Long-Term Care Insurance: 10 Things You Should Know

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When you imagine your retirement journey, you likely picture trips to the beach, leisurely days with the grandkids and lots of time for hobbies. A lengthy stay in a nursing home probably isn’t part of that vision. Yet nearly 70% of Americans turning 65 will need some long-term care and support.

“Everyone thinks they’ll be in the 30%, but the numbers say to plan otherwise,” says Beth Ludden, senior vice president of long-term care product development at Genworth.

The nationwide average daily cost for a shared room in a long-term care facility is $305, with an average annual cost of $111,32, per the most recent data from Genworth’s Cost of Care Calculator 2024. The range across the country can vary significantly, from a low of about $175 per day in parts of Texas and Louisiana to approximately $1,000 per day in parts of Alaska and California.

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While Medicaid can pay for long-term care, it generally only kicks in after you’ve spent down virtually all of your assets. Before then, you typically have three options. “You can either pay for everything yourself, a family member can take care of you, or you can buy long-term care insurance,” says Jesse Slome, executive director of the American Association for Long-Term Care Insurance.

Long-term care (LTC) insurance can protect your assets so all of your lifelong savings don’t go to a facility or home healthcare service. However, these products are expensive and have other limitations.

Here’s what to know:

1. Long-term care insurance pays out a set benefit

When you buy LTC insurance, you decide how much coverage you want. It’s usually a maximum daily or monthly benefit, such as up to $6,000 per month for a nursing home or a home healthcare worker. Some policies will only reimburse you for what you spend on care, while others will send you cash for the value of the benefit once you start needing care, regardless of the actual cost.

You also pick a waiting period, during which you need to cover costs before the coverage begins. A ninety-day period is the most common. For an added charge, your coverage amount can increase over time, so that your coverage keeps up with rising costs.

2. Insurers cap your lifetime benefit

Insurers once offered unlimited benefits for long-term care policies, but today, they usually limit payments to three to five years. You also pick the maximum possible payout from the policy. For example, a policy might pay out $165,000 total for care. If you spend past the policy limits, you’ll be back on your own.

The policy limits fit the needs of most retirees. Men, on average, need 2.2 years of long-term care, while women, on average, need 3.7 years, based on recent data. About 20% of 65-year-olds end up needing care for five years or longer. Ludden ran into this situation with her mother. “After four years, her policy ran out, and she had to use her funds to cover the facility for two months.”

3. Insurance can enhance government benefits

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If you have long-term care insurance, you could use the policy to pay for a better facility that doesn't accept Medicaid. If your policy runs out and you do end up going onto Medicaid, some state governments consider whether you bought insurance beforehand, says Genworth’s Ludden.

For example, say you buy $250,000 of LTC insurance coverage and spend down the entire policy, forcing you to pay for care with your personal savings. Depending on the state, the government might let you qualify for Medicaid benefits before you spend the last $250,000 of your other assets.

4. Premiums are expensive, especially for women

Long-term care insurance is not a cheap product. The cost depends heavily on your age and gender. A 55-year-old male in standard health would pay $2,075 per year for a $165,000 LTC policy with a 3% inflation rider, growing to about $400,500 by age 85. A 55-year-old female would pay $3,700 per year for the same policy, according to the American Association for Long Term Care Insurance. Women pay more than men because they typically live longer and are more likely to need extended long-term care.

A 65-year-old male would pay $3,280 per year for the same coverage, while a 65-year-old female would pay $5,290 per year. If you’re married or in a committed relationship, you can qualify for a discount on a joint policy that covers both of you.

Long-term care insurance policies use level premiums, meaning that after you sign up, the insurer cannot increase the cost based on your age and health. Buying younger can lock in a better deal. Insurers can increase rates for all policyholders but only if they can prove to the government that it’s needed to support future payouts, not for extra profits.

5. Prices for newer long-term care insurance policies have stabilized

When LTC insurance first came out, companies didn’t properly understand this market and charged too little for the payouts. As a result, they ended up repricing and raising rates for existing policyholders.

