Today, people are living longer than ever. In fact, according to the federal Centers for Disease Control and Prevention, the life expectancy in the United States is nearly 78 years.
For many seniors, however, longevity means rising health care costs and dwindling savings. In fact, a 2011 Society of Actuaries survey found that 48 percent of Americans between ages 45 and 70 have not taken the necessary measures to prevent themselves from outliving their assets.
To help alleviate this growing fear, insurance company The Hartford now offers what it calls the LongevityAccess rider, which allows life insurance policyholders who reach a certain age to tap into their policy’s death benefits.
Longevity rider basics
The Hartford’s LongevityAccess rider is designed for policyholders who live past age 90. Once they reach 90, they can begin collecting monthly payments from the death benefit that would have been left to their beneficiaries. The monthly payment is set at 1 percent of the current policy amount. So, a policyholder with a $500,000 policy can collect up to $5,000 a month. The rider allows policyholders to collect monthly payments for up to eight years.
In the event the policyholder withdraws his full death benefit within the eight-year timeframe, the beneficiaries on the policy still receive a residual death benefit. The rider is available to those with permanent or universal life insurance policies. Term policies are not eligible.
Should you buy a longevity rider?
The Hartford has seen a dramatic increase in sales of the LongevityAccess rider within the past year; national sales rose 80 percent last year alone, according to the Hartford Courant. This kind of rider will tack extra costs onto your policy. And it’s valid only as long as your policy remains in effect (which can be difficult, if you find yourself unable to pay premiums). However, a longevity rider might make sense financially for a number of reasons, including:
- Many retirement and financial plans are developed with the assumption that you will not live past your 80s. However, more and more people are living well into their 90s, making it so they’re unprepared financially for old age.
- The older you get, the more likely you are to have increased health care costs. Those who reach age 90 and still are relatively healthy will likely see an increase in medical bills in the coming years. A longevity rider can help offset the costs.