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A Complete Guide To Long-Term Care Insurance in 2021

If you are planning a long-range financial plan, especially if you are in your 50’s, it is important to consider the costs of long-term care (LTC) and whether or not you should purchase long-term care insurance (LTCI). Long-term care refers to a range of services that assist with basic personal tasks of everyday life. These tasks, also known as activities of daily living (ADLs), commonly include bathing, dressing, and eating.

As you age, there is a high chance that you will need some form of long-term care. Around 70% of people turning 65 this year will need help with their ADLs in the future. Unfortunately, facilities and agencies that provide this care can get very expensive. These high expenses result in about 83% of care being provided for by friends or family, and 65% of older adults that need long-term care relying on their friends or family for financial assistance.

Long-term care insurance helps cover the costs of care in a variety of places, including your home, a nursing home, an assisted living facility, or an adult daycare center. If your family or friends don’t have the time or money to pay for or to become your caregiver, this insurance is a perfect way to secure that care. This gives you and everyone else peace of mind, but it can get very expensive, which is why it is important to understand the details.

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Why Buy Long-Term Care Insurance?

There are three main options for long-term care: in-home care, community and assisted living, and nursing home facilities. As you age and your mental and physical health deteriorates, the type of care you choose will depend on the extent of your needs.

This figure shows the median annual cost of long-term care in 2020 

Percentage of retirees by expected long-term care costs for people turning age 65 between 2015 and 2019 
  • In-Home Care
    • Homemaker Services help with household tasks for people who are still living in their homes. These tasks include cleaning, cooking, and running errands.
    • Home Health Aides offer more extensive care to people who live in their own homes instead of residential care facilities. These caregivers are often hired when the family and friends of the person needing care can’t provide the care themselves.
  • Community and Assisted Living
    • Adult Day Health Care is provided at a senior living community for adults who need assistance during the day but don’t need round-the-clock care. These communities might provide health services, therapeutic services, and social activities.
    • Assisted living facilities offer living arrangements to seniors who need assistance with ADLs. This is an intermediate level of care, which means it offers round-the-clock services that aren’t as extensive as a nursing home.
  • Nursing Home Facility
    • Nursing Home Facilities offer the highest level of care. Residents are provided personal care, room and board, supervision, medication management, therapies, rehabilitation, and skilled nursing care 24-hours a day.

As you can see, long-term care can get very expensive. Around 40% of individuals paying for long-term care are paying for these expenses out of pocket. If you don’t have insurance that can cover these costs, paying for this care could cut into the nest egg that you are working so hard to keep safe for your heirs.

Most people think that regular health insurance covers the costs of long-term care. This is simply not true. Additionally, Medicaid only covers limited amounts of care, doesn’t cover the costs of supervision and day-to-day tasks, and requires you to exhaust all of your savings before receiving any benefits.

Long-term care insurance is designed to cover the costs of these services that Medicaid doesn’t cover. This insurance policy comes with three main benefits:

Savings: The overall cost of LTCI premiums will be much cheaper than what you would pay for care without insurance. This allows you to preserve your savings and assets.

More Care Options: Medicaid only pays for care in certain nursing homes. With long-term care insurance, you can cover the costs of care at any location, including your home.

Less Stress on Family and Friends: With insurance, you won’t have to rely on your family or friends for daily assistance or for paying for caregiving services.


LTCI cost
On average, people who pay out of pocket usually spend $140,000 in total for long-term care insurance

What Does Long-Term Care Insurance Cost?

According to the American Association for Long-Term Care Insurance, the average annual premium for LTCI in 2019 was:

  • $2,050 for single males age 55
  • $2,700 for single females age 55
  • $3,050 for married couples who are both age 55

These prices can be out of reach for most people, which is why only 7.2 million Americans have long-term care insurance. Although these prices seem high, your rates will differ depending on a variety of things:

