If you are like most people considering long term care insurance (LTCI) you’ve probably asked yourself “what if I never need it?” You could purchase a “return of premium” rider but probably won’t because of the cost. If you are married, “shared policies” or a “shared rider” is a must.
Essentially what a shared policy/rider means is that if one of you exhausts the value of your policy you have access the full value of your partner’s.
Consider this example. You are married or in a relationship and purchase your policy at age 50 with the following benefits
- $5,000 monthly benefit
- 5 year benefit period
- $300,000 lifetime maximum benefit
- 5% compounded inflation rider
- Shared rider
As discussed in a previous post, because you have a 5% inflation rider, your benefits grow 5% compounded on an annual basis. Roughly every 14 years the benefits will double in value, making the value of your policy in this example $1.2 million when you reach age 78. Now if you die peacefully without needing care at age 78, without a shared rider, the value of your policy is lost. However, because in this example you purchased the shared rider, the full $1.2 million dollars will now be available to your spouse or partner in the event that they exhast the value of their policy.
In short, it is a smart choice because the shared rider is relatively inexpensive (about 10% of the total premium) and allows you to buy less coverage overall, while still protecting you from the risk of one of you needing care for a long period of time. The other consideration is to make sure that neither of you needs to die in order for the other to be able to access the other’s policy benefits should one of you exhast yours
Make sure that you check with a long term care expert to compare the cost of this rider with all the companies you are considering.
Related posts:
