Long Term Care Rider vs Chronic Illness Rider: Which is Right for You in 2025?

In this comprehensive guide, we’ll tackle the nuances of Long Term Care Riders versus Chronic Illness Riders, highlighting the critical distinctions essential for crafting a tailored insurance plan from the leading long-term care insurance providers. Whether you’re exploring options for life insurance with a Long Term Care Rider or a Chronic Illness Rider, you will benefit from understanding the differences and similarities between these crucial financial safety nets.

With the global long-term care market valued at $1.2 trillion in 2024 and projections showing continued growth at 6.2% annually through 2034, understanding your options has never been more important. This guide will help you navigate these complex choices to protect your financial future.

Life Insurance with Long Term Care Rider or Chronic Illness Rider

Fidelity Investments reports that the average couple that retires at age 65 can expect to pay approximately $240,000 in medical expenses during retirement. Keep that number in mind, because Fidelity also reported that only 20% of workers over the age of fifty-five have managed to set aside $250,000 or more for retirement. Do you see the problem?

80% of the population over 55 has less money saved for retirement than they will likely need to cover their medical expenses alone.

That’s bad. But it gets worse. That number ($240,000) doesn’t include Long Term Care costs. And of course it doesn’t include rent, food, gas, utility costs, or that sweet vacation to visit the children and grandchildren.

Below we discuss two solutions to the problem that are available to almost everyone. A Long Term Care Rider and a Chronic Illness Rider can be be added to a cash value life insurance policy and provide financing options for the medical costs that will come during retirement.

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Long-Term Care Market Trends (2024-2025)

Before diving into the specifics of these riders, it’s important to understand why they’re becoming increasingly relevant in today’s healthcare landscape:

• Aging Population: By 2050, the global population aged 65+ will triple, creating unprecedented demand for long-term care solutions.
• Rising Care Costs: The average annual cost of a private room in a nursing home now exceeds $105,000, with home health aide services averaging $55,000 per year.
• Chronic Disease Prevalence: Approximately 80% of older adults have at least one chronic condition, with 68% managing two or more conditions simultaneously.
• Technological Advancements: AI-powered monitoring systems and medical wearables are transforming care delivery, making it more efficient but potentially more complex to navigate.

These trends underscore the importance of planning ahead for potential long-term care needs, making riders on life insurance policies an increasingly popular option for financial protection.

How Does a Long Term Care Rider or Chronic Illness Rider Work?

Years ago the life insurance companies started adding terminal illness riders to their policies at no extra charge. These accelerated benefit riders would give a portion of the death benefit to the policy owner prior to the death of the insured, based on the requirement that the insured was terminally ill with less than 12 months to live. In other words, the insured was likely to die soon, and so a portion of the death benefit was given in advance to make the final months more tolerable.

This living benefits rider is called an “accelerated death benefit” rider, because it allows the death benefit to be — that’s right — accelerated. It is a wonderful thing to have when a person is terminally ill. For some it provides the money to go on one last vacation, or to visit family, or to provide gifts to grandchildren.

These accelerated death benefits became a selling point, and others were added. The Long Term Care rider and the Chronic Illness rider are both accelerated death benefit riders. They allow the insured to gain access to their death benefit prior to death. In some cases many years prior to death.

Long Term Care Rider

The Long-Term Care (LTC) rider, also known as asset based long term care, provides several advantages, including financial benefits and flexibility in care options. Here are the key takeaways:

Guaranteed Monthly Cash Benefit

Once your LTC claim is approved, you will have 100% of your monthly cash benefit available, ensuring consistent financial support.

Flexible Usage

A LTC rider monthly cash benefit has no policy restrictions, and there’s no need to submit monthly bills or receipts, offering ease and flexibility in managing your care expenses.

Home-Based Care

The LTC rider allows for care in the comfort and familiarity of your home, including the option to be cared for by immediate family members, enhancing comfort and improving recovery or maintenance of health.

Diverse Care Options

You can choose licensed, facility-based care or more personalized care options like foster care, allowing for a tailored approach to your long-term care needs.

Asset and Income Protection

By covering care expenses, the LTC rider helps protect your assets and income sources from depletion, helping maintain your and possibly your spouse’s standard of living.

International Care

The LTC rider provides the flexibility to receive care outside of the U.S., with access to 100% of your available monthly LTC benefit, offering peace of mind even when abroad.

