Long-term care insurance is usually purchased as its own policy, but there are some companies that offer it as a rider to your life insurance policy.

For example, the state of Massachusetts allows hybrid insurance products that include coverage for long-term care. Insurers are allowed to combine annuities and life insurance with long-term care. This give life insurance companies the ability to provide products with "living benefits" that will pay you while you are still alive.

Most states permit the sale of long-term care hybrid policies. There are many types of policies and riders available.

Cash value life insurance offers a death benefit and a buildup in cash value. It is increasingly common to see long-term care riders added to cash value life insurance policies. There are essentially two types of riders added: acceleration and extension riders.

An acceleration rider lets you take an advance on your death benefit if long-term care is necessary. The rider basically allows you to accelerate the payment of the death benefit. Your death benefit is reduced by the amount you use for your long-term care expenses. You will usually be charged a small service charge, as well.

With an acceleration rider, if you need long-term care for a lengthy time period, your death benefit could be depleted. The rider can also come into affect when you have a terminal illness, which could require you to pay large medical bills. The downside to acceleration is that the benefit can have tax consequences that you should discuss with your tax advisor.

An extension rider increases your long-term care coverage beyond that of your death benefit. It can allow you to keep drawing money for long-term care expenses even after you have used up your death benefit amount.

The riders offered vary from company to company and state to state. Some policies give a percentage of the death benefit each month in long-term care. Others offer reimbursement for costs incurred up to a preset limit.

To use your rider, something has to trigger it. Depending on your rider, you may need home health care to use your policy. Other riders may require you to be chronically ill or unable to perform several activities of daily living.

Do the calculations

Acceleration riders are often inexpensive or free-of-charge, due to the fact that the company is simply paying the death benefit early. If your benefit is used early, you may be charge interest.

You need to know whether or not the rider attached to your life insurance policy will be an adequate substitute for long-term care insurance. Often, long-term care riders will not cover all the necessary long-term care expenses.

For example, you have a $100,000 life insurance policy with a rider that pays 2% each month for long term care. You meet the eligibility requirements are will receive $2,000 each month. That's $24,000 a year.

The average stay in a nursing home costs $40,000 a year. Your rider will not be enough. And you are reducing the amount of life insurance that will be paid to your beneficiaries.

While long-term care riders on life insurance policies offer a solution to the long-term care dilemma, it is really only viable for middle- to upper-income consumers because of the high face amounts on the policies they purchase. Small policies offer little funding when they only pay 2%.

Stand-alone long-term care policies often provide better and more coverage, especially when you take inflation and the rising cost of long-term care into account. However, you must address this issue at a relatively young age. With all types of insurance, the older you are, the more it will cost in premiums.

Choosing among long-term care insurance riders

Insurance companies are always trying to stand out above the pack. One marketing strategy frequently seen is the offering of policies that come with a variety of special features, discounts, riders and expanded benefits. As insurers come up with new long-term care products to appeal to consumers, they add all types of neat things to draw you in. Riders on a long-term care insurance policy can include nursing home care, home health care, assisted living and even adult day care.

When you are shopping for long-term care insurance, you need to compare the exact same coverage from policy to policy. This is increasingly hard to do, because long-term care policies often differ greatly from company to company. Some companies add things in as basic coverage while others add them on as riders.

A rider adds valuable benefits to an insurance policy. However, you need to choose riders that are worth the extra money. Some riders cost you more than you will get back out of them.

Home health care riders

If it's not a part of your basic long-term care policy, you might need to purchase a rider that adds home health care coverage to your policy. This is an extremely important benefit to have. Home health care coverage allows you to avoid going to a nursing home or assisted living facility if you are no longer able to care for yourself.

Nonforfeiture benefit riders

Nonforfeiture benefit riders are often offered due to state insurance regulations. This option will always be offered if you are purchasing a tax-qualified policy. The rider simply means that you won't forfeit all of your benefits even if you stop paying premiums before you make a claim.

This rider will cost you approximately 40% more in premiums. It often requires you to have the policy for a specific length of time before any benefit is available. The benefit you are given will be lower or payable for a shorter term than if you had continued with your premium payments.

Return-of-premium rider

This rider is considered a type of nonforfeiture benefit. Your estate or a designated beneficiary will be returned some or all of your premiums if you don't use the policy. Some versions allow you to drop your policy after a certain amount of time and receive some of your premiums back.

Return-of-premium riders are not offered by all insurance companies. The rider does allow you to get some of your money back if you decide that long-term care won't be necessary. But you will pay more for this privilege. Many experts consider the option as costly when compared to the benefits.

Shared-benefit rider

Shared-benefit riders let you extend the duration of your benefits if both you and your spouse have coverage. If you both have a policy, the rider will allow you to use each other's policies. If you run out of benefits, you can use your spouse's policy. This shared rider is often unnecessary as many companies will permit couples to share one single policy, which is often cheaper than two separate policies.

Inflation rider

An inflation rider is an important long-term care option. The rider ensures that your long-term care policy payments keep pace with the rising cost of care. Insurance regulators in many states require that any purchaser of a long-term care policy specifically reject the inflation rider if they do not want it.