A number of annuity companies are adding Long Term Care Riders to their annuity products. Usually, the rider is build into the policy for no additional cost. The big question: Is a Long Term Care (LTC) rider actually worth anything to the consumer? The answer is debatable.
LTC riders accelerate income payouts to clients when they need long term care. For example, lets assume a client has an annuity with an income rider. They have $380,000 in the annuity account value and it is paying income of $20,000 year. Suddenly, they need LTC…… The LTC rider is going to turn on and double the annual income payout from $20,000 to $40,000. This sounds good but you need to keep in mind that the income payout is being deducted from the account value of the annuity. Also keep in mind that they income rider will not payout for more than 5 years. (for most products)
While the rider is paying more income to the annuity to help cover LTC costs, it is also reducing the account value of the asset. The money left in the account is going to be paid to a beneficiary anyway so there are not many advantages to the accelerated payout.
LTC riders are built into a policy at no additional cost for a reason. They provide little value and should not be a major factor when purchasing an annuity.