  • Age: The older you are, the more you will pay when you buy an insurance policy. For instance, initial premiums at age 65 are 8-10% higher than initial premiums for individuals who are age 64. It is a good idea to start shopping for insurance in your 50s and 60s in order to get the best prices. Don’t make the mistake that most people make (95% of LTC claims are filed for people over 70) and wait to purchase this type of insurance when you are older. Additionally, you will have a higher chance of being approved for LTCI when you are younger. Applicants in their 50s have a denial rate of just 17%, while individuals in their 70s have a denial rate of 45%.
  • Health: The more health problems you have, the more expensive the policy will be. If you already have a debilitating condition, you will not qualify for long-term care insurance.
  • Gender: Premiums are usually higher for women since they live longer and are more likely to make a long-term care claim.
  • Marital Status: There are savings (up to 30% off) that you could qualify for if you are married and file jointly for long-term care insurance.
  • Insurance Company: Prices vary between different insurance companies. It is a good idea to consult an independent agent who sells policies from multiple companies. They should be able to reveal a variety of options so that you can compare and find the best one.
  • Amount of Coverage: The more coverage you opt-in for, the more expensive the insurance policy will be. For instance, you can get higher limits on the daily and lifetime benefits, inflation protection riders, shorter elimination periods, and fewer restrictions on coverage.

It is important to talk to an independent insurance agent about purchasing long-term care insurance. Insurance can be complicated, and most insurance companies try to be sneaky to squeeze out every last penny that they can. A good agent will know which companies are most likely to accept you, offer you price comparisons between different insurance plans, and can answer any questions you might have.

Only 11% of adults over the age of 65 have long-term care insurance

Questions To Ask The Insurance Agent

Don’t be afraid to ask questions when talking to an insurance agent. It is their job to make everything clear for you so that you can understand what you are paying for. If they drag their feet on giving you all of the information you need or are trying to rush you, it is probably best to go with another agent.

Some important questions to ask include:

What services are covered? Insurance policies vary greatly between each insurer. It is important to understand the exact services that will be covered. The most common coverage includes:

  • Nursing home care
  • Assisted living facilities
  • Adult daycare services
  • In-home care
  • Home modifications
  • Care coordination
  • Alzheimer’s special care facilities
  • Respite care
  • Hospice care

What is the elimination period? Most policies will require you to pay for long-term care services out of your own pocket for a certain amount of time (usually 30-90 days) before the insurance company starts reimbursing you for any care. This time is called the elimination period. It is very important to understand how long the elimination period is on the insurance policy so that you can understand how long you will have to fund the care out-of-pocket.

The elimination period could cost you in the future if you don’t stay in the senior living community long enough. For instance, 60% of seniors stay in nursing homes for less than 90 days. So if your elimination period is 90 days and you were in the nursing home for only 60 days, you will have to pay those expenses out-of-pocket with no reimbursement.

What is the benefits period? Most insurance companies offer a max of 3 years worth of coverage. Make sure you ask the agent about the benefits period and how long you will be covered.

Will there be premium rate increases in the future? Premium rates rarely stay the same over the years. Ask if you can expect premium rate increases in the future and how much they might increase.

What are the eligibility requirements? Under most policies, you will be eligible for benefits when you can’t do at least 2 out of the 6 ADLs below on your own or if you suffer from dementia or another cognitive impairment.

  • Bathing
  • Caring for incontinence
  • Dressing
  • Eating
  • Toileting
  • Transferring

When the time comes that you need care and want to make a claim, the insurance company will review your medical documents and might even send a nurse to do an evaluation.

What is the daily or monthly maximum benefit? Most policies will pay up to a certain limit for care until you reach the lifetime maximum on the benefits period. Make sure you understand this limit and, if you are married, ask about a shared option for couples. This lets you draw from your spouse’s pool of benefits if you reach the limit on your pool of benefits and vice versa.

How To Purchase Long-Term Care Insurance

Now that you understand long-term care insurance, it is time to look around at the different options and decide which one works best for you. Remember, each insurance company is different, so it is important to compare policies and find the one that best fits your needs.

In the 1990s, there were more than 100 insurers that sold long-term care insurance, but due to the uncertain costs of paying future claims as well as low interest rates since the 2008 market crash, there are now less than a dozen LTCI providers. Below are the largest providers of long-term care insurance today:

  • Bankers Life & Casualty
  • Genworth Financial
  • MassMutual
  • Mutual of Omaha
  • New York Life
  • Northwestern Mutual
  • Transamerica
  • State Farm Mutual Automobile
  • Thrivent
  • National Guardian Life
  • John Hancock

Once you pick a policy, the insurance company will have you fill out an application and answer some health questions. The insurer might ask for medical records and might schedule an interview with you by phone or face-to-face. Long-term care insurance is not covered by the Affordable Care Act, which means you can be denied coverage. If you qualify, you will get to choose the amount of coverage you want and begin paying premiums.

