All You Need to Know: LTC vs. Chronic Illness Riders

Did you know that the average couple retiring at 65 can expect to pay $220,000 in out-of-pocket medical expenses during retirement?

Many consumers don’t plan for these expenses, and aren’t aware how a serious medical impairment can jeopardize their retirement plans. In most cases, funds that were earmarked for retirement must now be accessed to pay for these unplanned expenses. By doing this, the client risks not having enough money to last them thru retirement. With many more people living past the age of 90, properly planning for these medical expenses can mean a world of difference to your retirement.

You can understand why it’s important to discuss how medical cost in retirement will be handled so that you can properly prepare your client with the best solution. But what exactly is the best solution? Which is better, a Long-Term Care rider or, a Chronic Illness Rider? These are questions that have no general answer as it depends on what your client’s needs and preferences are. Let’s look at each option a little closer!

ltc-chart

As you can see, Chronic Illness Riders and LTC Riders share similar characteristics. One of the differences is the payment type, Reimbursement vs. Indemnity. Let’s take a closer look at each one.

Reimbursement

Reimbursement products provide a benefit if the client meets the requirements of the policy and spends money on a qualified service.

The upside of reimbursement product is that client receive a benefit equal to their total cost, up to a predetermined maximum.

The downside is that there is a delay between when expenses are incurred and when the insured gets paid. The insured has to incur the expense, then collect and submit the receipt, then the carrier review and approves the receipts and finally issues the payment.

Indemnity

Indemnity products are those that provide clients with a benefit once they meet the requirements of their policy.

The advantage of an indemnity rider/product is that it does not require clients to provide proof that their benefit spending is related to the chronic condition. Therefore, the client can use the benefit to pay medical or non-medical expenses, or enhance his or her savings.

We encourage you to learn more about these options by downloading the resources below!

LTC vs. Chronic Illness Riders

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FAQ About LTC Riders

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