Just What Is A Long-Term Care Insurance Rider?
The cost of long-term care, such as a stay in a nursing home or home healthcare services, can be high. That’s why some older adults choose to add a long-term care insurance rider to their existing life insurance policies.
When you attach such a rider to your life insurance policy, you can use a portion of your death benefit while you are still alive to help pay for long-term care costs. The greater the percentage of your death benefit that you want to use, the more you’ll pay for the rider.
Typically, you’ll need a whole life or universal life insurance policy to add this rider. These policies provide life insurance coverage for your entire life. Term life insurance coverage only lasts for a specific number of years, often 30. Most people’s term life policies, then, end before they need long-term care.
How a long-term care rider works
Say your life insurance policy pays out a death benefit of $500,000. You can attach a rider stating that you can use 50% of these benefits to help pay for nursing home stays, home healthcare services or other long-term care costs.
If you use this rider, the death benefit paid out to your survivors will be lower. Say you use $200,000 of your $500,000 death benefit to pay for long-term care costs. Your survivors will receive $300,000 after you die.
If you don’t need long-term care before you die, your survivors will receive your entire death benefit.
For the coverage provided by a long-term care rider to kick in, you’ll typically need a triggering event. The most common of these is the inability to perform two out of six Activities of Daily Living (ADLs). The six standard ADLs are bathing, continence, dressing, eating, toileting and moving in and out of a bed or chair. If you can no longer perform two of these tasks, your long-term care rider coverage should kick in.
You might also be able to access your benefits if you suffer from severe cognitive impairment, such as Alzheimer’s or other forms of dementia.
How much does a long-term care rider cost?
Long-term care riders aren’t free. How much you’ll pay varies depending on your age and health.
The American Association for Long-Term Care Insurance said that the annual premium for a long-term care rider for a single 55-year-old man started at $2,080 in 2023, while the annual premium for a single woman of 55 started at $1,500.
There is no guarantee that a long-term care rider will cover all the costs of long-term care. But if you can afford this extra coverage, it might provide the financial safety net you need to cover your healthcare services as you age.
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