A long-term care rider lets you access part of your life insurance death benefit to pay for care if you can’t perform daily activities like bathing or dressing. This rider is available on both permanent and term life policies, with carriers like National Life, North American, and Ameritas offering built-in living benefits at no extra cost.
Long-term care is expensive. A private room in a nursing home now costs over $125,000 per year, and Medicare won’t cover most of it. That’s a problem if you or your spouse ever need help with daily activities after an illness or injury.
A long-term care rider on your life insurance policy offers one solution. It lets you tap into your death benefit while you’re still alive to help pay for care. You don’t have to buy a separate long-term care insurance policy, and the coverage is already built into many life insurance products.
But is this rider right for you? Let’s walk through how it works, what it costs, and whether it makes sense for your situation.
What Is a Long-Term Care Rider?
A long-term care rider is an optional add-on that makes your life insurance policy more flexible. Instead of waiting until you die for your beneficiaries to receive the death benefit, you can access a portion of it to pay for care while you’re still living.
These riders fall into a category called “living benefits.” The name makes sense. You benefit from the coverage during your lifetime, not just after you’re gone.
Long-term care can stretch on for years. Some people need assistance for a few months after surgery. Others require ongoing help for conditions like Alzheimer’s or Parkinson’s disease. Without a plan, these costs can drain your savings quickly. A life insurance rider like this can provide a financial safety net.
How Does a Long-Term Care Rider Work?
To use the long-term care benefits, you’ll need to meet a few requirements.
Buy the Rider in Advance
You can’t add this rider after you get sick. It needs to be part of your policy from the start. You’ll pay premiums that include the cost of the rider, and it stays in place as long as your policy is active.
Meet the ADL Requirements
Before an insurance company releases funds, you’ll need to prove you actually need the care. This is measured through your ability to perform the six activities of daily living (ADLs):
- Eating – feeding yourself
- Dressing – putting on and removing clothes
- Bathing – washing yourself
- Mobility – moving from bed to chair
- Toileting – using the bathroom
- Continence – controlling bladder and bowel functions
If a doctor certifies you can’t perform at least two of these six activities, or if you have severe cognitive impairment, you can unlock the rider’s benefits.
File a Claim
Most insurers offer reimbursement riders that pay you back after you’ve been billed for care. This is usually the least expensive option.
Some policies offer indemnity riders instead. These pay a lump sum when you file a claim. You get more flexibility with how you spend the money, but these riders typically cost more.
How Much Does a Long-Term Care Rider Cost?
The cost depends on your age, health, and the type of policy you choose. On average, expect to add several hundred dollars per year to your premiums.
Compared to standalone long-term care insurance, this rider is usually more affordable. Traditional long-term care policies for a 55-year-old can run around $1,500 to $3,700 per year depending on coverage levels and inflation protection. A rider on your life insurance policy often costs less while still providing meaningful protection.
The Hidden Cost: Death Benefit Reduction
Here’s something important to understand. Every dollar you withdraw for care reduces your death benefit.
If you have a $500,000 policy and use $200,000 for long-term care, your beneficiaries will receive only $300,000 when you pass away.
Some insurers reduce the death benefit by more than the amount you withdraw. For example, taking $50,000 might reduce your coverage by $75,000. Look for policies that offer dollar-for-dollar benefits to avoid this accelerated loss.
What Types of Policies Offer Long-Term Care Riders?
Long-term care riders are available on both permanent and term life insurance policies. Each option has its place depending on your goals and budget.
Permanent Life Insurance
Whole life and universal life policies are popular choices for LTC riders. These policies don’t expire as long as you pay premiums, so the rider will be there when you need it, even decades from now.
The downside is cost. Permanent life insurance premiums are significantly higher than term life premiums.
Term Life Insurance with Living Benefits
Here’s something many people don’t realize. Several insurance carriers now include living benefits, including chronic illness coverage, on their term life insurance policies at no extra cost.
This is a game-changer for people who want affordable life insurance with built-in protection against serious illness.
National Life Group offers term policies with accelerated benefit riders covering terminal illness, chronic illness, critical illness, and even Alzheimer’s disease. There’s no additional premium for these riders. If you qualify, you can access a portion of your death benefit while still living.
North American Company includes living benefits on their ADDvantage Term policies. Coverage includes chronic illness (inability to perform 2 of 6 ADLs for 90+ days), critical illness, and terminal illness. Benefits are included at no extra cost, and you can accelerate up to $2 million in total benefits.
Ameritas offers their Care4Life rider on term products like ClearEdge and FLX Living Benefits Term. The rider covers 15 critical illness conditions plus chronic and terminal illness. You can access up to 90% of your death benefit, and there’s no upfront cost. A $250 administrative fee applies only if you file a claim.
The key advantage of term life with living benefits is affordability. You get life insurance protection plus access to funds if you become seriously ill, all at term life rates.
The potential drawback? If your term policy expires before you need long-term care, you won’t have access to the benefit. That’s why it’s important to choose your term length carefully or consider converting to permanent coverage later.
What Are the Limits of a Long-Term Care Rider?
Before you add this rider to your policy, understand these limitations.
Elimination Period. Most policies have a 90-day waiting period after you qualify. You’ll need another way to pay for care during those first three months.
Percentage Limits. Many insurers limit how much of your death benefit you can access. A $500,000 policy with a 60% limit means you can use only $300,000 for care.
