Life Insurance with Long Term Care Rider

Life Insurance with Long term care Welcome to InsureChance, the first online life insurance marketplace. We are an independent online insurance agency committed to providing you with the highest quality of service in the most efficient manner. If you stumbled across this article you are probably considering buying life insurance with a long-term care rider and aren’t sure if this is a good idea or not. The good news is that we will be answering all your questions in this article that pertains to long-term care rider. As any independent agency out there, here at InsureChance will tell you, that you should be very cautious about the type of long-term care coverage you buy. Since there are so many different types of long-term coverage products the prices can be hefty plus not to mention the pitfalls that accompany them may be considerable. In this article, we will be giving you an explanation of the long-term care rider,  the different types of long-term care riders, some pros and cons, and four questions you should ask yourself before purchasing LTC insurance. The following are some key points from this article;

  1. A long-term care insurance policy will help you cover the costs of that care when you have a chronic medical condition, a disability or a disorder such as Dementia disease. Most policies will reimburse you for all the costs correlated with your care given in a variety of places such as your home, a nursing home, an assisted living facility, and an adult day care center.
  2. There are three ways that you can buy long-term care insurance. You can buy a Stand Alone Long-Term Care (LTC) insurance policy. Or you can purchase an Annuity with Long-Term Care benefit. Or you can purchase a life insurance policy with an LTC rider or accelerated death benefit which can also be known as a “Hybrid Life Insurance Policy”.
  3. A pro is that with long-term care insurance you will be able to maintain your independence while still affording quality care.
  4. The major downside of long-term care insurance is the same as any insurance, you may pay premiums for years and never use the coverage.

Long-term care rider explained

A long-term care insurance policy will help you cover the costs of that care when you have a chronic medical condition, a disability or a disorder such as Dementia disease. Most policies will reimburse you for all the costs correlated with your care given in a variety of places such as your home, a nursing home, an assisted living facility, and an adult day care center. You should not wait until you need the care to buy coverage because that won’t be an option. You will not be able to qualify for long-term care insurance if you have a deliberating condition. The most common ages in which people purchase long-term care insurance are between their mid-50’s to mid-60’s.

It might be hard to imagine today whether or not you should buy long-term care insurance but you will need some help taking care of yourself later in life. Buying long-term care insurance is one perfect way to prepare because long-term care refers to a host of services that wouldn’t be regularly covered by health insurance. This care includes assistance with routine daily activities such as bathing, dressing, eating, and getting in and out of bed.

The different types of Long-term coverage riders

There are three ways that you can buy long-term care insurance. You can buy a Stand Alone Long-Term Care (LTC) insurance policy. Or you can purchase an Annuity with Long-Term Care benefit. Or you can purchase a life insurance policy with an LTC rider or accelerated death benefit which can also be known as a “Hybrid Life Insurance Policy”.

According to the nonprofit Insured Retirement Institute, there are four risks associated with a stand-alone LTC policy: “They can be expensive, they don’t acquire any cash value, your premiums may increase, and the underwriting can be time-consuming. ”

If you are a risk-averse shopper then you should look into buying a fixed annuity which is just like those CD-like investment vehicles that can provide an income stream for life. Just like a CD, they are a tough sell in the current low-interest rate environment. Many people buy what is known as “fixed annuities” or “deferred annuities” which are designed to provide an income stream for life. Annuities are generally less expensive than buying stand alone long-term care coverage. There are options available for those who want to make some investments which would allow you to invest the premiums you pay for long-term care and apply them towards a fixed income while providing higher payouts. Doing so can result in you getting some bang for your buck.

Hybrid life insurance explained

If you need life insurance and want to make sure you have long-term care insurance as well you can add on the LTC rider. The life insurance approach to long-term care coverage is fairly straightforward. As we mentioned above, this is also called a Hybrid life insurance. Hybrid life insurance policies have two primary types. Keep in mind that hybrid policies combine long-term care insurance with permanent life insurance policies such as Universal Life Insurance.

  1. Life Insurance with an Accelerated Death Benefit Rider (this can be used for qualified long-term care needs)- With this type of hybrid life insurance it basically means that if you by any chance need in-home care or nursing home care you could pull the money out of your life insurance policy to help pay those bills, however, this will reduce your death benefit. This type of hybrid life insurance doesn’t create any money for your long-term care needs it just accelerates your death benefit which is typically a free rider (not all carriers offer this benefit free).
  2. Life Insurance with a Long-Term Rider- This type of hybrid life insurance is a permanent life insurance policy with a long-term rider added onto the policy. This is an option most carriers offer but only at an additional cost.

