4 Riders that Your LTCI Policy Should Have

A wide range of long term care insurance riders are being offered in the market today. As a consumer, you may be overwhelmed at the choices laid out before you. Riders, generally, are a good thing as it can make your policy more broad and flexible. However, remember that these come with a separate cost that will be added on top of your premiums. That’s why it’s crucial to wisely choose which additional feature to purchase. To help you decide, consider these four long term care insurance riders that can be essential for your policy to have.

1. Inflation Protection

If there’s one rider that you shouldn’t pass on, that would be inflation protection. This rider is essential as it insures that your policy’s benefits can keep up with the rising costs of care services. As per Genworth’s Cost of Care Survey for 2013, it is found that the annual median cost of nursing home stay has hiked up by 24% in just a span of 5 years. Most likely, your benefit amount—independent of inflation protection—will be short of your future care expenses.

Inflation protection works by increasing your daily benefit amount on a yearly basis. You have the choice to be protected under a simple inflation protection or a compounded one. Say, your daily benefit amount is $100. With a simple inflation rate of 5%, your daily benefit will increase by $5 each year. Meanwhile, if you have a 5% compounded inflation rate, the first increase will result to $105 worth of daily benefit. As for the second one, the increase would be 5% of 105 and so on.

The compounded inflation rate offers a higher level of security, and so does a considerable price tag. However, younger buyers should go for this as they are farther away from claiming their benefits as opposed to the older ones.

Apart from allowing your benefits to keep up with the increase in care costs, inflation protection is also a requirement if you want your policy to be under a state partnership program.

Inflation protection comes at an added cost. However, its price is way lower than what you will pay out of pocket if your policy falls short of your care expenses because it’s not equipped with this rider.

2. Spousal Benefit Rider

Couples should highly consider this rider as this feature lets a couple to share their long term care insurance benefits. This rider allows one spouse to utilize his partner’s benefits if he has already exhausted his own.

Integrating the spousal benefit in your policies can increase your premiums by 15%. However, this is more manageable than the cost of applying for a new policy.

3. Home Health Care Rider

Most people want to remain in their homes even at the time that they already require care. That’s why it’s important to ensure that your policy will pay care administered within the home.

If you have a tax-qualified policy, home care benefits of some sort are already tailored in it. In 2009, 95% of long term care insurance policies are tax-qualified. Meanwhile, if your policy is non-tax-qualified, then adding this rider to your long term care insurance is a smart move.

Today, most long term care insurance policies already have integrated in-home care benefits in their coverage. Before purchasing this rider, check if your policy already covers this type of care setting.

4. Return of Premium Rider

“What will happen to my premiums if I never claimed my benefits?” If you’re one of the risk-averse individuals who have raised this question, then a return of premium rider is right for you. This is a type of non-forfeiture rider. Insurers are mandated by the state to offer this type of features to purchasers of tax-qualified policies.

If you’ve never utilized your long term care insurance benefits, all or a portion of your premiums will be returned to your named beneficiary after you die—given that your policy has a return of premium feature.

However, this rider should be bought with caution as it can result to over payment. This feature can increase your premium by 25-40%. Remember that everyone has a high possibility of needing care, thus, you’ll likely make claims off your policy at some point. But, if you’re really keen on minimizing your risks, then, you can include this in your policy.

A rider is designed to give you more control over your long term care insurance policy, however, it can be counterproductive if your buy a feature that’s already integrated in your benefits. That means you’re shelling out more money than you’re supposed to be.

At first glance, these additional features can seem enticing. However, make sure that the riders you purchase will actually meet a need along the way.