How a Long-Term Care Rider Works

A long-term care rider allows life insurance policy holders to get part of their death benefit while they are still alive. This money would otherwise get paid to a beneficiary upon the policy holder’s death and can be used to pay for long-term care expenses. Let’s compare the pros and cons of this rider to help you decide whether you should get one.

A financial advisor can help you figure out how life insurance fits into your financial plan needs.

An insurance rider typically adds a new feature to an insurance policy. In the case of life insurance, a long-term care rider can generally be added so the holder can use the money to pay for long-term care expenses that traditional health insurance doesn’t cover.

You should note, however, that long-term care riders cannot be added to a term life insurance policy, though you may be able to add this accelerated death benefit to an annuity. In either case, you should confirm the requirements of the policy with your insurer before buying one.

As with other insurance policy riders, you can expect to pay higher premiums when adding a long-term care rider. Typically, you’ll add this rider to a permanent policy like universal life insurance or whole life insurance.

When adding a long-term care rider, expenses are paid out from the life insurance policy. Depending on the insurance company, you may get a lump sum or a monthly amount typically between 1% to 4% of the death benefit.

Insurers handle long-term care riders differently. Some policy holders may have to submit receipts to get compensation for long-term care expenses, while others may get a specific amount of money to spend as they please.

Pros and Cons of Long-Term Care Riders

As with any insurance policy rider, a long-term care rider has advantages and disadvantages. Three common advantages include:

Policy holders may find it easier to get a long-term care rider on an existing insurance policy rather than getting approved for coverage on a standalone long-term insurance policy.
When comparing a long-term care rider with a standalone long-term insurance policy, the rider can be less expensive. But either option, will cost you a considerable amount.
A long-term care rider can give you peace of mind, knowing that you will have an additional stream of income or a lump sum of money to pay for long-term care needs.

Before adding a long-term care rider, though, you should also consider three common disadvantages:

A long-term care rider, like other insurance policy riders, will make your life insurance premium go up.
This accelerated benefit will cut into the payment(s) that your beneficiaries will get, which means you will have to think carefully how much money you will want to pass on.
A long-term rider is a financial strategy that requires serious commitment. If at some point you choose to remove the rider from your insurance policy or stop paying for the policy altogether, you will not get your money back.

Bottom Line

A long-term rider can be an answer, albeit an expensive one, to a potentially frightening problem: needing a lot of medical care in your senior years and being unable to pay for it. What if, for instance, you develop dementia and need a long-term care facility? A long-time care rider could help pay for those medical expenses. You’ll want to mull this over carefully because while there are some advantages of a long-term care rider, there are also significant downsides as well.

Long-Term Care Tips for Retirement

A financial advisor can help you create a financial plan for your long-term care needs. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you are looking for long-term care, SmartAsset reviewed top long-term care providers for 2022.