11 Alternatives to Long-Term Care Insurance

If you don’t think long-term care insurance is right for you, don’t worry. There are multiple other options that you can choose to ensure your future care expenses are taken care of so that your friends and family don’t have to worry about them.

Short-Term Care Insurance

This type of insurance is just like long-term care policies, except it offers coverage for a shorter period of time (usually 3 months – 1 year). There is no elimination period on these policies, so you will get paid as soon as you start needing care.

  • Pros: Although the coverage lasts less than a year, this policy is cheaper and easier to qualify for than long-term care insurance. Another alternative is purchasing a short-term care insurance policy to pay for care during the elimination period of a long-term care insurance policy.
  • Cons: This policy will not pay for care for more than a year, which means it usually makes more sense just to save money for several months of care rather than paying year after year for a short-term care policy.


Hybrid Life Insurance

These policies, which combine life insurance and LTC insurance, provide money for long-term care if you end up needing it and provide a death benefit to your beneficiaries if you don’t use all of the LTC benefits.

  • Pros: You receive something from the policy even if you never use it for long-term care expenses. If you don’t use the policy on long-term care, your beneficiary gets a life insurance payout when you pass away.
  • Cons: This insurance policy is a lot more expensive than common life insurance or long-term care insurance policies. You can expect to pay around $75,000 through one upfront payment or a few smaller payments over 12 months.
family of three holding a pink piggy bank

15% of retirees can expect to pay a total of over $250,000 in long-term care costs

Save Money

If you have a decent amount saved and are planning to continue saving until you need care, you might be able to pay for long-term care out of pocket. If you have or are projected to have over $1 million, you will probably be able to pay for your own care.

  • Pros: You don’t have to risk paying for insurance that you may never use, and you don’t have to deal with an insurance company that is likely to raise premium rates over the years.
  • Cons: Long-term care is expensive and can put a big dent in the savings that you are leaving for your heirs. There is also the chance that you run out of money. If that happens, you can apply for Medicaid, which will limit your options and only pays for nursing home care.


Accelerated Death Benefits

This option is sometimes available on permanent life insurance policies like whole life insurance. This will allow you to take a portion of your life insurance payout while you’re still alive to cover long-term care expenses.

  • Pros: Some insurance policies include the cost in their rates, while others allow you to add it for a small cost when you buy.
  • Cons: When you are allowed to access the benefits for care expenses depends on the insurance company. Read into the details of each insurance policy before purchasing. Additionally, this option will reduce the payout your beneficiaries receive.


Sell Your Life Insurance Policy

Some people don’t realize that they can actually sell their life insurance policy through a viatical settlement. If you choose to do this, you can use the proceeds to pay for your LTC expenses.

  • Pros: Selling your policy can sometimes result in more money than what you would receive if you surrendered the policy for the cash value.
  • Cons: The money you receive will most likely be taxed, and your heirs will no longer receive a death benefit from the policy because that money will go to the new owner of the policy.


Social Security Or Pension

One option is using your Social Security check to pay for long-term care costs since it is guaranteed income. You can also choose to pair this with a pension to further reduce the long-term care bill.

  • Pros: You use guaranteed income to pay for long-term care costs so that you don’t have to dig into savings. This allows you to protect your nest egg while also receiving the care you need to live healthily.
  • Cons: Long-term care can get expensive. Sometimes this guaranteed income won’t cover all of the costs of care.


Withdraw From An IRA

An Individual Retirement Account (IRA) is a retirement savings account that provides various tax advantages. If you have an IRA, you can withdraw money from it when the time comes to pay for long-term care.

  • Pros: IRAs come with multiple tax benefits. When you take money from an IRA, it will raise your taxable income, but there are tax deductions you can take advantage of by using this money for long-term care costs. This basically turns your IRA into a tax-free health savings account.
  • Cons: This option might cover costs for a limited period of time. If you don’t have enough in your IRA, you will be expected to find funds elsewhere.


Veterans Aid and Attendance Program

The Veterans Aid and Attendance Program is a great way for veterans to lower their long-term care bill. This program offers up to $1,830 per month for anyone who served at least 90 days in the military during a time of war. It also offers up to $1,176 for a surviving spouse.

  • Pros: If you qualify, this is a great way to lower your caregiving expenses. This allows you to take less from your savings so that your heirs have more when you pass.
  • Cons: This program has other qualification requirements such as income and asset maximums. Additionally, long-term care will likely cost more than what this program pays out, so you will still have to come up with some other form of payment.

