Life Insurance with a long term care rider

Conseula Mack has a finance program on the PBS World side channel. This week she had an expert on medicare. She has a book on the subject.

She mentioned life insurance with a long term care rider as a way to fund long term care. It’s a guaranteed winner. You or your heirs are sure of a payout.

Anyone know any details? First time I have heard of this kind of coverage.

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Be VERY careful. LTC is a money-loser for insurance companies.

I can see how this might work (for them, not you). Does not look good.

IMO, the insurance company requires a prepaid mega-buck life insurance policy–with THEM as the beneficiary, or some trust fund that gets the $$$ when you die, which then pays the insurance company any amount they paid out (with interest, IMO) while you were in LTC. Anything left over goes to estate/heirs. So, the ins co got the $$$ up-front and can invest it as they choose. If they go bust, your (estate’s) problem. If the insurance company deems a class of policies “no longer economic”, they can cancel ALL those policies. Not sure how the paid-premiums would be handled, or those making claims. Up to the state’s laws–which will vary.

I would not consider it.

This type of rider is typically only available on whole life or universal life, not on term life. Those types of insurance are generally more expensive than term life, especially if buying the insurance at an older age.

With very few exceptions, unless you have dependents who will need money in excess of any estate you will leave in the event of your death, life insurance is a financial loser. You would be better off just putting the premiums into an S&P 500 ETF. And if you do have dependents who will need that money, you need to keep in mind that the LTC rider is paying out part of the death benefit, so they aren’t going to get the whole amount that you are insured for. That means that you need to buy enough coverage to cover your anticipated LTC costs PLUS the amount that your beneficiaries will need. That makes the insurance policy even more costly compared to term life for the amount of money your beneficiaries will need.

If you want LTC coverage, buy a LTC policy. Don’t double down by spending money on unneeded life insurance, too.



Anything an insurance company touches will have a minimum 15% to 20% “skim rate” on the premium paid. Keep the money invested, and use that to fund your LTC.



There are policies like this but if you want long-term care coverage you’re probably better off just buying a straight long-term care policy with inflation protection, particularly a special kind of policy called “long-term care partnership”.

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An insurance company cannot make itself the beneficiary of a life insurance policy it sells. Secondly an insurance company canNOT cancel a long-term care insurance policy. The only way someone can have their long-term care policy cancelled is if they don’t pay the premium in a timely fashion.

But they can raise the rates you pay for the LTC.


Most states have new rules to protect those who purchase long-term care insurance today. It’s called the “Rate Stability Regulation” and it has removed the profit incentive from rate increase on newer long-term care insurance policies. My policy is protected by these rules and I’ve had only one rate increase and it was only 15%.

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That is why I added the trust. The trust gets the $$$, repays the insurance company, and then gives the rest to the estate/beneficiaries.

Insurance companies CAN discontinue groups or categories of policies when they are “uneconomic”. Otherwise, the company goes bankrupt (per the attornies, anyway). So the law does allow that, and I have seen it happen. Had car insurance, paid in full once per year. I got notice from the company about changes. Mgmt had done an LBO. Changed the company name. Then they sent out notices they were not renewing any existing policies. They required EVERY previous customer to reapply for new insurance with the (new?) company. Policy premiums went sky high. They wanted four times the premium I had paid the year before. I told them where they could put it. A moderate increase was ok. That was not. Got rid of my car and haven’t owned a car since. Not worth the expense.

States can not prevent companies from making decisions that are not good for consumers. They can try to minimize the harm, but that is about as far as they can go. The courts have consistently allowed companies to screw the public because “JOBS”, or the false claim they were at risk.

Many who pay into long term care insurance for years never collect a dime. The life insurance part guarantees you or your heirs a return.

The question is are the extra costs worth that guarantee.

How long have you had the policy. How many years before you had the Rate increase?


Many who pay for their auto, homeowner’s and/or umbrella policies never collect a dime either. Yet people, even if not required to purchase these policies, do so, because they want the coverage just in case. Not sure why LTC insurance should be viewed any differently. So again, if you want a LTC policy, buy a LTC policy.

Insurance is just that: insurance. Insurance is not as an investment for you to get a return on. If you are looking for an investment, you need to realize that on average, the “return” that you will get must be less than what you could have earned if you had just invested the premium payments, because the insurance company wouldn’t be selling a product that they thought they would lose money on.


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I will add that if someone REALLY needs to make sure they get a payout, you can also add a ROP (return of premium) rider on the policy so that all the money isn’t simply wasted if the insured never uses the coverage. Should be cheaper than life insurance with a LTC rider.

It’s true that insurance companies can cancel auto insurance policies.
It is NOT true that insurance companies can cancel long-term care insurance policies.

Long-term care insurance policies can only be cancelled by the insurance company if the premium is not paid in a timely manner.

This is called “guaranteed renewable”. The policyholder has the right to renew the policy every year, for life.

Regarding your statement that the “trust gets the $$$, repays the insurance company, and then gives the rest to the estate/beneficiaries” there is nothing like this. I’m not sure where you may have heard about something like this but whatever your source was, they don’t know what they are talking about.

The hard part about “self-insuring” for long-term care is that you don’t know when you’ll need care or how long you’ll need care for. My mother–in-law paid about $40,000 in long-term care insurance premiums. She received over $375,000 of long-term care benefits from her policy before she passed away. Even Warren Buffett would love that kind of return.

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I have had the policy for 14 years. I had it for about 10 years before I got the 15% rate increase. My state was one of the first states to enact the “rate stability regulation”.