LIFE INSURANCE isn’t exactly an exciting topic, but I just read an article* about an enhanced feature which really is, well, exciting as an Aging in Place tool. It is a rider that allows the client access to their death benefits if they need nursing home or long term care.

Riders are a way to add enhanced features to a traditional life insurance policy and they have been popular since the early days of the industry. These days, an “accelerated benefits” rider is often used by people with a terminal illness or a permanent disability, for example. Now there is an option to help pay for the cost of care. So, how does it work?

Let’s assume a female policy holder has a $300,000 permanent life insurance policy. Along with this, she wants to be able to cover $200 a day in a nursing home. She could purchase a 2% long term care insurance rider to be added to the policy. This would enable her to access $6,000 a month of her total death benefits to pay for care. The cost of the rider could be as little as $400 more a year.

The qualifying event is much the same as traditional long term care insurance. The client usually needs to require assistance in 2 out of the six activities of daily living and there is a 90 day waiting period, then payments could come each month until the benefit is exhausted. Most policies reimburse for costs incurred rather than providing the funds in advance.

Naturally, the particulars can vary from company to company, but the costs are considerably less than regular long term care insurance. Best of all, the life insurance is still in place if the long term care insurance isn’t needed.

A recent U S Dept of Health and Human Services study found 70% of people over 65 will need long term care. Given that something like 5,000 people a day are turning 65, that is a lot of people, including many of us.

Planning for the possibilities is not the most enjoyable part of aging, but it is an important part. It’s nice to see there is increasing flexibility in the world of insurance to help us with our choices.

Aging in Place, it doesn’t happen by accident.

*Information and example are from the National Association of Insurance and Financial Advisors’ NAIFA’s advisor Today, July 2010 issue.

Scott Funk is Vermont’s leading Aging in Place advocate, writing and speaking around the state on issues of concern to retirees and their families. He works as a reverse mortgage consultant.