Much has been said about how expensive true Long Term Care insurance can be. Although there are strategies that can be used to keep the premium at, or below, what many people are already paying for Life insurance, some people do not want to make the trade-off.
For people who do not want to choose between insurance to pay for the expenses associated with Long Term Care or giving money to their heirs when they die, the insurance industry has developed combination plans.
These plans allow you to postpone making a decision until you absolutely have to. By adding state approved riders to certain Life insurance policies, you can choose to take a portion of the policy’s death benefit to pay for your Long Term Care expenses while you are alive and have the balance of the death benefit paid to your beneficiaries after you die.
In this post I want to give a brief description of the more common riders that are available. Since Life insurance is regulated on the state level and each state is different, the riders that are discussed in this post may, or may not, be available in your state. You should speak with your insurance professional to determine if this is an option that you can take advantage of.
Critical Illness riders allow you to claim a portion of your death benefit if you are diagnosed with one of the named illnesses in your policy. Once the benefit has been paid to you, you may use the money in any way you see fit.
This rider is very similar to the Long Term Care rider, however there is one difference. In order to claim benefits under this rider, your Activities of Daily Living limitations must be caused by a Chronic Illness. If you lose ADL function as the result of an injury, you may find that you are not able to get help with your Long Term Care bills from your Life insurance company.
If you elect to use this rider, I advise you to read the rider very carefully. Pay special attention to the Limitations and Exclusions.
ACCELERATED DEATH BENEFIT (ADB)
This rider is the most common. Most Life insurance companies offer it at no extra charge. However, it is likely that you will be required to sign an affidavit that you understand how the ADB rider works when you submit your application.
Accelerated Death Benefit riders allow you to claim a portion of your death benefit while you are alive if your physician is willing to verify that you have a terminal illness and death is expected within a specified time frame.
The normal ADB rider requires a doctor to verify that your life expectancy is less than 12 months. Although I have seen ADB riders with a 24 month life-expectancy clause, they are the exceptions and not the rules.
LONG TERM CARE
A handful of insurance companies offer true Long Term Care insurance as a rider on permanent Life insurance policies. This option offers more comprehensive coverage than the other riders but is generally very expensive.
It is not unusual for me to see the cost of coverage under this rider be more expensive than if a person were to get a traditional Long Term Care Insurance plan.