Is it covered?

I have a few concerns about using life insurance as a funding strategy for long term care.  I don’t mean in the sense of a true linked benefit / asset-based LTC product like Asset-Care.  What I am referring to is the “add-on” coverage provided by a rider on the life insurance policy.

“Oh, by the way, we can add this rider and if you have a long term care situation, you can use part of your death benefit to pay for that need.”

That’s all well and good but what if all of that life insurance policy’s death benefit was intended for a debt elimination or legacy planning or simply spousal income?  Think about that the next time you encounter a client whose life policy “can do that”.

What I really want to discuss here isn’t the viability of using a life policy to meet a long term care funding need.  I want to discuss making sure that the life policy and the rider used to provide that benefit CAN provide LTC money if needed.

Often times, people (consumers and producers) misunderstand the language of their “LTC Rider” that is tied to their life insurance policy.  And, rather than providing money for care received at home while recovering from a stroke or a fall, the policy provides no benefits.  Why is this?  Simply, the rider was written to meet the chronic illness definition.

Remember, the chronic illness definition typically includes language that requires the condition to be permanent and irrecoverable.  In the case of a stroke or a fractured hip or even a head injury – that criteria is not met.

Focus on the language of the rider to determine if it is LTC or something else.  If the triggering events are limited to “2 of 6 activities of daily living” and do not mention anything about a cognitive issues such as dementia or Alzheimer’s then it is NOT LTC.  If the language limits where care can be received (typically limiting care to be in a nursing home) or omits home care – it is NOT LTC.

The moral of the story is this: even if your client says that their policy “does that” (provides LTC benefits), confirm the language so that no one is surprised when an extended healthcare event occurs and LTC benefits are needed.