“The new policies sold today have factored in the things that caused issues with older policies. While no one can guarantee you won’t face a substantial rate increase due to a market adjustment, it’s very unlikely,” says Slome.

6. You can use partial protection

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"LTC insurance doesn’t have to be an all-or-nothing proposition," says Slome. If you’re concerned about the cost, he suggests getting a policy for a lower amount with the plan to cover the remaining costs with your savings. For example, if you think long-term care will cost you about $6,000 a month, you could get a policy for $3,000 and pay the remaining $3,000 out of your assets.

There are also short-term care policies that only pay out benefits for one year but cost much less than long-term care insurance. These policies charge both genders the same prices, making them a better deal for women. Medicare provides short-term care in a facility for a stay of up to 100 days, but not beyond that.

7. You must pass health underwriting to buy long-term care insurance

LTC insurance companies do not accept every applicant. You must meet the health underwriting standards and apply while still reasonably healthy. “You can’t wait until you’re in a facility and need help paying bills to apply. By then, it’s way too late,” says Slome. People aged 55 to 69 in reasonably good health are generally the best fit for LTC insurance, says Slome. Eighty is the maximum age to apply at most companies.

Once you qualify for LTC insurance, the coverage is usually guaranteed renewable for your entire life as long as you keep paying the premiums. If you let the policy lapse and reapply, you would need to pass health underwriting again.

8. There are alternative ‘hybrid’ products

You can buy a life insurance policy that includes long-term care policy coverage. If you need care, the policy pays out some or all of the death benefit while you’re still alive. If you pass away without needing long-term care, your heirs receive the full policy death benefit.

“There’s a payout either way. It’s not a use-it-or-lose-it scenario like stand-alone long-term care insurance,” says Jordan Mangaliman, chief executive of Goldline Insurance and Financial Services in Fullerton, California.

You could qualify for life insurance into your seventies if you’re in good health, says Mangaliman. Life insurance policies usually pay a lower total benefit for care versus similarly priced LTC insurance policies. You must also read the fine print for when your life insurance would pay.

Another option is to buy an annuity. You pay for the annuity upfront, and in exchange, it gives you future income payments that can be guaranteed to last your entire life. Some annuities offer a long-term care benefit. For example, an annuity might double your monthly payment for several years when you need long-term care, says Mangaliman. In exchange, adding this benefit could reduce your starting monthly annuity payments.

9. It pays to compare insurers before buying

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Each insurance company has its own rates and health underwriting standards. Before signing up, you should get a few quotes from different companies.

Mangaliman suggests using an insurance broker representing multiple insurance companies to speed up the process. When comparing, consider each insurance company’s A.M. Best rating for financial stability to pay future claims and J.D. Power score for customer satisfaction.

The long-term care insurance market is small, with only six insurers selling stand-alone policies: Mutual of Omaha, Thrivent, National Guardian Life, New York Life, Northwestern and Bankers Life. In terms of quality, insurers tend to offer similar levels of coverage, and the main difference is the price they quote for you.

“It’s not like one company will sell you a Mercedes while another is a Honda. With LTC insurance, they’re all Hondas,” says Slome.

10. LTC insurance gives you more options for care

If you have a long-term care insurance policy, you have more flexibility to decide how you receive treatment and where. For example, you could spend the money on a home healthcare worker rather than go into a nursing home under Medicaid.

Slome finds that people with insurance are more willing to pay for better care and get help sooner, whereas those without insurance tend to hold off. “If an earthquake destroys my house, I won’t cheap out on the repairs because I have homeowner’s insurance. People do the same when they have long-term care insurance,” he says.

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

David is a financial freelance writer based out of Delaware. He specializes in making investing, insurance and retirement planning understandable. He has been published in Kiplinger, Forbes and U.S. News, and also writes for clients like American Express, LendingTree and Prudential. He is currently Treasurer for the Financial Writers Society.

Before becoming a writer, David was an insurance salesman and registered representative for New York Life. During that time, he passed both the Series 6 and CFP exams. David graduated from McGill University with degrees in Economics and Finance where he was also captain of the varsity tennis team.

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