The Rising Need for Long-Term Care
As we age, the likelihood of needing assistance with daily activities increases. The U.S. Department of Health & Human Services reports that 60% of individuals will require help with tasks like dressing and bathing at some point. These care costs are significant, with expenses ranging from $4,500 to nearly $10,000 per month for services like assisted living and nursing home care.
AARP defines long-term care as “assistance with personal daily tasks, such as bathing, dressing, and eating, and can be provided at home, in the community, or a facility.” With most adults 65 and older expected to need long-term care at some point, the financial burden on families can be significant.
Given the rising costs of care, finding the right financial solution is crucial. Many seniors and their families turn to long-term care insurance, but not everyone has a policy in place—or enough coverage to meet their needs. That’s why exploring alternative funding options, such as long-term care riders and life settlements, can provide much-needed financial relief.
What Is a Long-Term Care (LTC) Rider?
A Long-Term Care (LTC) rider is an add-on to a life insurance policy that allows policyholders to access a portion of their death benefit to cover qualified long-term care expenses. This feature provides flexibility by allowing individuals to use their life insurance while still alive if they need long-term care.
LTC riders typically become active when the policyholder can no longer perform two or more activities of daily living (ADLs), such as eating, dressing, or bathing. Once activated, a portion of the life insurance benefit is paid out periodically to cover care costs.
Benefits of an LTC Rider
Adding an LTC rider to a life insurance policy offers several advantages:
- Financial Flexibility: Policyholders can use their benefits while still alive, rather than solely as a death benefit.
- No Need for a Separate LTC Policy: Eliminates the necessity for standalone long-term care insurance, which can be expensive.
- Peace of Mind: Ensures that policyholders have financial support when they need long-term care, without exhausting their personal savings or burdening their families.
However, LTC riders come with costs, typically increasing insurance premiums by $600–$800 per year, and they reduce the final death benefit available to beneficiaries. Additionally, not all policies offer LTC riders, and policyholders must meet specific health and eligibility requirements.
Alternatives to LTC Riders
If an LTC rider isn’t the right fit, there are several other ways to fund long-term care expenses.
1. Life Settlements
A life settlement allows policyholders to sell their existing life insurance policy for a lump sum of cash. This can be a valuable option for individuals who no longer need their policy or struggle to afford premiums. The funds can be used for long-term care, medical expenses, or other financial needs.
Typically, life settlements are best suited for policyholders aged 65+ with policies worth $100,000 or more. Harbor Life Settlements specializes in helping individuals navigate this process efficiently.
2. Viatical Settlements
For individuals diagnosed with a terminal illness, a viatical settlement provides tax-free funds by selling their life insurance policy. This option ensures that patients can access immediate financial resources for medical and long-term care needs. If you have specific tax-related questions, be sure to talk with a tax professional.
3. Hybrid Life Insurance Policies
Hybrid policies combine traditional life insurance with long-term care benefits. These policies allow policyholders to use benefits for long-term care if needed, but if care isn’t required, the policy continues as traditional life insurance.
NerdWallet highlights the advantage of hybrid policies, stating: “A hybrid policy ensures that your investment is not wasted—if you don’t need care, your heirs still receive a payout.”
4. Accelerated Death Benefits (ADB)
Many life insurance policies include an Accelerated Death Benefit (ADB), which allows policyholders to access a portion of their death benefit if diagnosed with a chronic or terminal illness. This option enables individuals to cover medical and long-term care costs without selling their policy.
How Medicaid & Other Policies Factor Into Long-Term Care
For those who don’t have long-term care insurance or need additional financial assistance, Medicaid may help cover certain long-term care costs. However, Medicaid eligibility varies by state, and not all assisted living facilities accept Medicaid. Medicaid waivers and state programs can sometimes help offset long-term care costs for eligible individuals.
Understanding Medicaid’s role in covering long-term care expenses is crucial when planning for the future. Learn more about how Medicaid supports assisted living and what options might be available to you.
Making the Right Choice for Your Long-Term Care Needs
Choosing the right funding method for long-term care depends on individual circumstances:
- If you want to retain your policy but need flexibility, an LTC rider may be the best choice.
- If you need cash immediately, a life settlement could provide financial relief.
- If you have a terminal illness, a viatical settlement may be an option.
- If you prefer an insurance policy with built-in long-term care benefits, consider a hybrid life insurance policy.
Talk to an Expert
Navigating long-term care funding options can be complex. Harbor Life Settlements offers guidance to help policyholders maximize the value of their policies. Contact us for a free policy estimate and discover how you can leverage your life insurance for long-term care.
Empower Your Future: Plan for Long-Term Care Today
Long-term care planning is essential, and life insurance can be a valuable financial asset in covering these costs. By exploring LTC riders, life settlements, viatical settlements, hybrid policies, and ADB options, policyholders can find the best solution for their needs.
Don’t wait until care is needed—start planning today. Harbor Life Settlements can help you evaluate your options and maximize the benefits of your policy.
