Long-Term Care Riders on Annuities: What They Really Are and What They Are Not

Hi there, Stan The Anuity Man, America’s Annuity Agent, licensed in all 50 states. Top independent agent in the country and, more importantly, the tallest.

Today we’re talking about long-term care riders on annuities.

This is a hot topic. And sometimes the facts get in the way of the sales pitch. That’s where I come in.

Let’s clear this up.

Long-Term Care Is a Health Insurance Product

First, understand something very clearly.

Fixed Annuities are issued by life insurance companies at the state level.

Long-term care insurance is not a life insurance product.

It is a health insurance product.

Health insurance products require underwriting. They ask probing questions. They need to determine whether you are healthy enough to insure.

If you’re 78 years old and calling about long-term care coverage, you need to understand they are trying to insure younger, healthier people. Pricing and eligibility matter.

So when an agent says:

“I’ve got this annuity with upfront bonuses, market upside with no downside, and it has a long-term care rider.”

That’s a lot.

And most of it needs a courtesy flush.

There is no such thing as issuing a traditional fixed annuity with true long-term care coverage attached without underwriting.

If someone says that, they either do not understand what they’re selling or they’re pushing the truth.

What They’re Actually Selling: Confinement Care Riders

When agents talk about “long-term care riders” on annuities, they are almost always referring to confinement care riders.

That is not long-term care insurance.

Confinement care riders are not health insurance products.

Here’s my saying:

When you get sicker, you get your money back quicker.

That’s it.

If you cannot perform two of the six activities of daily living, such as feeding yourself, bathing yourself, dressing yourself, then the annuity allows you to accelerate access to your own money.

It’s your money coming back faster.

That is not the same thing as true long-term care insurance.

It’s not an additional pool of benefits. It’s not medical coverage. It’s simply accelerated access to your own funds.

That’s a big difference.

Guaranteed Issue Long-Term Care? No Such Thing.

If an agent says:

“This is guaranteed issue long-term care with no underwriting.”

Stop right there.

There is no such thing as guaranteed issue traditional long-term care insurance.

If there is no underwriting, it is not real long-term care insurance.

Period.

Who Might Use a Confinement Care Rider?

There are situations where confinement care riders may be the only option.

If someone does not qualify for traditional long-term care insurance because of health issues, then this may be the fallback.

But you need to understand what you are buying.

You are not buying long-term care coverage.

You are buying quicker access to your own annuity value if you become confined.

When you get sicker, you get your money back quicker.

That’s the rule.

Long-Term Care Annuities Do Exist

Now, to be clear, there are products called long-term care annuities.

Those are structured insurance products and must be properly set up and underwritten.

That is very different from the typical “long-term care rider” being pitched at seminars with bonuses and hype.

Agents love to throw around the word hybrid.

Hybrid is a marketing term.

Hybrid is a sales pitch.

It is not a product category.

Be careful with terminology.

Do Not Cancel Real Long-Term Care for a Rider

One of the worst mistakes I hear is:

“I canceled my long-term care insurance and replaced it with an annuity that has a long-term care rider.”

That is a massive misunderstanding.

Traditional long-term care insurance is a health insurance product.

It has tax advantages.

It has defined benefits.

Replacing that with a confinement care rider on an annuity is not an apples-to-apples move.

It is not the same thing.

Final Reality Check

If someone says they can give you guaranteed issue long-term care coverage inside an annuity without underwriting, it is not true long-term care insurance.

If you want real long-term care coverage, that requires underwriting.

If you want to look at confinement care riders, we can run quotes and explain exactly how they work in plain English so you can make a decision based on facts, not hype.

Never forget:

If it sounds too good to be true with annuities, it is.

Annuities are contractual products. There are no unicorns chasing butterflies.

I’m Stan The Annuity Man. See you next time.