Home equity makes up more than 2/3 of the total wealth of the average 65-year-old American couple.

Sell A Home Or Get A Reverse Mortgage

While social security, retirement savings, long-term care insurance, Medicaid, and other resources can help, most seniors end up needing additional funds to cover everything. Selling your home or getting a reverse mortgage might be the best way to do this.

  • Pros: In 2020, the median home price was $284,600. Selling your home or using a reverse mortgage can help get you a decent amount of money to cover any costs you can’t pay for.
  • Cons: Selling a home is a long and stressful process. If you are physically incapable of doing this, friends or family will have to take on the task of selling it and moving everything out of the home. This option also means your beneficiaries won’t receive the home when you pass. Additionally, a reverse mortgage comes with extra costs (mortgage insurance, closing costs, origination fees, and servicing fees) and requires you to live in the home as a primary residence. If you live in an assisted living facility or nursing home, you will not qualify for a reverse mortgage.

Apply For Medicaid

Medicaid is a federal and state program that helps with medical costs for people with limited income and assets. Long-term care is considered a medical cost, so you can use this program to help pay for care.

  • Pros: Medicaid guarantees a certain amount of financial protection because most long-term care costs are covered under this program. If you end up having to go into long-term care, you won’t be financially burdened if you qualify for Medicaid.
  • Cons: Although Medicaid can be great for low-income individuals, there are additional requirements you must meet to qualify for this service. Also, Medicaid does not cover the costs of an assisted living facility. This program only covers the costs of certain nursing homes that accept Medicaid residents.



An annuity is a health insurance contract that will pay you regular income either immediately or in the future. These can be purchased with a lump sum or through a series of payments. You can use the income from annuities to pay for long-term care. Just make sure the amount you receive, which is determined by the amount you paid, your age, health, and gender, is more than the long-term care expenses.

  • Pros: Unlike long-term care insurance, you can buy annuities even if you are in poor health.
  • Cons: You will need a large sum of cash to invest in these annuities, and it is probably a good idea to hire a tax advisor due to the taxes around these instruments being very complicated.


Final Tips

If you are looking for long-term care insurance, follow these tips to ensure to pay for the most affordable option:

  1. The Sooner, The Better: You can qualify for LTCI up until age 75 with most companies, but the sooner, the better. Denial rates and premiums are much higher for older adults compared to those in their 50s.
  2. Work With An Independent Agent: Working with an independent agent could save you thousands of dollars over time. A good agent will reveal multiple policies from multiple different insurance companies. This allows you to make comparisons and find a policy that makes the most sense for you.
  3. Budget: Before shopping around, decide what you are comfortable spending on your coverage. You can look at the costs of care in your area to determine the median costs of a long-term care facility. Then, ask the insurance agent for policies in your price range. If there are no policies available, talk to a financial advisor for other options that might be available to you.
  4. Stay Simple: Most insurance companies offer multiple addons to their insurance policies called “riders.” These addons are usually unnecessary and are just another way for them to make more money. Avoid adding features that you don’t need.
  5. Ask Questions: Make sure you completely understand the insurance policy that you are thinking about purchasing. Read all of the fine print and ask any questions that will help you make sense of the policy. Do not purchase anything unless you completely understand it.
  6. Think Ahead: Think about the policy you are purchasing in terms of payment and coverage over the years. Are premiums going to go up? How will coverage change?
  7. Record Your Payments: To pay the initial insurance fee, pay with a check or credit card so that there is evidence of payment. Make sure you receive the policy within 60 days and put it in a safe place. Then, consider setting up automatic payments so that you don’t accidentally miss a payment and lose your coverage.
  8. Taxes: Long-term care insurance actually comes with tax advantages when you itemize deductions. Federal and some state tax codes let you count part, if not all of your LTCI premiums as medical expenses, which could qualify as a deductible. In 2020, the maximum amount of qualified premiums increased, which you can see in the chart below:

The Bottom Line

As with most major expenses in our lives, there are insurance policies made around these expenses and other unlikely events. However, unlike car insurance, health insurance, and life insurance, long-term care insurance is somewhat predictable because you know you will get old and will eventually need some form of care.

Long-term care insurance is definitely something to think about when planning your long-term financial goals while you are in your 50s and 60s. Just make sure you thoroughly understand the costs and details of any insurance policy you plan to purchase.

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