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Anyone who’s supported an ailing parent or loved one understands the many challenges of providing long-term care. Even in relatively good circumstances, providing care can be physically, emotionally, and financially draining.
Long-term care (LTC) insurance can alleviate some of this burden. It’s a type of insurance that covers the cost of services not typically covered by private health insurance, Medicare, or Medicaid. This can include professional assistance with daily living activities such as bathing, dressing, and eating. Such services may take place in the individual’s home, in assisted living facilities, nursing homes, or in other types of professional care settings.
LTC insurance varies based on the insurer and type of policy. Coverage may be available as a standalone policy or combined as a hybrid policy that includes life insurance. Some policies may limit the type of care covered, while others are much more comprehensive and provide several customization options.
It can be difficult (as we’ve discovered in preparing this review) to find coverage details online. A financial advisor or independent insurance agent who offers LTC insurance may be a helpful resource in your search.
We reviewed LTC coverage options from several leading U.S. providers. Where possible, we relied on each insurer’s website for information about policies, coverages, riders, and other features, though some details are from third-party reviews. Our “choice” selections are based on standout features provided by these companies.
While we’ve made every effort to ensure accuracy, we recommend that you verify these companies' offerings directly.
LTC insurance is a type of coverage that can help you pay for a wide range of services needed if you can no longer perform one or more activities of daily living (ADL). ADLs typically include bathing, dressing, eating, transferring (moving from one position to another), toileting, and continence.
An LTC policy may cover these services in various settings, such as your home, a nursing home, an adult day care center, or an assisted living facility.
LTC insurance offers benefits typically not provided by private health insurance or public programs such as Medicare or Medicaid. It’s intended to help families manage the significant costs of caring for a loved one who needs constant supervision.
The average cost of an LTC insurance policy for a 55-year-old man with $165,000 of coverage is $900 per year. The average cost of the same policy for a 55-year-old woman is $1,500. These figures are from the American Association for Long-Term Care Insurance and are based on 2023 data.
For perspective, here are some average annual costs of long-term care services, according to a separate 2021 study:
If you’re relatively young, fit, and healthy, it can be difficult to grasp the need for long-term care. But losing the ability to perform common tasks is, unfortunately, a part of life for many people as they age.
In fact, a recent study by the Administration on Aging showed that 70% of Americans over the age of 65 will eventually require some form of care, either in their home by qualified service providers or in a professional facility. The average length of stay in long-term care is 3.2 years.
These figures underscore the breadth of individuals who could benefit from having LTC insurance.
LTC insurance works like many other types of insurance policies. You shop for and purchase a policy from a provider. You pay a premium to keep that policy in force. Then, when the policy’s benefits are needed, you file a claim with the insurer. The insurer will review your request and approve the claim if it meets certain criteria set forth in the policy contract, which you receive and agree to when you purchase the policy.
With an LTC policy, these criteria are called “benefit triggers.” These triggers typically include a demonstrated need for assistance with any of several activities of daily living (ADL), including:
An LTC insurance claim payout is thus intended to help you pay for professional services to assist with these ADLs. This assistance may occur in your home, an assisted living facility nursing home, an adult day care center, or another setting.
LTC policies typically have a waiting period (sometimes called an elimination period), during which you must pay for these services out of pocket; the policy begins paying once the waiting period is over. Waiting periods commonly range from 30 to 90 days.
You may be able to choose this length when you buy the policy. Just be aware that, with all other things equal, a policy with a shorter waiting period will cost more in premium than a policy with a longer period.
Policies typically have a maximum daily and lifetime payout that limits how much they’ll pay for services.
There are two primary types of LTC insurance, as follows:
A traditional LTC insurance policy works as described above. You pay a premium to keep the policy in force. Once certain criteria are met, you can file a claim to receive the policy benefits.
A hybrid policy combines the benefits of long-term care insurance and life insurance. The policy includes coverage for LTC services and pays a death benefit to the policy beneficiaries after the insured person passes away.
Individuals have other ways to fund their long-term care expenses beyond the traditional and hybrid types of LTC insurance.
Many life insurers offer optional long-term care riders. These riders add coverage that allows you to access a portion of the policy’s death benefit to pay for long-term care services.
A short-term care policy works similarly to a traditional LTC, except—as the name implies—benefits are paid out for a shorter period.
Some employers offer LTC insurance as an employment benefit, similar to group health or life insurance. Policies may be available at little to no cost to you (the employee), making it a cost-effective alternative to a traditional LTC policy.
A growing number of states now offer long-term care partnership programs. These programs allow you to collect LTC insurance payouts without worrying about Medicaid asset paydown requirements. In other words, you can buy and benefit from LTC insurance while still qualifying for Medicaid.
These partnership programs were designed to help people plan for their long-term financial needs.
Several factors affect the cost of LTC insurance, including the following:
Because women live longer on average than men, they can expect to pay more for LTC insurance.
Younger, healthier individuals can expect to pay less for LTC insurance than older people with chronic health issues.
Married people usually pay less for coverage than single people.
As with any type of insurance, the more coverage you have, the more the policy will cost. A policy with higher daily and lifetime maximums, shorter waiting periods, and optional riders will cost more than a policy without these features.
LTC insurance can help provide peace of mind that the need for professional long-term care services won’t be financially ruinous. But LTC insurance is optional, and anyone considering buying coverage should be familiar with its pros and cons.
*Consult with a qualified tax preparer for more information.
Follow these tips when shopping for and buying LTC insurance.
As with most types of insurance, LTC policy features and costs vary from company to company. Check with at least three or four providers to ensure you get the coverage you need at the best price.
Moreover, as you check with various companies, be sure you understand their coverage options, including waiting periods and payout maximums, riders, and any other options. Review policy terms and conditions carefully.
If you’re also in the market for life insurance, find out what companies offer hybrid policies or LTC riders. You may be able to get all the coverage you need from a single provider.
An insurer’s financial strength isn’t just academic. Buying from a company that does an excellent job of managing its balance sheet means you can have greater confidence they’ll be there for you when you have a claim.
As mentioned earlier in this article, LTC insurance is costly and complex. Consider reaching out to an independent insurance agent or financial advisor for help. Such a professional can help you get the coverage you need at a price that suits your budget.
It’s an unfortunate truth that, as we get older, many of us will lose the ability to take care of routine tasks such as eating and bathing. Long-term care services, provided by professional caregivers either in homes or in qualified facilities, offer this support and LTC insurance can help alleviate the financial burden of paying for those services.
Deciding whether LTC coverage is worth buying requires evaluating several factors, including your financial situation and preparedness for long-term care expenses, your probable healthcare needs, whether you have family that could provide support, and your personal preferences.
It’s not uncommon for LTC insurance premiums to increase as you age. This is due to your likelihood of needing care as you age and the insurer’s need to continue charging premiums that reflect their cost of doing business.
LTC insurance age maximums vary by company. However, it’s usually possible to get coverage into your 70s. Two of the companies in our review offer coverage up to age 79.
Your LTC insurance premiums may be tax deductible depending on the type of policy, your age, and your medical expenses. See IRS publication 502 or talk to a qualified tax preparer for more information.
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