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Life insurance: What is a long term care rider and how does it work?

Long term care rider insurance

Life insurance: What is a long term care rider and how does it work?No one likes the idea of getting older. And no one likes the idea that as we get older, we might need help taking care of ourselves.

The need for long-term care is, however, a nearly-unavoidable fact of modern life. According to statistics provided by the US Department of Health and Human Services, Americans today have a 70% chance of needing long-term care once they turn 65. And unfortunately, long-term care is expensive.

Luckily, with some careful planning, there are ways to pay for long-term care without relying on your family members to give up their livelihood to take care of you.

What is a Long-Term Care Rider?

A long-term care rider is a type of accelerated death benefit that can be added on to your life insurance policy. It enables you to use part of your life insurance death benefit to pay for long-term care while you are still alive.

Long-term care riders can work in a number of different ways, depending on the type of life insurance policy you have.

For instance, term life insurance (permanent life insurance) policies offer two potential options.

Some term life policies allow you to reduce your future death benefit in a dollar-for-dollar match. In other words, if you take $1 out of your death benefit to pay for long-term care, your future benefit is reduced by $1.

Other term life policies require you to give up more of your future death benefit in exchange for applying that money to long-term care now. For example, for every $1 that you take out for long-term care now, you reduce your future death benefit by $1.50 or $2.00.

When purchasing a long-term care rider for your life insurance policy, be sure to read the fine print to understand exactly how your specific rider will work should you need to exercise it down the road.

What are the Pros and Cons of a Long-Term Care Rider?

No one wants to become a burden on their family. Utilizing a long-term care rider enables you to pay for your own care so you don’t have to rely on financial assistance from your children on other family members.

Paying for your own care through a long-term care rider can ensure that your family members can continue to work full-time, instead of going to part-time so they can care for you.

A long-term care rider can also help you maintain a higher quality of life as you age.

However, it is important to remember that utilizing your long-term care rider will reduce the amount of money your family will receive after you die. This may be problematic if your family is relying on your life insurance death benefit to replace your income and provide for them after your death.

When Can I Use My Long-Term Care Rider?

Most long-term care riders are limited in how they can be utilized. Most policies specify the need for long-term care, not simply routine medical care.

Some policies may limit access to the long-term care rider in cases of terminal illness only. Others may be less specific and somewhat more flexible.

For instance, you may be able to utilize your long-term care rider if it can be demonstrated that you have severe cognitive impairment.

You may also be able to access these funds if you can demonstrate that you need daily assistance for self-care (often called “Activities of Daily Living” or ADLs.) For example, a doctor may need to certify that you need help with a minimum of two ADLs for you to access your long-term care rider.

None of us want to think about that day when we can’t take care of ourselves. Yet the need for assistance, and long-term care, is extremely common. If you are concerned about becoming dependent on others and worried about being a financial burden on your family, consider whether a long-term care rider might be an option to help you pay for the long-term care you need.

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Life insurance: What is a long term care rider and how does it work?


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