Long-term Care Riders

A long-term care rider is an optional add-on to an existing insurance policy, such as a life insurance policy or an annuity, that allows you to use part of the policy’s benefits while you are still alive to cover long-term care expenses. These expenses can include nursing home care, home health services, adult day care, and other costs related to chronic illness or disability that require assistance with daily activities like bathing, dressing, or eating.

How It Works:

• Life Insurance Long-Term Care Rider: You can access a portion of your life insurance death benefit early if a medical professional certifies that you need help with at least two activities of daily living or have a cognitive impairment like Alzheimer’s. The amount used for long-term care reduces the death benefit paid to beneficiaries after your death.
• Annuity Long-Term Care Rider: Added to an annuity contract, this rider provides funds to cover long-term care costs, often with no annual premium increases and a single premium payment. It can enhance monthly payouts if care is needed and offers immediate access to funds for long-term care.

Key Features:

• The rider typically requires proof of chronic illness or inability to perform daily living activities.
• There may be a waiting period (e.g., 20 to 100 days) before benefits can be accessed.
• Benefits paid out for long-term care are generally not taxable.
• If long-term care is not needed, the full death benefit remains available to beneficiaries (in life insurance riders).
• This rider helps avoid the "use it or lose it" drawback of traditional long-term care insurance by preserving some death benefit value.

Benefits:

• Helps cover expensive long-term care costs that Medicare does not cover.
• Provides financial flexibility by using life insurance or annuity funds for care.
• Offers peace of mind by protecting retirement savings and reducing reliance on family support.

In summary, a long-term care rider is a hybrid insurance feature that provides financial support for long-term care needs by allowing early access to life insurance or annuity benefits, helping policyholders manage the high costs of extended care while preserving some value for beneficiaries.