Tax Implications. In most cases, accelerated death benefits are tax-free under IRS guidelines. But if your payout exceeds the standard cost of care as defined by the IRS, the excess could be taxable. Large payouts might also affect your eligibility for Medicaid. Talk to a tax advisor about your specific situation.
Not True Long-Term Care Insurance. These riders are not the same as standalone long-term care insurance. They provide access to your existing death benefit, not additional coverage. The money you use comes out of what your beneficiaries would have received.
Long-Term Care Rider vs. Chronic Illness Rider
These two riders sound similar but work differently.
A chronic illness rider provides benefits when you have a permanent condition that prevents you from performing daily activities. You’re not expected to recover. The benefit helps cover ongoing care for the rest of your life.
A long-term care rider can provide benefits for temporary conditions too. You might need rehabilitation after a stroke or surgery. Once you recover, you stop receiving benefits.
Chronic illness riders often pay benefits as a lump sum or annual payment. Long-term care riders typically pay monthly to cover ongoing expenses.
Some policies include both types of coverage under their living benefits package. When comparing policies, ask specifically what conditions qualify and how benefits are paid.
Alternatives to a Long-Term Care Rider
A life insurance rider isn’t your only option for covering long-term care costs. Consider these alternatives.
Standalone Long-Term Care Insurance. These policies are designed specifically for long-term care and often provide more comprehensive coverage. They don’t reduce your life insurance death benefit. The downside is cost, and premiums can increase over time.
Medicaid. This government program covers long-term care for people with limited income and assets. But you’ll need to spend down most of your savings to qualify. Having a life insurance policy with an LTC rider could affect your eligibility.
Health Savings Account (HSA). If you have a high-deductible health plan, you can save money tax-free in an HSA and use it for qualified medical expenses, including some long-term care costs.
Personal Savings. Some people prefer to self-insure by building a dedicated savings fund for future care needs. This approach gives you complete control but requires significant discipline and resources.
Annuities with LTC Benefits. Some annuity products include long-term care features. Since annuities don’t have a death benefit to deplete, this can be an attractive option for certain situations.
You can combine multiple strategies. For example, you might carry term life insurance with living benefits for protection during your working years, then add a standalone LTC policy or rely on savings as you approach retirement. The federal government’s long-term care resources can help you understand your options.
Should You Buy Life Insurance with a Long-Term Care Rider?
The answer depends on why you’re buying life insurance in the first place.
If your primary goal is income replacement for your family, think carefully before adding an LTC rider. Using the death benefit for your own care could leave your spouse or children without the financial protection they need.
If you’re buying coverage that could serve multiple purposes, a policy with built-in living benefits makes a lot of sense. Term life insurance with chronic illness coverage from carriers like National Life, North American, or Ameritas gives you protection against death and serious illness at an affordable price.
If you’re concerned about long-term care but don’t want to buy a separate policy, an LTC rider offers a middle ground. You get some protection without the higher premiums of standalone long-term care insurance.
The best approach is to evaluate your complete financial picture. How much life insurance do your beneficiaries actually need? What other resources do you have for potential care costs? What’s your family health history?
We’re happy to help you work through these questions. Our team can show you quotes from multiple carriers and explain exactly how each policy’s living benefits work.
Frequently Asked Questions
What is a long-term care rider on life insurance?
A long-term care rider lets you access part of your life insurance death benefit to pay for care if you can’t perform daily activities like bathing, dressing, or eating. The money comes from your policy’s death benefit, so any amount you use reduces what your beneficiaries receive.
How much does a long-term care rider cost?
Costs vary by carrier and policy type. Many term life policies now include living benefits at no extra premium. On permanent policies, expect to pay several hundred dollars per year for the rider. This is typically less expensive than buying standalone long-term care insurance.
Can I add a long-term care rider to term life insurance?
Yes. Several carriers including National Life, North American, and Ameritas offer term policies with built-in living benefits that cover chronic illness, critical illness, and terminal illness. These benefits are often included at no additional cost.
What triggers a long-term care rider?
Most riders require a doctor to certify that you can’t perform at least two of the six activities of daily living (eating, bathing, dressing, toileting, transferring, continence) or that you have severe cognitive impairment like Alzheimer’s disease.
Is a long-term care rider the same as long-term care insurance?
No. A rider accelerates your existing death benefit. You’re using money that would have gone to your beneficiaries. Standalone long-term care insurance provides separate coverage that doesn’t affect your life insurance policy.
What happens to my death benefit if I use the long-term care rider?
Your death benefit decreases by the amount you withdraw, and sometimes by more than that amount depending on the policy. If you use a significant portion for care, your beneficiaries will receive less when you pass away.
Key Takeaways
- A long-term care rider lets you access your life insurance death benefit to pay for care if you can’t perform daily activities or have cognitive impairment.
- Many term life policies now include living benefits at no extra cost. Carriers like National Life, North American, and Ameritas offer chronic illness, critical illness, and terminal illness coverage built into their term products.
- Using the rider reduces your death benefit. Every dollar you withdraw is a dollar less for your beneficiaries.
- Most riders have a 90-day elimination period and limits on how much of your death benefit you can access.
- A long-term care rider isn’t the same as standalone long-term care insurance. It’s a way to add flexibility to your life insurance, not a replacement for dedicated LTC coverage.
- The right choice depends on your goals. If income replacement is your priority, be careful about depleting the death benefit. If you want affordable protection against both death and serious illness, term life with living benefits is worth considering.
Need help deciding? We work with National Life, North American, Ameritas, and dozens of other carriers. Use the quote tool on this page to compare your options.
