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For many seniors, long-term care (LTC) insurance—an insurance policy that helps pay for chronic medical care—can be a worthwhile choice. After all, nearly 70% of seniors aged 65 or older will require some form of long-term care in their lifetime—a service that can be prohibitively expensive, setting families back thousands of dollars a month.

But is long-term care insurance worth it? This policy tends to come at a steep price: in the U.S., for example, the average 55-year-old man pays an annual premium of $2,220. And thanks to insurance marketing tactics, potential buyers often believe that they’ll spend years in a nursing facility—which isn’t always the case.Keep reading to learn more about this frequently discussed policy, and whether it’s right for you—as well as how and when to buy it.

What is long-term care insurance?

For seniors with chronic conditions, long-term care—whether at home, in a nursing or assisted living facility, or at an adult day center—is often a must. To pay for this comprehensive form of care, some turn to Medicare or private health insurance. Many, however, can’t—typically, long-term care isn’t classified as a “medical service.”

That’s where long-term care insurance comes in. This option—which may involve reimbursements or direct service payments—helps seniors and their families cover the lofty costs of daily care, ensuring loved ones are provided with caretakers who can assist with a variety of everyday tasks, such as:

  • Bathing
  • Eating
  • Medication
  • Housework
  • Entertainment
  • Money management

The technical specifics of long-term care insurance can be confusing—which is why the right guidance is imperative. Some might also find the conversation distressing, because it raises an inevitable question: how will I get the care I need when I’m old?

When should you buy long-term care insurance?

The median age for purchasing long-term care insurance is 65. Before then, potential buyers may find it difficult to predict the long-term trajectory of their finances and health. But waiting too long may be a mistake: by the time they turn 80, many seniors encounter increasingly steep premiums, and end up getting priced out.

For those over the age of 65, Medicare and private health insurance aren’t particularly useful. For the most part, neither pays for long-term custodial care or non-medical assistance with everyday tasks. However, low-income individuals may qualify for Medicaid, a government program that covers medical and long-term care.

For those who are worried about the costs of long-term care, an early start is the best approach. According to the American Association for Long-Term Care Insurance (AALTCI), most individuals who pursue long-term care insurance are between the ages of 50 and 69. Younger buyers are at an advantage, with higher approval rates and lower premiums. Older applicants tend to encounter more difficulty: 22% of applicants in their 50s are unable to obtain coverage, usually due to prior medical conditions like stroke or heart disease. The decline rate is even higher for older applicants: 30% for those in their 60s, and 44% for those in their 70s.

What many seniors don’t realize is that long-term care insurance isn’t the only solution for covering the costs of aides, facilities, and other non-medical assistance. Selling a life insurance policy can also generate enough cash to fund future long-term care programs.

How much does long-term care cost?

Long-term care tends to be expensive, with highly variable costs. At-home care is generally more affordable than nursing homes or assisted living facilities, but pricing can vary dramatically by location.

Due to unprecedented COVID-related staffing shortages, costs have increased. Consider the median annual costs of care in 2021:

  • $108,405 for a private room in a nursing home
  • $54,000 for assisted living facility services
  • $61,776 for a home health aide
  • $59,488 for a home care homemaker

Note: as a result of inflation, the numbers you’ll see while researching have likely increased (or are set to increase).

How much does long-term care insurance cost?

As with long-term care itself, LTC insurance costs vary widely. Policy prices depend on a variety of factors, including age, health status, and coverage amount; those with greater benefits or longer coverage periods tend to pay more. Annual premiums for a 55-year-old couple, for example, can range from $3,000 to $6,300, according to the AALTCI. To avoid overpaying, prospective buyers should speak to a financial advisor or another professional.

Who should not buy long-term care insurance

For most, purchasing long-term care insurance makes sense—especially if long-term care is likely in the near future. Exceptions include:

  • High-net-worth individuals who can fund long-term care themselves, or who can self-insure
  • Individuals who qualify for Medicaid
  • Individuals whose long-term care costs are covered by their health insurance policies

Have you done your research?

With annual premiums in the thousands, it’s best to do your research before buying long-term care insurance. You should know answers to the following before making any decisions:

  • Can my family and I afford long-term care?
  • What does my long-term health trajectory look like?
  • What kind of long-term care do I need/expect to need?
  • Do I qualify for Medicaid?
  • When should I buy it? On average, how high are premiums for someone in my age range?

Where you’re getting your policy

When it comes to coverage and rates, where you get your policy from can make all the difference. LTC policies can be purchased from insurance brokers, insurance agents, or even financial planners. State partnership programs and former employers can also help.

According to The Society for Human Resource Management, over 30% of employees were offered long-term care insurance in 2018—22% higher than in 2017. If you’re in a similar situation, keep in mind that these benefits may be free, but often come with other costs.

Do you know what your daily benefit amount should be?

A daily benefit amount is the exact amount—to the dollar—that you’ll be entitled to once your policy goes into effect. This amount can vary enormously, so keep in mind how much you think you’ll have to spend on either a nursing home room or a home health aide.

Don’t forget about inflation

Consider getting inflation protection for your policy, even though it costs more. This feature anticipates a 3% to 5% loss due to inflation and the rising cost of nursing homes and at-home care.

Are you in a position to wait?

Long-term care insurance often comes with a waiting period—that is, a period of time before benefits begin, even when you’ve established a need for care. The longer the waiting period— which ranges from 60 to 90+ days—the lower the overall premium costs. During this waiting period, you or your family will be expected to pay for your care, so be sure to prepare accordingly. Moreover, consider how long you anticipate the benefits period will last, and adjust your calculations: oftentimes, women are expected to use 3.7 years, and men 2.2.

Of course, there are other options out there. If you choose “first day benefits,” for example, you can skip the waiting period—but you’ll have to pay much higher premiums.

It’s also possible to wait too long. If you’re already older than 70, premium payments may be extremely expensive.

Recent improvements to LTC insurance

Thanks to media coverage and consumer group pressure, LTC insurance has recently seen a great deal of improvement. These changes include:

  • Much clearer LTC terms and conditions
  • Greater transparency—consumers have a much better idea of where their premiums are going
  • Policies that cover home care, residential long-term care, and more
  • For policyholders who cannot afford lower levels of coverage, the ability to “step down” to lower coverage and pay lower premiums

Other options

Is long-term care insurance worth it? Possibly—but whether it’s your best choice depends on a variety of factors.

LTC insurance isn’t your only option. ​​For those who currently have a life insurance policy, Coventry Direct has several guides on how to sell your life insurance policy to get the cash you need to cover the costs of long-term care. Want to learn more? You can get started here to learn how much you qualify for.

Editorial Disclaimer: Coventry Direct, a member of the Coventry group of companies, educates policyowners and insureds interested in learning about life settlements. Resources and publications are researched, written and updated by in-house experts to reflect the most up-to-date industry knowledge.

This article is provided by NAIFA education partner Coventry Direct. To learn more about long-term care insurance, contact a financial services professional using our one-of-a-kind Find an Advisor tool.