Legacy Protection

If you don’t use the LTC funds, you pass on a legacy to your family members.

How It Works:

• You select the long-term care specified amount when you purchase the policy.
• If you use the LTC benefits, 100% of the monthly cash benefit is guaranteed, and your beneficiaries still receive guaranteed minimum death benefit proceeds, provided the policy is in force at the time of your death.
• If you don’t use the LTC benefits, your beneficiaries receive the full death benefit proceeds income tax-free.

Benefit Duration:

• The duration of LTC benefits depends on the chosen payout option, the amount elected to take, and other policy factors.
• Benefits can last a minimum of 25 to 50 months, based on the selected payout percentage.
• You can take less than the total monthly benefit, potentially extending the duration of LTC benefits and preserving a more significant portion of the life insurance benefit for your beneficiaries.

Qualifying for LTC Benefits:

1. A U.S. licensed healthcare practitioner must certify that you have a severe cognitive impairment or cannot perform at least two ADLs for 90 days or more.
2. You must pass a 90-calendar-day elimination period before benefits begin.
3. To maintain eligibility for benefits, a healthcare practitioner must submit a plan of care and annually recertify.

Leading Companies Offering Long Term Care Riders in 2025

When considering a life insurance policy with a Long Term Care rider, these Long Term Care Insurance companies consistently rank among the top providers:

• Mutual of Omaha – Known for competitive pricing and an A+ Superior rating from A.M. Best. Their traditional long-term care insurance products offer robust benefits with clear qualification terms.
• National Guardian Life (NGL) – Their EssentialLTC product stands out for offering shared care benefits for couples, allowing spouses to access each other’s benefits if needed.
• Nationwide – Provides universal life insurance policies with flexible LTC riders that allow policyholders to use death benefits for care expenses without complex qualification requirements.
• New York Life – Partners with AARP to offer specialized coverage for older adults, though premiums tend to be higher compared to competitors.

Each of these providers offers unique features, so it’s important to compare options based on your specific needs, age, health status, and budget.

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Chronic Illness Rider

The Chronic Illness Rider provides financial support to policyholders who are diagnosed with a chronic illness that severely impacts their ability to perform daily activities or results in severe cognitive impairment. The Chronic Illness rider provides a valuable option for policyholders, allowing them to access part of their death benefit early to cover medical expenses and other financial needs.

Eligibility and Conditions

The Chronic Illness rider becomes applicable if the insured is permanently unable to perform at least two of the six Activities of Daily Living (ADLs) or has severe cognitive impairment, as certified by a physician within the last 12 months. There is a 90-day elimination period before policyholders can claim benefits.

Benefit Amounts

The minimum accelerated death benefit amount varies, with some companies providing 5% of the initial death benefit or $75,000, whichever is less. The maximum amount per election also varies, with 25% of the initial death benefit or $250,000, whichever is less, with a lifetime maximum of $1,000,000 across all policies.

Impact on Policy

Electing to use the Chronic Illness Rider reduces the policy’s overall death benefit, account value, and surrender value. Certain policy features, such as partial surrenders and changes to the death benefit, may be restricted or unavailable once an election is made.

Limitations and Exclusions

The Chronic Illness rider does not cover chronic illnesses arising from self-inflicted injuries, substance abuse, participation in illegal activities, or acts of war, among other exclusions.

Qualifying for Benefits

For a Chronic Illness rider to trigger, a physician must certify that the insured is chronically ill as defined in the policy.

Election of Benefits

Policy owners can receive the accelerated benefit as a lump sum or in payments.

Effects of Accelerated Benefit Payments

Accelerating benefits will affect the availability of loans, partial surrenders, and changes to the policy’s death benefit. A residual death benefit is required to ensure that a death benefit remains at the time of death, which must be at least 5% of the initial death benefit or $10,000, whichever is greater.

Top Providers of Chronic Illness Riders in 2025

These insurance companies have established themselves as leaders in the chronic illness rider market:

• WAEPA – Offers a competitive chronic illness rider that provides up to 50% of the life insurance benefit tax-free over a four-year period, making it particularly valuable for those with progressive conditions.
• Genworth – Known for their flexible coverage options with accelerated benefit riders for chronic illnesses that can be customized based on individual health risks and financial goals.
• Western & Southern – Provides highly customizable chronic illness riders as part of their life insurance policies, with options to increase coverage as your needs change.

