Life Insurance Chronic Benefit Riders

Many permanent life insurance policies can have a rider that allows for the death benefit to be used prior to death for the payment of long-term care services. The triggering mechanism for these benefits is similar, if not the same as the one's for the traditional long-term care insurance policy.

The advantages of this type of policy are that there are LTC benefits that are not usually at any additional cost since these benefits are built into these policies. The drawback is that the benefits are usually a percentage of the total face value of the policy and the total amounts are lower than what might be needed when they are tapped. Typically, these benefits will be no more than 24% of the face value of the policy in any year, and this high of a percentage is only available at higher ages. The younger you are, the lower the percentages, thus not necessarily taking care of the need. The increase in the face value of the policy might not be easily justified due to the cost of the insurance.

Also, these policies also do not qualify for tax deductibility or the partnership program. Also, the life insurance underwriting is a different animal than the LTC underwriting (mortality vs. morbidity). That being said, these policies can be a good fit for taking care of an elimination period in a traditional policy. If you have a significant need for a relatively large permanent life insurance policy, this plan could make sense for you.