Living Benefits Blog
ACCELERATED DEATH BENEFITS vs LONG TERM CARE
Living Benefits are called “Accelerated Death Benefits” in the Life Insurance Policy. Although Living Benefits can cover expenses of Long Term Care plus a whole lot more, these two benefits are different.
(1) What is the difference between the benefits afforded to an insured through an accelerated death benefit vs a long-term care insurance policy or rider?
This product is a life insurance policy with a rider that gives you the option to accelerate some or all of the death benefit in the event that you meet the criteria for eligibility as described in the rider. This policy or certificate does not provide long-term care insurance subject to California long-term care insurance law. This policy or certificate is not a California Partnership for Long-Term Care program policy. This policy or certificate is not a Medicare supplement (policy or certificate).
There is no restriction placed on the use of the accelerated benefit received - the benefit may be used for any purpose, it does not need to be used to pay for qualified long-term care medical expenses.
Long-term care insurance is a form of health insurance, rather than an optional rider on a life insurance policy. Long-term care insurance benefits are specified at the time of the contract. Benefits may be limited to qualified long-term care medical expenses or to daily benefit limits.
(2) What are the eligibility criteria for Accelerated Death Benefits vs Long Term Care?
The Accelerated Death Benefits Rider 2 (Chronic Illness) allows for the payment of a portion of an insured's death benefit, on a discounted basis, if the insured is Chronically Ill. Chronically Ill means that the Insured has an illness or physical condition such that he or she:
1. is unable to perform (without Substantial Assistance from another individual) at least two Activities of Daily Living for a period of at least 90 consecutive days due to a loss of functional capacity; or
2. requires substantial supervision by another person for a period of at least 90 consecutive days to protect the Insured from threats to health and safety due to his or her own Severe Cognitive Impairment.
The six activities of daily living include bathing, continence, dressing, eating, toileting, and transferring.
In general, the eligibility criteria for qualifying for a benefit for long-term care insurance is also the inability to meet two of the activities of daily living, or severe cognitive impairment as described above. This may vary between policies.
(3) Does an elimination period apply to either an accelerated death benefit or long-term care insurance? What is the elimination period?
During the first thirty days of the policy to which this rider is attached, we will not accept an Application for Election of Accelerated Benefits under this rider.
After the first thirty days of the policy, Accelerated Benefits can be elected if the Insured is Chronically Ill. Chronically Ill means that the
Insured has an illness or physical condition such that he or she:
1. is unable to perform (without Substantial Assistance from another individual) at least two Activities of Daily Living for a period of at least 90 consecutive days due to a loss of functional capacity; or
2. requires substantial supervision by another person for a period of at least 90 consecutive days to protect the Insured from threats to health and safety due to his or her own Severe Cognitive Impairment.
For long-term care insurance, the consumer typically chooses between elimination periods that vary from 30 days to 6 or more months.
The choices available will vary between policies. Generally, the shorter the elimination period chosen, the higher the premium required for the long-term care insurance policy.
(4) What if the benefits under the accelerated death benefit or long-term care (LTC) insurance if benefits are never needed?
For life insurance policies in good standing, if the accelerated benefits are not used, policy death benefits and other rider benefits are still available.
Premiums for long-term care insurance are paid on a recurring basis, and failure to pay premiums will generally lapse the policy. If LTC benefits are not claimed, they are typically forfeited. LTC insurance policies may offer non-forfeiture benefits for additional premium.
