How Much Does Long-Term Care Insurance Cost?


January 31, 2024

Today’s older adults are savvy, choosing to focus on all aspects of future planning, including the “what-ifs” of senior living and long-term care. Understanding that Medicare doesn’t cover senior living options like independent living, assisted living, or memory care, and only covers up to 100 days of skilled nursing each year, seniors are looking at another way to ensure they can receive the support they need, if they need it. One solution that is gaining traction over the past 2 decades? Long-term care insurance.

Long-term care insurance (LTCI) has become an important consideration in retirement planning, particularly as life expectancies increase and the costs of healthcare rise. However, it can be overwhelming or confusing when choosing long-term care insurance plans. You want to make a confident decision that will benefit you for years to come.

Understanding LTCI, who it’s for, what it covers, and its costs are critical for making informed decisions.

Let’s take a look at LTCI, including the cost implications for individuals at different ages and some companies providing this insurance.

What is Long-Term Care Insurance?

Long-term care insurance is a type of insurance policy designed to cover or offset costs associated with long-term care services, which are not typically covered by traditional health insurance, Medicare, or Medicaid.

This type of care is often necessary for individuals with chronic illnesses, disabilities, or age-related conditions that limit their ability to perform everyday activities independently, like bathing, dressing, and eating. However, it can also be a wise investment for any adult who is looking to ensure they can offset costs of senior living in the future.

Often, LTCI is not designed to be a stand alone solution. Instead, long-term care insurance can be a great help to fill the gaps in your main health insurance coverage.

For Whom Is Long-Term Care Insurance Intended?

LTCI is primarily intended for older adults, although it can be beneficial for anyone who anticipates needing long-term care. Purchasing a policy at a younger age can be advantageous as premiums are generally lower for younger, healthier individuals. However, it’s vital for anyone considering LTCI to evaluate their personal and family health history, potential future health needs, and financial situation before committing to a plan

What Types of Care is Covered By Long-Term Care Insurance?

Like any type of insurance policy, long-term care insurance policies are all unique and have different features. You should choose a policy that suits your needs and your budget. Long-term care insurance typically covers services that include:

  1. In-Home Care: Assistance with activities of daily living while at home. These services can be medical or non-medical in nature, depending on your situation and needs. Medicare does cover prescribed medical home health services, but only for a certain time frame. A long-term care insurance policy would kick in after that coverage to offset the costs for more care or support.
  2. Assisted Living Facilities: Residential care for those who need assistance but not full-time nursing care. Most long-term care policies do not necessarily cover the full cost of living in a senior living community, but instead will pay a designated amount each month. This way, you are paying for the remaining amount each month, which can significantly help your budget.
  3. Nursing Home Care: 24-hour care provided in specialized facilities. Medicare does pay for skilled nursing care at a skilled nursing facility (sometimes referred to as a nursing home), but only for up to 100 days each year. Long-term care insurance kicks in after Medicare stops paying and offsets the cost of care moving forward.
  4. Adult Day Care Services: Daytime care and social activities in a community-based setting.
  5. Respite Care: Temporary relief for primary caregivers.

The extent of coverage depends on the policy’s terms, including benefit periods, daily benefit amounts, and potential exclusions.

Long-Term Care Insurance vs. Medicare

A common misconception is that Medicare, the federal health insurance program for people 65 and over, covers long-term care. In reality, Medicare’s coverage is quite limited in this regard.

Medicare Coverage includes:

  1. Short-Term Medical Care: Medicare covers short-term medical care, including hospital stays, skilled nursing facility care, and some home health services.
  2. Limited Skilled Nursing Facility Care: Coverage is provided only after a hospital stay and for a maximum of 100 days per benefit period.
  3. No Custodial Care: Medicare does not cover custodial care if it’s the only care needed. This includes assistance with activities of daily living, which is a primary component of long-term care.

LTCI Coverage typically includes:

  1. Extended Coverage: LTCI is specifically designed to cover long-term services, including both medical and non-medical care, for people with chronic illnesses or disabilities.
  2. Comprehensive Care Options: Policies generally cover a broad range of services, including in-home care, assisted living, and nursing home care.
  3. Customization: LTCI policies can be tailored to an individual’s needs and preferences, offering more flexibility than Medicare.

What Does Long-Term Care Insurance Cost?

The cost of long-term care insurance varies based on several factors, including age at purchase, health status, the level of coverage, and the insurer. Generally, premiums increase with age, as older individuals are more likely to claim benefits sooner.

Some experts recommend spending no more than 5% of your income on a long-term care policy.

Cost Estimates at Age 60

For a 60-year-old, the average annual premium for a standalone LTCI policy can range between $2,500 to $3,500. This estimate assumes a policy with a daily benefit of around $150 for three years of coverage and a 90-day elimination period (the time before the insurance starts paying out).

Cost Estimates at Age 70

At age 70, the costs are significantly higher due to increased health risks. The average annual premium can be in the range of $4,500 to $7,000, considering similar coverage levels as those for a 60-year-old. It’s important to note that these are average figures, and individual circumstances can lead to higher or lower premiums.

What Companies Provide Long-Term Care Insurance?

Numerous companies offer long-term care insurance, each with varying policies and pricing structures. Some of the notable providers include:

  1. Genworth Financial: A leader in long-term care insurance, known for customizable policy options.
  2. New York Life: Offers both traditional long-term care insurance and combination products with life insurance.
  3. Mutual of Omaha: Known for its competitive pricing and customer service.
  4. MassMutual: Offers long-term care coverage through a life insurance policy with a care rider.

Each company has its strengths and areas of specialization, so it’s crucial to compare and contrast policies to find the best fit for an individual’s needs and budget. It’s wise to involve your financial planner in the decision-making process as well, as they can guide you based on your forecasted retirement income and financial goals.

Affordable Alternatives for Long-Term Care

Because of the relatively high price tag for long-term care insurance, it may be beyond the reach of many seniors and their families.

If you can’t afford LTCI, we encourage you to read our article “How To Pay for a Nursing Home With No Money: Options and Alternatives.”

It covers a number of options to pay for long-term care, including:

Social Security and Supplemental Security Income (SSI)
Aging in place
Grants and loans to support aging in place

Next Steps

Long-term care insurance is a significant investment in one’s future health and financial well-being. The cost varies greatly depending on age, health, and the specifics of the policy, but investing in LTCI can provide peace of mind and financial security. As with any insurance product, it’s essential to thoroughly research and compare options and consult with a financial advisor to ensure the chosen policy aligns with overall retirement and healthcare planning strategies.

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