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  • Writer's pictureMike Riska

The Basics of a Long-Term Care Rider

When health insurance, Medicare, or Medicaid do not provide coverage for a particular long-term care (LTC) expense, LTC insurance may help. LTC insurance can cover items such as medications or even in-home assistance for cleaning or meal preparation.

The VB Shop offers combination policies for employers that incorporate LTC benefits. These policies are referred to as long-term care riders. An LTC rider might provide valuable protection if you ever discover that you require particular medical services that you might not otherwise be able to afford.

What is a long-term care rider?

A long-term care rider is a clause in a life insurance policy that permits you to receive a portion of the death benefit—the sum of money awarded to your beneficiary after your passing—while you are still alive. Those funds can be used to pay for long-term care.

This type of rider is similar to the premature death benefit that most life insurance policies have. Diagnosing a chronic condition that renders you unable to care for yourself can activate an LTC rider. Still, a terminal illness must be identified to qualify for the hastened death benefit. Only certain types of universal, whole, or variable permanent life insurance are often eligible for LTC riders. Fewer and fewer insurance companies offer this feature for term life insurance.

If you want to include an LTC rider, you must do so when purchasing a life insurance policy. The cost of your overall premium will increase if you elect to add an LTC rider.

LTC Riders

The long-term care rider allows policyholders to use the death benefit from their permanent life insurance while still living. To be eligible for the death benefit, a registered healthcare professional must certify that you have a chronic disease that prohibits you from performing at least two of the six activities of daily living (ADL), such as eating, bathing, or dressing. Alternatively, a doctor can determine that you suffer from a persistent illness or cognitive impairment.

To be diagnosed with a qualifying chronic illness, you typically require a certified healthcare professional to verify that you have a chronic condition that prohibits you from performing at least two of the following six activities of daily living (ADL) such as:

  • Performing personal hygiene functions

  • Bathing

  • Getting out of bed or a chair without assistance

Before the insurance pays out any benefits, you must prove the impairment for 30, 60, or 90 days (the elimination period). Once the impairment has been certified, the insurance provider will begin covering long-term care costs.

What could an LTC rider pay for?

The combined LTC and life insurance coverage typically covers services that help you conduct ADLs. If you cannot do ADLs, an LTC rider may pay for a home caretaker or your admission to a long-term care facility.

Long-term care payment types

An LTC rider often offers two payment alternatives: a flat sum and a monthly payment. The simplest type is a lump sum payout. Once you receive the insurance company's check, in this case, you are free to spend the money on living expenditures or medical costs.

When it comes to monthly payments or refunds, extra work can be required. Under this payout structure, you would be paid back for the money you spent on long-term care in the preceding month. For this option, you must keep good records of the costs incurred and send detailed invoices to your insurance company for reimbursement.

Have questions about how long-term care can work with life insurance for your employees? Contact the experts at The Voluntary Benefits Shop to discuss how to offer this important option as part of your benefits package.

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