>>For more info on hybrid life insurance visit this Forbes article!

Accelerated Death Benefit for chronic illness Explained

Most policies offer you the opportunity of adding an accelerated death benefit for chronic illness rider at an additional cost. Accelerated death benefit riders cannot be marketed as long-term care insurance according to Investopedia. This rider is for those who get diagnosed with a chronic illness that is non-recoverable and will likely last an entire lifetime. Once the physician documents the non-recoverable chronic illness you would be eligible to make a claim for your indemnity benefit, partial or full death benefit, and you would be able to receive this without restrictions on how you choose to use your funds. When you submit a claim a lien is placed against the death benefit but it should not result in a reduction of the death benefit. This is because a reduction of the death benefit is only calculated at the time of claim and is based on several factors including age, sex, rating, and current interest rates.

 

The PROS of Long-term Riders

There are a couple of pros that go alongside LTC riders. A pro is that with long-term care insurance you will be able to maintain your independence while still affording quality care. If you get diagnosed with an illness you will feel at ease with an LTC rider or hybrid policy because you know that you are going to be protected as far as healthcare bills are concerned. This will in return reduce the financial and psychological stress that comes with a long-term care need causes for the family.

The CONS of Long-term riders

Just like any regular other policy, there is a list of pros and cons that follow. A con that LTC’s have is that if you are using an annuity it may affect your retirement income. Another con is how expensive the premiums can be with an LTC rider, we mentioned above that you will afford quality care with this rider but not in a sense of afford as in cheap. Far from it. The major downside of long-term care insurance is the same as any insurance, you may pay premiums for years and never use the coverage.

Questions you should ask yourself before purchasing an LTC rider

There are a couple of questions that you should ask yourself before you go out and purchase an LTC rider. Here at InsureChance, we don’t push for products that will not benefit our clients. Many of our competitors will try and push riders on clients such as an LTC rider without second guessing because they are trained to sell no matter what. We do things differently here. You should evaluate the pros and cons of long-term care insurance to decide but also ask yourself these four questions just to help determine whether or not this type of insurance will benefit you.

  • Do you live a healthy lifestyle? Based on statistics healthy people are more likely to need long-term care assistance later in life. On the other hand, those who suffer from heart issues or cancer may take the unhealthy ones sooner. Oh, the irony! Like we mentioned before, LTC= independence, if you live a healthy lifestyle it can allow you to stay in your own home and own your independence longer.
  • Have you checked your family history and family dynamics? This is a really important question to ask yourself when looking to buy LTC. You should investigate your family’s history from parents, grandparents, aunts, uncles, cousins, and siblings. Find out if anyone has needed care later in life because right here you will be able to know whether or not you need to purchase an LTC rider or hybrid policy. This is simple genetics, there is a certain percentage of you that could develop whatever it is that they have had in the past or present.
  • Will you be able to afford a premium that could be hefty? This is another important question to ask yourself because you want to make sure you can pay your premiums and an LTC rider will make your premiums rise tremendously. You can imagine your premiums to typically be 3% of your death benefit.
  • What kind of care will you need? Keep in mind when purchasing an LTC rider that full-time long-term care assistance can run between $6,000 and $10,000 a month or more if you need additional medical care. If you have sufficient assets to cover this kind of cost then don’t purchase long-term care insurance. If you don’t have sufficient assets, then you should know that without long-term insurance you will end up having to spend this kind of money.

We’re here to help!

An LTC rider or hybrid policy is really not such a terrible idea as many would picture it because if you really think about it, we all pay our monthly car insurance but if you’ve been paying them for years would you be upset that you didn’t get in a car accident all those years and never used your insurance? Of course not! You’re happy you never had to experience such an awful thing. When it comes to insurance, in general, it is a risk itself but it is there to help you when things get rough and you truly never know 100% if you are going to have an illness down the road or not. However, life insurance is a must, you should purchase life insurance because we all know 100% of us are going to die, as vulgar as it sounds it’s the truth we do not live forever and at least you can sleep safely knowing that your family won’t have that financial burden on top of their shoulders. Whether you decide to purchase an LTC rider or not you should still take advantage of our FREE services! We are an independent life insurance agency who will shop around on your behalf for quotes until we find the best life insurance company for you. Afterward, we will do the application for you and BAM that’s it, you will be a proud owner of life insurance. Don’t DIY, do it yourself, when you have us around, give us a call today so that you can spend more time with those who truly matter most, your family.

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About Sabrina Banks

Sabrina is an insurance nerd and content strategist at InsureChance! She is an avid traveler, cat lover and all around a ball of joy. Her obsession is creating valuable content to empower the online consumer.

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