Your Complete Guide to Life Insurance with a Long-Term Care Rider

Apr 26, 2023 | Article, Guide

What is a life insurance long-term care rider?

A long-term care rider is a living benefit, a supplemental addition to your life insurance policy that provides financial protection by allowing you to access part of your life insurance policy’s death benefit on a monthly basis or as a lump sum payment to help pay for long-term care while you’re still alive. The money can be used for expenses such as a nursing home, home health care worker, long-term care facility, adult day care, or any other assisted medical care not covered by traditional health insurance.


That’s an important caveat—you cannot use the money from a long-term care rider to pay for prescriptions, doctor visits, hospital stays, surgery, or anything along those lines that traditional health insurance typically covers.

Long-term care riders are rarely offered for term life insurance policies. They are generally available as an option for permanent life insurance policies such as whole life insurance or universal life insurance.

Qualifications for a long-term care rider

In order to qualify for a long-term care rider, you must be suffering from a chronic health condition, either temporarily or permanently, that does not allow you to independently perform at least two of the six basic ADLs, which are Activities of Daily Living:

  • Ambulating
  • Continence
  • Feeding
  • Dressing
  • Personal Hygiene
  • Toileting
taking care of someone

A diagnosis for that chronic health condition must come from a licensed, qualified healthcare professional and satisfy your insurance carrier’s requirements.

helping someone walk

What’s the difference between a long-term care rider and a chronic illness rider?

For a chronic illness rider to take effect, your debilitating condition must be permanent, whereas with a long-term care rider, it can be temporary.

Learn more about chronic illness riders here:

Chronic health conditions that may require long-term care

Although it varies from insurance company to insurance company, there are specific diagnoses that often qualify a policyholder to begin collecting monthly payouts under a long-term care rider, depending on their severity. Those include:

  • Alzheimer’s Disease
  • Senile Dementia
  • Cancer
  • Diabetes
  • Heart Disease
  • Stroke
  • Asthma
  • Cronne’s Disease
  • Parkinson’s Disease
  • Cystic Fibrosis
  • Multiple Sclerosis (MS)
  • Amyotrophic Lateral Sclerosis (ALS)
  • Rheumatoid Arthritis

This is just a partial list, and any condition that meets the above-discussed ADL criteria may activate a long-term care rider.

How a long-term care rider works


It’s important to note here that you must add a long-term care rider to your life insurance policy before you develop the chronic health condition that would trigger the rider. Once you’ve received a diagnosis of a health issue that meets the ADL criteria, it’s too late to add a long-term care rider to your life insurance policy.

Once your insurer has approved your long-term care rider activation, there is usually a waiting period before cash payouts begin, although the length of that waiting period will vary.

With most long-term care riders, there will be a maximum monthly amount you can take in payouts, figured as a small percentage of your policy’s death benefit, so that number will vary depending on the size of your death benefit. Most long-term care riders also have a lifetime cap on the total amount you can access, generally 70% to 80% of your death benefit.

For example, if your life insurance policy has a death benefit of $200,000, and your long-term care rider is capped at 80%, you could receive up to $160,000 while you are alive.

Once the payments begin, the money is subtracted from the total amount of your death benefit, which means upon your death, your beneficiaries will receive a smaller payout. In the example above, your death benefit would be reduced to $40,000. If your life insurance policy has built up cash value, having a long-term care rider could also reduce the value of that

Pros of a long-term care rider:

  • Nearly 70% of all Americans will require long-term care at some point.
  • Long-term care is extraordinarily expensive. The average cost of a private room in a nursing home is now $9,000 per month, and long-term care facilities can cost from $80,000 to $150,000 per year.
  • A long-term care life insurance rider tends to be less expensive than a standalone long-term care insurance policy.

Cons of a long-term care rider:

  • While long-term care is prohibitively expensive, long-term care riders are also expensive. The average annual cost of a long-term care rider is nearly $1,000 for a single male, $1,500 for a single female, and more than $2,000 for a couple. That’s only an average, and depending on your age and health, that premium cost can rise dramatically.
  • You must be in comparatively good health in order to qualify for a long-term care rider to begin with.
  • The waiting period before payouts begin, often as much as 90 days, can be a financial hit if you have immediate expenses that have to be met.
  • If it turns out you’re one of the 30% or so of Americans who do not require long-term care, then you’ve spent a significant amount of money that could have been better spent elsewhere.
  • The premium payments for long-term care riders often increase as you age.
  • If at some point you choose to surrender your life insurance policy, and the long-term care rider along with it, you forfeit all the money you’ve paid into the rider.

There’s another alternative

As the owner of a life insurance policy, you have the legal right to sell that policy to a third party for an immediate, one-time lump sum payment, which is called a settlement. There are two types of settlements: viatical settlements and life settlements.

A viatical settlement is an option for life insurance policyholders who have been diagnosed as terminally ill, usually with under two years to live, although that can vary. The policy must have been in force for at least two years and must have a death benefit of at least $100,000. The age of the policyholder does not matter.

heart in hands

A life settlement, also called a senior settlement, is for a policyholder who is at least 65 years old, but they are most often in their seventies. They must have a policy that’s been in force for at least two years, with a death benefit of at least $100,000.

Learn more about the difference between viatical settlements and life settlements here:

Benefits of selling your life insurance policy

  • You receive an immediate lump sum of cash you can use for any reason, from paying for long-term care to paying for medical care to taking that bucket-list trip with your loved ones.
  • For example, with a life settlement, you can receive between 10% and 35% of the death benefit with an average of 20%—that’s $20,000 on a $100,000 life insurance policy.
  • Viatical settlements tend to return an even higher percentage of your death benefit, as you’re not expected to live as long—an average of between 60% and 90% of a policy’s face value.
  • Also, viatical settlements are usually not taxed.

Learn more about selling your whole life insurance policy here:

A Life/Viatical Settlement Company

A licensed, reputable life/viatical settlement company can walk you through the entire process and help you decide if a settlement is the right choice for you.

If you are interested in learning more about selling your life insurance policy, contact the experts at PolicyBank® for more information so they can help you make an informed decision.