Understanding Long-Term Care Riders on Life Insurance: Are They Right for You?

According to KUNC Radio, an estimated 70% of people 65 and older will need long-term care and support services before they pass away. Despite this, only 3% to 4% of adults aged 50 and older have long-term care policies.

The problem is that aging is expensive. After all, older adults no longer earn income from jobs, considering they're already out of the workforce. Moreover, advancing age often brings about health conditions and bodily changes that require help from care providers.

The good news is that a long-term care rider on life insurance options for seniors can help cover some of the costs of long-term care services.

In this guide, we will explore this type of insurance rider. Read on to discover what it is, the benefits it can provide, and why you or an older loved one may need it.

What Is a Long-Term Care Rider on Life Insurance?

Senior life insurance riders, such as long-term care riders, are an optional type of coverage offered with life insurance for elderly adults. A long-term care rider provides a life benefit, meaning the insured, also called a "policyholder" or "policy owner," can use it while still alive.

With this special long-term care coverage, the policyholder can access a portion of their policy's death benefit. They can then use the proceeds to cover long-term care expenses. Insurance companies typically pay the benefit monthly, but some may also pay it in other terms, like semi-annually or annually.

What Long-Term Care Expenses Can This Insurance Rider Cover?

A long-term care insurance rider can be an additional monetary source for senior care financing. It can cover some of the policyholder's cost of care when they need assistance with activities of daily living (ADLs).

Your older loved one can use the payout they receive from their long-term care insurance rider to pay for the expenses that arise from their need for assistance with ADLs. For example, they can use the proceeds to pay for skilled nursing home services, assisted living care, or residing in a memory care community. They can also use it to cover medical care costs associated with aging.

What Are ADLs?

ADLs are everyday tasks a person must be able to perform to stay healthy and independent. The primary ones, also called basic ADLs, include the following:

• Bathing or showering
• Personal hygiene and grooming
• Transferring (e.g., from the bed to a chair and back)
• Choosing appropriate clothes and putting them on
• Toileting, including using and going to and from the toilet
• Continence, including helping clean up after bladder and bowel movement
• Eating, including preparing meals and feeding oneself

Why Would Seniors Need Help With ADLs?

Older adults may need help with ADLs if they have:

• Suffered a stroke
• Had an accident or major surgery
• A severe health condition
• Declining health due to advancing age
• A cognitive-related condition, such as dementia or Alzheimer's disease

Multiple factors, such as advancing age and a fall accident, also contribute to the need for ADL assistance. According to the U.S. CDC, falls are the leading cause of injury among adults 65 and older. Every year, as many as 14 million, or one in four, adults in this age group report experiencing a fall.

What Are the Eligibility Requirements for This Insurance Rider?

One of the typical requirements is that the insured should require help with at least two ADLs. To prove this, a licensed healthcare professional must usually certify that the policyholder's need for ADL assistance is a medical necessity.

An example is an older adult who's had a stroke. They may have impaired mobility, reducing their ability to go to the toilet, shower, prepare and eat healthy meals, and care for themselves. In this case, their need for ADL help is already a medical necessity.

Another requirement is that the life insurance policy offers a long-term care rider as an option. Not all policies offer this, so please ensure you or your older loved one confirms with the insurance agent that the plan allows you to add it.

Why Should Seniors Consider Purchasing a Long-Term Care Rider?

A good enough reason is that long-term care services and support can be expensive. For example, according to Genworth, the monthly national median cost of a semi-private room in a nursing home is $8,669, while it's $9,733 for a private room. Assisted living communities cost less, but the median is still $5,350.

Although the costs are lower in many states, without the additional support of a long-term care insurance rider, your older loved one's expenses can quickly drain their finances. If you or other family members provide them with financial support, your aging loved one's long-term nursing home, assisted living, or specialized memory care needs can significantly affect your finances.

It's also best to purchase a long-term insurance rider sooner rather than later for its primary policy's death benefit. Even if your older loved one doesn't use the rider, the death benefit will remain intact. In this case, the beneficiaries will get the whole benefit amount when the insured passes away.

Long-term care insurance riders also typically cost less than stand-alone long-term care insurance policies.

How to Cash Out Funds From a Long-Term Care Rider

First, the policyholder must apply to activate the long-term care rider and present the certification issued by their healthcare professional. Once the insurance company approves the application, there's usually a waiting period, often 90 days. After the waiting period, the policy owner should receive the funds in their nominated bank account.

The insurer will subtract the payouts from the policy's primary death benefit. If the policyholder passes away, their beneficiaries' payout will be equivalent to whatever remains from the policy's cash value.

Consider Purchasing a Long-Term Care Rider

A long-term care rider on life insurance can provide significant financial assistance to seniors who may eventually need long-term care and support services. Since most older adults will eventually require help with ADLs, purchasing this insurance rider makes sense.