Paying for care
Life insurance with long-term care rider
A life insurance policy with a long-term care rider lets the owner use part of the death benefit while alive to pay for qualified care. The rider is an add-on to a permanent life policy. Benefits paid for care reduce the death benefit that heirs receive.
Why it matters for your family
A common design pays the benefit in level monthly amounts over a period set by the policy. The Administration for Community Living notes that these riders may not offer inflation protection. Insurers must follow long-term care rules when a policy includes this rider. Families should ask what triggers a payment, which care settings qualify, and how much the death benefit drops. A common mistake is to treat the face amount as a care budget. The rider may pay only part of it. Ask a licensed insurance agent for the policy illustration, and ask a tax professional about tax effects.
Source: acl.gov
Read more: 5 Myths about Long-Term Care
Related terms
- Hybrid long-term care policyA hybrid long-term care policy combines life insurance or an annuity with long-term care benefits.
- Accelerated death benefitAn accelerated death benefit is a payment of part of a life insurance death benefit to the insured while still alive.
- Long-term care insuranceLong-term care insurance is a private policy that pays for help with daily living when a person can no longer manage alone.
- Life settlementA life settlement is the sale of a life insurance policy to a third party for cash.
- Elimination periodAn elimination period is the waiting time in a long-term care insurance policy before benefits begin.
- Private payPrivate pay means a family pays for care directly from its own money.
