Life Insurance With a Long-Term Care Rider

More than half of Americans will need long-term care at some point in their lives. A long-term care rider on your life insurance policy lets you access your death benefit while you’re alive to pay for long-term care support and services. If you don’t use it, your death benefit is untouched.

Headshot of Jennifer Schell, writer for Annuity.org
  • Written By
    Jennifer Schell

    Jennifer Schell

    Financial Writer

    Jennifer Schell is a professional writer focused on demystifying annuities and other financial topics including banking, financial advising and insurance. She is proud to be a member of the National Association for Fixed Annuities (NAFA) as well as the National Association of Insurance and Financial Advisors (NAIFA).

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  • Edited By
    Savannah Pittle
    Headshot of Savannah Pittle, senior editor for Annuity.org

    Savannah Pittle

    Senior Financial Editor

    Savannah Pittle is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

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  • Financially Reviewed By
    Daniel J. Adams, MBA, CFP®, CLU®
    Daniel J Adams, Annuity.org reviewer

    Daniel J. Adams, MBA, CFP®, CLU®

    Founder and President of CEG Life Insurance Services

    As the founder of CEG Life Insurance Services, Daniel J. Adams has extensive experience with life and health insurance products. Daniel assists clients in building a secure financial future as a Certified Financial Planner™ professional and independent insurance agent. He also trains new agents and advises other financial professionals.

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  • Updated: August 11, 2023
  • 5 min read time
  • This page features 7 Cited Research Articles

Key Takeaways

  • You can add a long-term care rider to your life insurance policy that allows you to access your death benefit to pay for long-term care costs.
  • A long-term care rider will likely increase the cost of your premiums but will generally be less expensive than a separate long-term care insurance policy.
  • More than half of Americans will need long-term care at some point in their lives. Women are more likely to need it than men because they live longer.

What is a Long-Term Care Rider?

A long-term care rider is an addendum to your life insurance policy that lets you access your policy’s death benefit to use for long-term care expenses while you are still alive. Expenses include the cost of long-term care facilities, home care, therapy, nursing costs and other associated fees. Medical services like hospital and doctor visits are not covered. 

It’s important to note that Medicare does not cover long-term care support and services, making a long-term care rider a valuable life insurance strategy for policyholders. 

A life insurance policy with a long-term care rider is the only financial product that offers an enhanced death benefit, long-term care insurance, and supplemental tax-free retirement income in a single policy. For those people seeking all three benefits as part of a retirement plan, there may be no better product.

How Does a Long-Term Care Rider Work?

Depending on your insurer and policy, a long-term care rider might increase your premium, but will likely cost less than a standalone long-term care policy. If you don’t use the rider while you are alive, your death benefit remains fully intact for your beneficiaries.

To qualify for a long-term care rider, you must be diagnosed as chronically ill, meaning you are unable to perform at least two of the basic activities of life (such as bathing, dressing, eating or moving around) without assistance. Your rider will pay for the support and assistance you need to perform these daily activities, either in your home or in a care facility.

Some insurance providers designate medical conditions that qualify for long-term care riders, including Alzheimer’s or Parkinson’s disease, certain cancers, Rheumatoid arthritis, and other serious ongoing conditions and diseases. Check with your provider for their list. 

When it comes to accessing your benefit, long-term care riders come with different payout options and usually a waiting period before you can access your benefits. 

Payouts and Reimbursements

With a long-term care rider, you’ll generally receive access to 1% to 4% of your policy’s death benefit per month, which you can use to pay for your long-term care expenses. Although the specifics will vary by provider, long-term care rider payouts generally fall into two categories: indemnity and reimbursement.

Indemnity
This type of payout gives you a lump sum each month that you can use for your expenses as needed.
Reimbursement
This type of payout requires you to pay your expenses up front, then collect and submit receipts to your provider for reimbursement.

Indemnity payouts may run through your benefit faster, but reimbursement payouts require more paperwork and organization on your end. Be sure to check which method your provider offers.

Requirements and Waiting Periods

Your insurance provider will have specific requirements you must meet before you can get access to your death benefits. These requirements might include proof of your chronic illness from a medical professional, a detailed plan of care, your medical history and records, and completed claim forms.

In addition, most insurers have a waiting period before you can access your benefits. Usually, the waiting period is 90 days, though your specific policy may vary. Your waiting period only begins when you have fully met your provider’s requirements. 

Who Should Combine Life Insurance and a Long-Term Care Rider?

According to research from the Office of the Assistant Secretary for Planning and Evaluation, 52% of Americans are expected to need long-term care and support at some point during their lives. Your family health history can make the need more likely, but accidents and sudden illness are always possible. In addition, since women live longer than men statistically, they are more likely to need care in the long run.

Long-term care can be expensive. The median monthly cost for an in-home health aide is about $5,200, while a private room in a nursing facility is over $9,000, according to a 2021 Genworth study. Since Medicare does not cover long-term care fees, it’s smart to plan for the possibility.

Life Insurance With a Long-Term Care Rider vs. Long-Term Care Insurance

A long-term care rider moderates your life insurance policy, so you have access to the death benefit while you are still alive to pay for long-term care support and services. Long-term care insurance, on the other hand, is a separate standalone policy that covers only long-term costs.

Long-term care insurance typically will have higher premiums than a long-term care rider on a regular life insurance policy. The premiums can vary widely depending on what kind of coverage you want.

2023 Annual Cost of a LTC Policy With a $165,000 Benefit

Policyholder(s) Cost
55-year-old man $900 to $3,500
55-year-old woman $1,500 to $6,200
55-year-old couple $2,080 to $8,575
Source: American Association of Long-Term Care Insurance

If you believe you’ll need a substantial amount for long-term care, a separate long-term care policy might be appropriate. A long-term care rider may be more suitable if you want a safety net for the possibility of long-term care but don’t want or need a standalone long-term care policy.

Frequently Asked Questions About Long-Term Care and Life Insurance

Can you buy long-term life insurance?

Yes, you can purchase a separate long-term care life insurance policy rather than adding a long-term care rider to your life insurance. Premiums are generally more expensive for a separate long-term care policy than for a long-term care rider on a regular life insurance policy .

What types of conditions can qualify you for a long-term care rider?

You must be chronically ill to qualify for a long-term care rider, meaning you are unable to perform at least two activities of daily life (like bathing or dressing) without help.

Is a long-term care rider cheaper than separate long-term care insurance?

Long-term care riders are usually less expensive than a separate long-term care insurance policy. The exact costs will depend on your provider and the policy you choose.

Are long-term care rider payouts taxable?

Long-term care payouts are generally not taxable. A percentage of your premiums are also tax deductible, even if you receive a payout.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: August 11, 2023