When evaluating these providers, pay special attention to how they define “permanent” conditions and what documentation they require for benefit claims, as these factors can significantly impact your ability to access benefits when needed.

Long Term Care Rider vs Chronic Illness Rider Comparison Table

Life Insurance with Living Benefit Rider	Long Term Care Rider	Chronic Illness Rider
What is the Benefit?	Accelerated benefit via advancement from death benefit that may be further supplemented by an extension of benefits rider.	Pays an accelerated benefit which is an advancement of the death benefit
Eligibility Requirements	Licensed health professional certifies insured cannot perform 2 of 6 ADLs or severe cognitive impairment, both temporary and permanent	Licensed health professional certifies insured cannot perform 2 of 6 ADLs for last 90 days or severe cognitive impairment with likely no potential for recovery
Benefit Payment	Reimbursement or Cash Indemnity	Cash Indemnity
Benefit Payment Requirement	May require evidence of actual expenses paid or may be used for any purpose	Generally, can be used for any purpose
Is Benefit Payment Taxed?*	Typically not taxable (see IRC Section7702B)	Typically not taxable (see IRC Section 101g), but may be taxed if per diem limit is exceeded
Elimination Period	Varies but typically 0, 90, 180 or 365 days	Varies but typically 0-90 days
Benefit Amount	2% to 4% of DB or IRS Per Diem Limits with potential increasing benefits over time due to inflation protection rider, up to full death benefit, with additional extension of benefits possible	Generally based on lesser of 2% to 4% of policy DB or IRS per diem limits
Return of Premium	Typically included. 100% ROP after specified period.	Not typically included.
Increasing Death Benefit?	Some insurers allow for Option B, increasing death benefit	Some insurers allow for Option B, increasing death benefit
Inflation Protection Rider	Included at an additional cost	Not Available

Key Regulatory and Financial Differences

Beyond the basic feature comparison, understanding the regulatory and financial implications of each rider type can help you make a more informed decision:

Feature	Long Term Care Rider	Chronic Illness Rider
Regulatory Framework	IRC §7702B	IRC §101(g)
Eligibility Criteria	Temporary or permanent conditions	Permanent conditions only
Payment Structure	Indemnity or reimbursement options	Indemnity only
Usage Flexibility	Broad: covers multiple LTC events	Restricted to permanent diagnoses
Premium Costs	Higher due to comprehensive coverage	Lower but offers limited scope
Tax Treatment	Benefits typically tax-free	May be taxable if exceeding IRS limits

Understanding these distinctions is crucial for aligning your choice with your financial planning objectives and potential care needs.

What is Long Term Care?

Long-term care (LTC) is a combination of services which provide the medical and non-medical needs of people with a chronic illness or disability who cannot care for themselves for a long period of time. Oddly enough, the reason LTC is so expensive is not because it pays for highly skilled medical professionals. The opposite is typically true. See: What is long-term care insurance?

LTC is usually paying for rather unskilled care providers, but it is costly because the care needs to be provided around the clock – seven days a week, such as in-home care, assisted living facility or nursing home. Qualifications for long term care benefits usually necessitate being unable to do two of the six basic tasks for everyday living. These tasks are called activities of daily living (ADLs).

If two of the below ADLs are something you can’t do for a long period of time (typically 90 days), you would qualify for long-term care insurance benefits.

ADLs (Activities of Daily Living)

1. Feeding.
2. Toileting.
3. Bathing.
4. Selecting proper attire (Dressing).
5. Maintaining continence.
6. Walking and transferring.

In addition to the ADLs there are other “instrumental” activities of daily living (IADLs). These IADLs are required for living on your own.

IADLs (Instrumental Activities of Daily Living)

• Managing finances
• Handling transportation (public transit or personal driving)
• Shopping
• Preparing meals
• Using the telephone
• Managing medications
• Housework and basic home maintenance

For many patients with serious cognitive impairment, such as Dementia or Alzheimer’s Disease, the IADLs are an assessment that determines the need for LTC, even though they may not have any problem with the ADLs. Specifically, if your cognitive impairment is so severe that you are seen as a potential danger to yourself, you will qualify for your long term care rider benefits.

