Life Insurance Policies with Long-Term Care
Long-term care coverage is not a standard feature of life insurance policies. In life insurance, a long-term care rider can be added to the policy as a living benefit rider.
All permanent life insurance policies have cash value, which is also called a living benefit because it is meant to be used during your lifetime. You can use cash value in any way you want, including long-term care.
In the case of an LTC rider, as a living benefit rider, some of the policy’s death benefit can be used to finance long-term care. Or, with a rate increase, the death benefit can be separate from the long-term care benefit.
Let’s take a quick look at different types of life insurance policies that may add a long-term care rider:
Universal Life Insurance
Universal life insurance is a permanent form of life insurance, with the unique character of flexibility. You can increase or decrease the policy’s premium and death benefit. Universal life insurance accumulates cash value that is intended to be used while the insured is alive. By adding a long-term care rider to this type of policy, should you suffer from a long-term condition the rider will payout from the death benefit to cover long-term care costs or separately from the death benefit, depending on the type of rider you choose.
Flexibility of a universal life policy is appealing to many because of life changes. An LTC rider will give you more adaptability in case long-term care is necessary. If you are looking for a policy that gives you leverage when going through the ups and downs of life, a universal life policy with an LTC rider is a good choice for you.
Whole Life Insurance
Whole life insurance is the oldest form of permanent life insurance. It has a guaranteed cash value and death benefit. Unlike universal life policies, premium payments and the death benefit are fixed and not flexible. Including a LTC rider to this type of policy will give you the same benefits as with a universal life insurance policy LTC rider, and cash value will not need to be withdrawn for long-term care costs if you choose.
If your primary concern in a life insurance policy is to ensure you will not overwhelm loved ones with financial obligations, a whole life insurance policy with an LTC rider may be right for you. It will give you added protection, should long-term care medical expenses and care arise. In addition your loved ones will know that a caregiver will be present and their time will not be needed continuously.
Term Life Insurance
Term life insurance policies have a time cap. They cover a certain amount of years, and if you pass away within the time frame, the policy pays out to your beneficiaries. If not, the policy terminates without the benefit being paid out. It is less expensive than permanent life insurance and does not build cash value. A long-term care policy rider is not easy to find in the insurance market, but when attained they typically payout on expenses for long-term care, should you suffer from a long-term illness during the period of the contract.
Term insurance policies are less expensive than permanent insurance policies, which makes it a more suitable option in many cases. If affordability is essential for you adding a long-term care rider to a term insurance policy will give you added protection.
Long-Term Care Riders for Life Insurance
To sum up a long-term care rider provides coverage for long-term care expenses, similar to traditional long-term care insurance. Both provide coverage for medical and care options, such as nursing home care, associated with long-term illness for a period of time. An LTC rider’s benefits are paid out when you are diagnosed with a chronic illness, physical or mental. It must be certified by a physician that you cannot perform at least two ADLs for a minimum of 90 days or that due to mental health reasons, your safety is endangered without a caregiver. A long-term care rider gives added security to any type of insurance policy you choose, as the policy alone will not cover long-term care expenses.
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