How to Pay for a Long Term Care Nursing Home Stay with Life Insurance

How to Pay for a Long Term Care Nursing Home Stay with Life Insurance

One of the most pressing financial threats in retirement is a long term care stay. There are 1.3 million Americans in a nursing home, and home health care has soared in popularity with 4.5 million patients choosing to receive care in the comfort of their own home (CDC).

A private room in a nursing home facility in Decatur, IL costs almost $7,000 per month. By 2030, that monthly expense is expected to be about $9,500 (Genworth). That’s a $2,500 monthly increase in just 10 years.

Seven in 10 people will require long term care in their lifetime, and the average length of stay is three years (U.S. Department of Health and Human Services).

When we start doing the math, most people in Decatur, IL should plan for at least $342,000 of long term care expenses. That’s a massive financial risk, and in these situations, we typically look to insurance solutions to help.

But is traditional long term care insurance still the best choice, or is a life insurance long term care rider better?

Want a no-obligation long term care rider quote? Our local Sams/Hockaday agents are at your service. Request a quote today!

Is Long Term Care Insurance Worth It?

Traditional long term care insurance in Illinois isn’t as accessible or affordable as it used to be. If you can afford it and are young enough to qualify, it’s a fantastic choice.

But sadly, many people are priced out of long term care insurance, and if you’re over the age of 65, your odds of being approved aren’t great. In fact, only about 50% of people who apply are accepted.

If you’re lucky enough to be accepted, you’re likely to experience double-digit rate increases as the years go on. In the past couple of years, we’ve even seen a rate increase as high as 114%. Long term care stays are extremely expensive, and million-dollar claims are more common than you’d think.

How does a long term care rider work

Because of these expensive claims, many long term care insurance companies have dropped out of the market altogether. In 2000, about 125 insurers were selling long term care insurance. Today, only 12 companies sell traditional long term care insurance to individuals.

The lack of choice makes it difficult to compare your options.

So, what are some other ways to protect yourself from an expensive long term care stay?

Alternatives to Long Term Care Insurance

Two great alternatives to long term care insurance are:

  1. Short term care insurance
  2. Life insurance with a long term care rider

Short term care insurance, also called recovery care insurance, provides coverage for up to one year. The underwriting is very similar to a Medicare Supplement application, and it’s very affordable. 

According to the American Association for Long-Term Care Insurance, a typical short-term care insurance buyer is between the ages of 65-74 and has a net worth of less than $500,000.

While short term care insurance isn’t promising coverage for life, something is definitely better than nothing.

A second option is a long term care rider, which can be added to certain life insurance policies. A long term care rider offers living benefits that can help pay for long term care expenses. Many people refer to life insurance with long term care as a hybrid solution.

hybrid long term care insurance

You choose a death benefit, and if you need long term care, you can start drawing money from that death benefit while you’re still alive. If you don’t use it all, whatever is left over will be paid to your beneficiary when you die.

Only 16% of Americans with long term care coverage have a standalone policy, while 84% opt for a long term care benefit attached to a life insurance policy or annuity (AALTCI).

A long term care rider is much more affordable than traditional long term care insurance, and here’s the best part: you know you’ll use the policy!

How Does a Long Term Care Rider Work?

A long term care rider gives you access to a percentage of your life insurance death benefit each month. 

For example, let’s say you purchase a life insurance policy with a $100,000 death benefit. If you get the 4% long term rider, you can access $4,000 per month for long term care services. Many policies allow you to use that money for a nursing home stay or even home health care. You can continue drawing that monthly benefit until the money runs out.

Understanding living benefit riders

If you used all $4,000 each month, you’d essentially have long term care coverage for 25 months.

The next question most people have is how much coverage do I need?

We first see what nursing homes cost in your area. Then, we forecast how those costs will increase over time. The cost of care tool from Genworth is helpful here as you can enter your zip code and see the average costs in your area. You can also see what the projected costs will be 10 or 20 years down the road.

long term care cost in illinois
Projected monthly median costs of long term care in Decatur, Illinois by 2030

Something is always better than nothing, so even if we can’t get as much as we want, it’s still much better than having no coverage at all.

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Frequently Asked Questions

A long term care rider is a new concept for a lot of clients we talk to, so there are always plenty of questions to go around. Here are some of the most popular questions we get about long term care insurance and long term care riders.

Is Long Term Care Insurance the Same as Life Insurance?

Long term care insurance is not the same as life insurance. Life insurance protects you against premature death, and claims aren’t paid until you die. You can also use life insurance for estate planning and goals of that nature.

Long term care insurance protects you against an expensive long term care stay, and claims are paid when two out of six ADLs occur. In other words, you can go on claim when you can’t do several activities of daily living on your own, like eating, dressing, or bathing.

With a long term care rider that’s added to a life insurance policy, you’re blending these two coverage options together. You’re covered for death but also covered in the event of a long term care claim while you’re living.

Is There a Tax Deduction for a Life Insurance Long Term Care Rider?

In certain situations, there is a tax deduction for traditional long term care insurance premiums. However, there is not a tax deduction for a long term care rider. However, we’re not tax advisors, so be sure to consult with your tax preparer.

Is an LTC Rider the Same as a Chronic Illness Rider?

An LTC rider is very similar to a chronic illness rider, but they aren’t the same.

From our perspective, the LTC rider is a more comprehensive benefit. If you can’t perform two out of six ADLs, your benefit is triggered. With a chronic illness rider, you have to have a particular chronic illness like heart disease or cancer.

Is There a Difference Between the Benefits Provided Through an Accelerated Death Benefit vs a Life Insurance Long Term Care Rider?

A long term care rider is considered an accelerated benefit. However, don’t confuse a long term care rider with a terminal illness acceleration. 

A terminal illness acceleration gives you access to up to 50% of your death benefit if you have less than 12 months to live. That’s a much larger percentage than you get with a long term care rider, which is typically around 4%.

Is a Life Insurance Policy With Living Benefits Worth It?

Every case is different, so it depends on the client’s needs and if they deem it worth it. In many cases, people feel a long term care rider is worth it, because it offers added benefits and added protection.

Is a life insurance policy with living benefits worth it?

Many of our staff members personally have life insurance with living benefits, so we do believe it’s worth it. But that decision is yours to make!

Related: Is Long-Term Care Insurance Worth It?

What's the Biggest Risk to Buying a Hybrid Policy?

There really aren’t any risks to buying a hybrid life insurance with long term care benefits policy.

Underbuying is always a concern as most people buying hybrid policies get less than they need, and that often has to do with inflation. Many policies don’t have inflation protection included, so there’s always a risk of not having enough when it’s actually time to go on claim.

But that’s not really a risk – that’s just underbuying.

What's the biggest risk to buying a hybrid policy


Traditional long term care insurance is expensive, hard to qualify for, and only a handful of companies still offer it.

Two great alternatives include short term care insurance or a long term rider that can be added to a life insurance policy.

We love the long term care rider option as it's more affordable, the underwriting is more reasonable, and you know you’ll use it!

Ask your agent about life with LTC today!

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Disclaimer: We do not offer every plan available in your area. Currently we represent 4 organizations which offer 41 products in your area. Please contact, 1‑800‑MEDICARE, or your local State Health Insurance Program to get information on all of your options.