If you’re planning to buy a whole life policy, be sure to consider the long-term care rider.
Worried about the nighmarish cost and limitations of long term care insurance?
A new feature offered by certain whole life insurance policies is a rider that lets you start drawing up to 2 percent or $330 per day of your death benefit—not your cash value—for long term care needs.
It’s not too difficult to qualify for this benefit if aging starts impairing your physical or mental abilities. To start collecting, you must need help with at least two of six activities of daily living (including eating, dressing, and bathing) or have a cognitive impairment, such as Alzheimer’s disease.
The cost of the rider varies by your age and health status. But it added only $315 per year to an example policy we got a quote for involving a 40-year-old Illinois man in perfect health who wants a $500,000 policy with level annual premium payments.
That $315, of course, is on top of a base premium of $6,760 per year for the whole life policy, which provides a life insurance death benefit and builds cash value for as long as you pay the premium. See the story, Is whole life insurance right for you? for more details. You’ll need to get a premium quote from a licensed insurance agent, based on your specific age, health status, and other factors.
If you can afford the cost of whole life insurance, which is significantly higher than the premium for an equivalent term life insurance policy, this benefit can allow you to avoid the high and rising cost of a more restrictive straight long-term care policy. That coverage comes with a 30- to 180-day waiting period before benefits start.
With the long term care rider, as soon as you qualify for benefits, you no longer need to pay your premiums to keep the whole life policy in force, as is usually the case with long-term care policies.
Last posted by Jeff Blyskal at consumersreports.org