Life insurance with a long-term care rider

A long-term care rider can help cover medical costs you may incur as you age, But this add-on isn’t the right solution for everyone and will likely increase your insurance costs.

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By

Tory CrowleyAssociate Editor & Licensed Life Insurance AgentTory Crowley is an associate life insurance and annuities editor and a licensed insurance agent at Policygenius. Previously, she worked directly with clients at Policygenius, advising nearly 3,000 of them on life insurance options. She has also worked at the Daily News and various nonprofit organizations.&Rebecca ShoenthalEditor & Licensed Life Insurance ExpertRebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.

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Antonio Ruiz-CamachoAntonio Ruiz-CamachoAssociate Content DirectorAntonio helps lead our life insurance and disability insurance editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.
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Reviewed by

Maria FilindrasMaria FilindrasFinancial AdvisorMaria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

Updated|3 min read

Expert reviewedExpert reviewedThis article has been reviewed by a member of ourFinancial Review Council to ensure all sources, statistics, and claims meet the highest standard for accurate and unbiased advice.Learn more about oureditorial review process.

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What is a long-term care life insurance rider?

A long-term care (LTC) rider is a policy add-on that can be added to your life insurance policy to ensure that you’re financially protected while you’re still alive if you become too ill to take care of yourself and need to pay for care. A life insurance rider is a supplemental component to life insurance policies that provides additional protection. If you need to use a long-term care rider, you’ll claim money from your policy’s death benefit. Most people use funds from a LTC rider toward a nursing home, private nurse, or other assisted medical care.

Key takeaways

  • A long-term care rider is an optional add-on to a life insurance policy that allows you to access funds from your life insurance benefit while you’re still living, if you meet certain criteria. 

  • To use a LTC rider, you typically need to be unable to perform at least two functions of daily living (including eating, bathing, getting dressed, walking, and toileting). 

  • Adding a LTC rider is expensive, and most people will be better off getting a separate policy for long-term care or for chronic illnesses.

How do you use a long-term care life insurance rider?

To make a claim on your LTC rider, you must be unable to independently perform two of the six activities of daily living (ADLs) either temporarily or permanently. [1] The following activities are considered activities of daily living:

  • Eating

  • Bathing

  • Getting dressed

  • Walking or getting from one place to another

  • Using the toilet

  • Maintaining bowel and bladder continence

With most insurers, the amount available for long-term care expenses is limited to between 70% and 80% of the death benefit, paid out monthly. At the time of the rider application, you’ll choose the percentage (from 1% to 3%) you want to receive each month if you need to use the rider.

  • For example, if you have a $250,000 life insurance policy, the most you’d be able to take out for long-term care if you have the rider is $200,000 if your insurance company allows 80%. 

  • With a 3% monthly benefit, this would provide $7,500 per month until you’ve collected the maximum amount.

You won’t be able to solely rely on a long-term care rider to provide for all of your medical care. While the rider is typically enough to cover the cost of home health care and assisted living, it won’t pay for doctors’ visits, prescriptions, and surgeries, which are normally covered by health insurance or Medicaid.

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Reimbursement vs. indemnity payouts

There are two types of long-term care riders: reimbursement plans and indemnity plans.

  1. Reimbursement long-term care riders This is the most popular, cost-effective choice. With this type of rider, you can submit receipts for your care costs and the insurer will reimburse you or your care provider. The total amount you’ll be eligible for reimbursement is set by the insurance company.

  2. Indemnity long-term care riders This type of rider is more expensive and is paid out as a lump sum when you activate the rider. An indemnity plan tends to be costlier because it can potentially pay out a higher amount, regardless of how much the medical expenses cost.

How much does a long-term care rider cost?

There’s no set cost for the LTC rider. How much you’ll end up paying will vary with each life insurance company. Unlike most riders that can be added on to your policy for a flat fee, long-term care riders are priced out as an individual product. Because of this, they tend to be some of the most expensive riders and can end up adding upward of $600 to $800 a year to your life insurance premiums.

According to a cost survey from the American Association for Long-Term Care Insurance (AALTCI) , LTC rider premiums for a couple, both age 55, started at $2,080 in 2023. The annual premium for single women and men started at $1,500 and $900, respectively. [2]

Does life insurance cover the costs of a nursing home?

What are the alternatives to a long-term care rider?

Standalone long-term care insurance

If you want comprehensive long-term care coverage but don’t want to take away from the total amount of money you leave to your loved ones, you can purchase a standalone long-term care insurance policy.

Similarly to a long-term care rider, a standalone policy covers the costs of care for people who need help with activities of daily living, such as people with Alzheimer’s or people who are living in nursing homes or care facilities.

These policies are expensive and can become unaffordable as you age. To get affordable rates, it’s best to purchase a long-term insurance plan as early as possible, just like you would want to do with life insurance. 

Chronic illness accelerated death benefit rider

Depending on which riders your insurance company offers, you might be best off getting a chronic illness accelerated death benefit rider. 

Like a long-term care rider, a chronic illness rider pays out when the insured can’t perform two of the six activities of daily living. However, while a long-term care rider can pay out if an individual has a temporary disability, the chronic illness rider only pays out if a medical professional certifies that the disability is permanent.

Learn more about how to understand your life insurance policy

Is a long-term care rider worth it?

Having a plan to care for your medical bills is vital, but whether or not that means purchasing a long-term care rider depends on your life insurance needs and overall financial picture. As you age, the probability of incurring a disability or illness that requires care increases. About 70% of people turning 65 today will need long-term care, which can cost almost $9,000 a month for a private room at a nursing home facility. [3]

For most people, the long-term care rider’s high cost isn’t the most effective way to plan for the future. A Policygenius agent or financial advisor can help you determine if a long-term care rider is worthwhile based on your individual circumstance.

References

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Policygenius uses external sources, including government data, industry studies, and reputable news organizations to supplement proprietary marketplace data and internal expertise. Learn more about how we use and vet external sources as part of oureditorial standards.

  1. National Library of Medicine

    . "

    Activities of Daily Living

    ." Accessed March 07, 2024.

  2. American Association for Long-Term Care Insurance

    . "

    Long-Term Care Insurance Facts - Prices - Data - Statistics - 2023 Reports

    ." Accessed March 06, 2024.

  3. Genworth

    . "

    Cost of Care Survey

    ." Accessed March 06, 2024.

Authors

Tory Crowley is an associate life insurance and annuities editor and a licensed insurance agent at Policygenius. Previously, she worked directly with clients at Policygenius, advising nearly 3,000 of them on life insurance options. She has also worked at the Daily News and various nonprofit organizations.

Rebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.

Editor

Antonio helps lead our life insurance and disability insurance editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.

Expert reviewer

Maria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

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