Technological Innovations in Long-Term Care (2025)

Emerging technologies are reshaping how long-term care is delivered and managed, with important implications for those considering LTC and chronic illness riders:

• AI Monitoring Systems: Smart home technology can now detect falls, medication non-compliance, and even subtle changes in behavior that might indicate health decline, potentially extending independence and delaying the need for facility-based care.
• Medical Wearables: Advanced wearable devices can track vital signs, movement patterns, and even early indicators of cognitive decline, allowing for earlier interventions and potentially more favorable rider utilization.
• Telemedicine Integration: Many LTC riders now cover virtual care services, which can reduce costs and increase accessibility, particularly for those in rural areas.
• Electronic Care Coordination: Digital platforms connecting family caregivers, healthcare providers, and insurance companies streamline the claims process for both LTC and chronic illness riders.

These technological developments may influence your choice between rider types, as LTC riders typically offer more flexibility to incorporate emerging care options compared to the more restrictive chronic illness riders.

What is a Chronic Illness?

A chronic illness is one that lasts a long time, typically longer than 3 months, and has no medical cure and does not disappear on its own.

Examples of chronic illness include:

• Heart disease
• Stroke
• Diabetes
• Arthritis
• Kidney disease
• Multiple sclerosis
• HIV/AIDS

The ideal situation for anyone looking for a LTC riders or Chronic Illness riders is to apply before you have the need for the insurance policy. Once the illness or mental condition arises it is much more difficult to get coverage.

Demographic Projections and Their Impact on Care Planning

Understanding the demographic shifts occurring in the U.S. and globally can help contextualize the importance of securing appropriate coverage:

• Aging Population: By 2050, the global population aged 65+ will triple from current levels, creating unprecedented demand for long-term care services.
• Caregiver Shortage: The ratio of potential caregivers to those needing care is projected to drop from 7:1 to 4:1 by 2030, potentially increasing the cost of professional care services.
• Chronic Disease Prevalence: With chronic conditions affecting 80% of older adults, the likelihood of needing some form of long-term care during retirement continues to rise.
• Geographic Disparities: Rural areas face greater challenges in care access, making the flexibility of LTC riders particularly valuable for residents outside major metropolitan areas.

These demographic realities underscore the importance of proactive planning, as both premiums and qualification standards are likely to become more stringent as demand increases.

LTC Riders or Chronic Illness Riders FAQs

I doubt I’ll qualify with my poor health.

Often, asset-based LTC riders require a phone interview without a medical exam.

I’ll lose it if I don’t use it.

Not true. With asset-based LTC the insured either uses it, or passes the benefit along to the beneficiaries with the rest of the death benefit. Many companies also offer a return of premium option that allows you to terminate the policy and get all your premiums back.

I want a policy that covers me and my spouse and my life insurance policy is only for me.

There are riders that will specifically add a spouse to the long-term care insurance coverage even if the underlying life insurance policy is insuring just one person.

What are the tax implications of each rider type?

Long-term care rider benefits are typically tax-free under IRC §7702B when used for qualified expenses. Chronic illness rider benefits may be partially taxable if they exceed IRS per diem limits or policy basis. Consult with a tax professional for your specific situation.

Can I have both riders on the same policy?

Generally no. Insurance companies typically offer either a long-term care rider OR a chronic illness rider on a given policy, but not both simultaneously. You’ll need to choose which protection better aligns with your needs and circumstances.

How do these riders affect my policy’s cash value growth?

Adding either rider type typically increases premium costs, which may slow cash value accumulation compared to a policy without riders. However, the protection they provide often outweighs this consideration for those concerned about long-term care needs.

Conclusion

The statistics don’t lie, most people will need long term care services as they age. And yet most people are unprepared. The LTC rider or Chronic Illness rider options are a significant way to safeguard your family from financial ruin in the event of a serious illness. These riders also provide wealth and legacy preservation, so all your assets you diligently created in life are not depleted in the end.

With the long-term care market projected to reach $1.2 trillion by 2024 and growing at 6.2% annually, securing appropriate coverage now is more important than ever. The choice between a Long Term Care Rider and a Chronic Illness Rider should be based on your specific health risks, financial situation, and care preferences.

Insurance & Estates is committed to connecting you with the best company and the best features, based on your unique need and goal. If you want to talk about your long term care insurance options, please contact us today to speak to a financial professional who can help you put together a strategy for your long term care needs.

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