Long-term care insurance may prove to be one of the most important types of policies you can buy. Unfortunately, traditional long-term care insurance carries a hefty price tag, one that many people cannot afford. Many major life insurance carriers address the growing need for long-term care coverage by offering riders available for purchase on most permanent life insurance products.
Long-term care riders added to permanent life insurance allow policy owners to address two very important coverage needs with a single product. If the insured person ever requires professional nursing home care or assisted living, the life insurance policy essentially converts to a long-term care contract. Benefits that would have otherwise only been payable to beneficiaries after the insured's death then become accessible to the owner for payment of long-term care expenses.
An accelerated long-term care benefit rider is the most common and allows the policy owner to draw down the existing life insurance death benefit. If long-term care is no longer needed and the death benefit has not been exhausted, the policy converts back to its original permanent life insurance state at the reduced amount. However, if long-term care expenses exceed the original face amount of the life insurance contract, benefits are exhausted and no further value can be gained from the contract.
An extended long-term care rider, although rarer and more expensive, may also prove more advantageous. Unlike the accelerated benefit rider, which leaves the policy owner without coverage once the death benefit has been exhausted, the extended benefit rider continues to provide payment for as long as care is required even if the recurring long-term care benefit payments exceed the original life insurance face value.
Gregory Gambone is senior vice president of a small New Jersey insurance brokerage. His expertise is insurance and employee benefits. He has been writing since 1997. Gambone released his first book, "Financial Planning Basics," in 2007 and continues to work on his next industry publication. He earned a Bachelor of Science in psychology from Fairleigh Dickinson University.