Aug 14th, 2012
Should Survivorship be added to my Long Term Care policy? Is it worth it? Read on for answers to these questions, and some “back of the envelope math” as well.
What is Survivorship?
Summary: Survivorship is a rider (optional feature that costs additional money) that couples can add to their Long Term Care Insurance policies. With Survivorship, when one spouse dies, the “Surviving” spouse no longer has to pay their Long Term Care Insurance premium. Think of it as a death benefit for your spouse, without a lump sum cash payout, but rather the forgiveness of premiums going forward.
**Is it worth it? **Read below for our take on whether Survivorship Rider is worth it
What Companies Sell Survivorship?
Virtually every insurance company offering Long Term Care Insurance will offer a Survivorship rider as an option to couples purchasing a policy together.
- Mutual of Omaha
- New York Life
- ...and many other companies offer a Survivorship rider of some sort.
Most offer a ten-year Survivorship, meaning when you buy this rider, both partners or spouses are required to add it and keep it for a period of time, generally 10 years, before it kicks in.
Check your state's specific brochure through our E-quote system.
With Genworth Privileged Choice Flex you have two options in most states:
- 10-Year Survivorship – both covered partners must have the rider, and live 10 years with no claims before the benefit would be valid.
- An Enhanced 7-Year Survivorship Rider – a big advantageis that even if claims are made during the 7 year period, the benefit is still valid.
- Check your state’s official brochure through our E-Quote system for the specifics of your state.
Is Survivorship Benefit Worth It?
The Survivorship Long Term Care Benefit is one of the first riders added by many agents because it sells well emotionally. It is almost viewed a chivalrous purchase, as nearly always the wife will benefit when she becomes a widow.
If we peel back the onion a bit, it seems that, in many cases, Survivorship can be unnecessary and in fact may cost more in premium than you’ll receive in benefit. After all, insurance companies don’t offer these riders to be charitable. They carefully calculate profit and loss and determine a sweet spot where the options are attractive enough to sell, but profitable enough to offer.
Long-Term Care Insurance is designed for those with assets (and likely income) to protect. If you are able to comfortably afford both spouse’s policies when both are alive, the prospect of affording 50% of the premium after one partner dies should not be a concern.
Think about the flip side of the coin: Imagine paying 25 years for a Survivorship benefit versus putting that extra money to work in your own savings and investments, with interest.
An Example: When Survivorship Benefit is Worth Considering
If one spouse has significant annuitized income that will stop upon death, such as a pension, Social Security, or a private annuity, this may be an option worth considering. Another example is when there is a large discrepancy in age between the husband and wife. A much older husband, statistically, is likely to leave his younger bride with many years of life after his passing. A grim subject, no doubt, but worth considering when “doing the math” on optional features.
**Long Term Care Insurance **is no inexpensive. And there’s a chance you never use it. Finding a good mixture of benefits and pricing is critical, and a good adviser is worth their weight in gold when it comes to providing unbiased advice. Ask any agent sitting in front of you about the pros and cons of Survivorship and you’ll most certainly hear a lot of pros and few cons.