Should You Consider Long-Term Care Insurance Through a Life Policy? 

At some stage in life, you may unfortunately find yourself in need of long-term care (LTC). It might not be pleasant to contemplate, much like putting together an estate plan, but preparing for this life stage should include consideration of your LTC insurance options. Standard health care insurance and Medicare typically don’t cover all LTC; it’s more likely to cover short-term care like hospice, skilled nursing facility stays, and some home care. Or, if it does cover LTC, it will more than likely not cover the full expense.   

There are two main types of policies to choose from: traditional long-term care insurance or life insurance with an LTC rider (a chronic illness rider is separate). This article delves into the option of adding living benefits to a life insurance policy, also known as a linked-benefit or hybrid policy, which not all insurance companies offer. Read more about long-term care insurance here. 

To lay the foundation, here are points to consider for why long-term care insurance is worth exploring and the costs you can expect. 

Reasons to consider LTC insurance 

• The cost of caregiving is notoriously expensive. In 2024, the estimated average cost of assisted living is $5,511 each month and a private room in a nursing home is $10,025.¹ 
• Since your premiums will increase with age, it’s best to get long-term care insurance well before you get into your 60s, especially if you have a history in your family of issues that could lead to the need for caregiving services.  
• Regardless of whether you have willing loved ones, caregiving can be a significant burden — having the option for professional care can provide relief for both you and them. 

Costs of long-term care insurance 

• Traditional long-term care insurance policies can be expensive because the insurer might need to cover long-term care expenses for many years. In 2023, a 55-year-old, single and healthy female who purchased a long-term care policy with initial benefits of $165,000, paid around $1,500 per year or $125 per month.²
•  Also, there’s a good chance you may not qualify for long-term care insurance if you’re already in poor health or have a debilitating condition. 
• For a life policy with a living benefit rider, the average monthly cost is $85 for a 20-year term life insurance policy of $250,000 for a non-smoking 55-year-old female.³
• . Adding a LTC care rider generally costs between 20% to 60% more, depending on health and lifestyle factors.⁴
•  Therefore, if a life policy cost is $85 per month, adding a rider at 40% more would bump it up to $119. However, one company quoted $327 monthly for a single female aged 55 for initial long-term care benefits of $180,000 and a minimum death benefit of $120,000.⁵

Understanding a LTC rider with life insurance 

To help determine whether you want to consider a LTC rider, here are other factors and comparisons beyond cost. 

1. Premiums and payouts. When you have long-term care insurance added onto a permanent life policy, you usually pay in installments or in one lump sum. The insurer pays out from your death benefit, which means your beneficiaries may receive less or no money when you die. Payouts could be a reimbursement of approved expenses after submitting a claim or a consistent amount every month. Traditional long-term care insurance operates similarly to health insurance: You pay a monthly premium and your approved expenses are paid by the insurer when you submit a claim.  
2. Qualifying. Like with a traditional policy, a LTC rider covers care expenses for when you cannot perform at least two activities of daily life (ADL), including eating, bathing, getting dressed, walking, and toileting. Depending on the insurer, a health care professional may need to diagnose you with a covered health condition — common ones include Alzheimer’s and Parkinson’s, and other debilitating ailments that cause dementia or physical disabilities. 
3. What’s covered. Typically, whether traditional long-term care insurance or a LTC rider, you should check to be sure that your coverage includes assisted living facilities, nursing homes, and home health. 

Pros and cons of long-term care riders  

Pros 

There are some potential advantages to having a life insurance policy with living benefits over having traditional long-term care insurance — but they will likely depend on the policy as well as your age, health, state of residence, and more. 

1. Flexibility. A hybrid policy eliminates the “use it or lose it” issue. If you don’t use the long-term care benefits, you won’t lose the death benefit, and your beneficiaries will still get the full payout. Also, you have more premium payment options as well as payout options.  
2. Cash value. With a permanent life insurance policy, you’re building cash value on a tax-deferred basis, which you can use for expenses outside of long-term care such as home upgrades to accommodate disabilities which may not be covered by a traditional long-term care policy. 
3. Underwriting. The underwriting process may be less stringent because it’s tied to your life insurance policy, but understanding an insurer’s requirements for qualifying will help clarify whether it’s quicker or easier than a traditional long-term care insurance policy. 

Cons 

The cons of hybrid life insurance may include the following, but again it’s important to keep in mind your situation and the policy terms. 

1. Death benefits. Because the payouts could be dipping into the death benefit of your life insurance policy, your beneficiaries may not receive any money or receive a smaller amount than you’d like. 
2. Coverage limits. There may be limits on how much of the benefits can be used for long-term care, so it’s important to understand these limits and how they align with your potential care needs. 
3. Waiting periods. Insurers have different approval processes so this is a factor to consider. You may have to wait longer than 90 days after getting care to be reimbursed and there’s always the risk that claims could be denied. If this is a concern, there are long-term care policies available that cover the initial 90-day period before your primary policy takes effect. 

Determine what is the right option for you 

A life insurance policy with a LTC rider provides a way to address both potential long-term care needs and provides a financial benefit to your loved ones after your death. Long-term care insurance terms and benefits vary considerably, whether a LTC rider or a traditional policy, but it may be worth evaluating if having a hybrid solution is best for your situation.  

If you’re not sure how to determine your best option or want more information about how long-term care insurance policies fit into your overall wealth management strategy, Mercer Advisors can help. Our comprehensive financial plan includes unbiased insurance advice, so let’s talk. 

1. “Long-Term Care Calculator,” SeniorLiving.org, June 25, 2024. 
2. “2023 Long-Term Care Insurance Price Index Released,” American Association for Long-Term Care Insurance, March 6, 2022. 
3. “How much does life insurance cost for a 50-year old?,” PolicyAdvisor, June 1, 2023. 
4. “Long-Term Care Insurance Facts,” American Association for Long-Term Care Insurance, March 2023. 
5. “Should you buy life insurance with a long-term care rider?”, Progressive, 2024.