders
A few carriers also allow an acceleration of the death benefit for critical injuries and illnesses like cancer, heart attack and more…times when money can be tight and bills higher!
The benefit of using a life insurance policy with a long-term care rider is that the policyholder can use the benefits to pay for care in any setting, whether it's at home, in an assisted living facility, or in a nursing home. This can give policyholders more flexibility and control over their care, as well as comfort knowing that they have a plan in place to cover potential long-term care costs.
Keep in mind that the death benefit will be decreased when taking these accelerations of the death benefit. The death benefit is usually decreased more than $1 for each $1 you accelerate. The longer you have had the policy the closer the ratio gets to 1:1. When the carriers charge upfront for the rider they usually will only decrease the death benefit dollar for dollar!
It's important to note that not all life insurance policies offer long-term care riders, and the availability of these riders can vary by state. Additionally, policies with long-term care riders can be more expensive than traditional life insurance policies. However, for those who are concerned about the potential cost of long-term care expenses, a life insurance policy with a long-term care rider may be worth considering.
In conclusion, long-term care can be a significant expense for individuals and families, and it's important to plan for these costs in advance. Life insurance policies with long-term care riders can be a valuable tool in covering these expenses, offering policyholders more flexibility and control over their care. If you're considering a life insurance policy with a long-term care rider, be sure to research your options and consult with a financial professional to determine the plan that addresses your needs.
Here are some sources to support the information about life insurance policies with long-term care riders:
1. "Long-Term Care Riders for Life Insurance: An Introduction": This article from Forbes provides an overview of long-term care riders for life insurance policies, including how they work and the benefits they can offer. It also discusses some of the potential drawbacks and costs to consider.
2. "How Life Insurance with Long-Term Care Riders Can Help": This article from Kiplinger discusses the benefits of life insurance policies with long-term care riders, including the ability to cover long-term care expenses without having to purchase a separate long-term care policy.
3. "Long-Term Care Riders on Life Insurance Policies": This article from Investopedia provides an in-depth look at long-term care riders on life insurance policies, including the different types available and the pros and cons of each.
4. "The Benefits of Long-Term Care Riders on Life Insurance Policies": This article from NerdWallet explores the benefits of adding a long-term care rider to a life insurance policy, including the potential tax advantages and flexibility it offers.