How Much Does Long-Term Care Insurance Cost?

Regardless of age, you should review long-term care costs now

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According to the U.S. Department of Health and Human Services, someone who is 65 years old today has a 70% chance of needing long-term care (LTC) as they age. However, only 24% of those who require long-term care receive it for more than two years.

The main reason is that assisted living and long-term care services are costly. While Medicaid covers some long-term care costs, it requires you to have very little income and few assets in order to be eligible.

The remaining option to pay for care is long-term care insurance. Learn more about long-term care insurance and how much it costs.

Key Takeaways

  • Long-term care insurance pays you for long-term care costs and typically covers care in nursing homes, your home, assisted living facilities, or adult daycare centers.
  • The cost of long-term care insurance varies significantly from carrier to carrier, so it pays to shop around.
  • You can't wait until you need long-term care to purchase a policy; look into long-term care insurance between the ages of 52 and 64.

What Is Long-Term Care Insurance?

Long-term care insurance pays or reimburses you for long-term care costs. Policies typically cover care in nursing homes, your home, assisted living facilities or adult daycare centers.

Policies usually start paying benefits if you need help with two or more activities of daily living (ADLs), which are defined as eating, bathing, dressing, toileting, transferring, and continence. You may also be eligible for benefits if you have a cognitive impairment or if a doctor certifies that care is medically necessary.

Several services may be covered under your policy, including assistance with ADLs, housekeeping, and nursing services. 

Policies vary in terms of benefit amounts, where care is covered, and when benefits start. Review the terms of policies you're considering carefully.

Why You Might Need Long-Term Care Insurance

Statistically, most people will need some form of long-term care at some point in their lifetime. Some people believe that they don't need to worry about long-term care because the government may pay for these services, but that's only the case in limited circumstances.

Medicare is a health plan for medically necessary services, and long-term care is not considered medically necessary. For example, Medicare may pay for long-term care for up to a maximum of 100 days for skilled services or rehabilitative care in a nursing home, and it doesn't pay for personal care.

Medicaid does provide some long-term care coverage. To qualify for Medicaid, you must fall below a certain income level and have minimal assets. Veterans may be eligible for long-term care from the U.S. Department of Veterans Affairs.

Other than programs like these, which are limited and only cater to specific populations, people either have to spend their assets on long-term care or protect them with long-term care insurance.

How Much Is Long-Term Care Insurance?

The cost of long-term care insurance varies significantly from carrier to carrier. With long-term care insurance, it pays to shop around.

Here's the average cost of long-term care insurance, along with the lowest and highest insurance rates, according to the American Association for Long-Term Care Insurance (AALTCI).

Long-Term Care Costs in 2021 If Purchased at Age 55
Average Cost for Age 55 (2% Growth) Annual Premiums
Single Male $1,750
Single Female $2,150
Couple (Combined Premium) $3,000
Lowest Cost for Age 55 ($165,000 Only) Annual Premiums
Single Male $950
Single Female $1,500
Couple (Combined Premium) $2,080
Highest Cost for Age 55 (5% Growth) Annual Premiums
Single Male $3,685
Single Female $6,400
Couple (Combined Premium) $8,575

How COVID-19 May Affect LTC Insurance Costs

There's a lot of uncertainty about the impact that COVID-19 will have on long-term care insurance costs. Overall, insurance costs have been on the upswing, which may continue despite the lower costs that many insurance companies experienced in 2020. Having COVID-19 won't necessarily disqualify you for a policy, but there may be a delay in processing your application.

Long-term care costs may also be impacted by the special rules for withdrawals from retirement funds due to COVID-19. You're no longer allowed to take up to $100,000 in penalty-free distributions from your retirement funds under the American Rescue Plan Act of 2021, as was possible under the CARES Act. That means less money to pay for long-term care, which could make buying long-term care insurance a more pressing need.

Understand What You're Paying For

Since policies vary by company, it's best to ask questions to ensure that you can compare policies on an apples-to-apples basis. Here are some vital questions to ask: 

  • What circumstances start policy benefits?
  • What is considered an ADL under your policy?
  • How does a shared benefit work if both spouses need long-term care?
  • Do premiums increase over time or remain constant?
  • Is there inflation protection? 
  • What is the maximum benefit pool?
  • What is the maximum amount of time the benefits are payable?
  • Is there an elimination (waiting) period before benefits start? If so, how long is it? 

Who Needs LTC Insurance and When?

The decision to purchase long-term care should be viewed as part of your long-term financial plan. Whether you need it or not is very specific to your situation. Ask yourself:

  • Do you have other potential sources of income that you could spend on long-term care? For example, do you already have a life insurance policy that you could borrow money from or surrender if needed?
  • Are you in a position to self-insure long-term care costs? Do you have family members who could help?
  • Do you have limited income and assets? If so, you may not need a long-term care plan. 

You can't wait until you need long-term care to purchase a long-term care policy. At that point, you would no longer be eligible for a policy. It's best to purchase a policy sooner rather than later. The AALTCI recommends looking into long-term care insurance between the ages of 52 and 64.

Here are the average annual long-term care insurance premiums from several insurance companies as of 2021. These premiums are for a total of $165,000 of benefits initially increasing with inflation for ages 55 and 65.

Average Annual Long-Term Care Premiums by Age (2% Growth For Inflation)
 Applicant  Average Annual Premium
Single Male, Age 55  $1,750
Single Female. Age 55 $2,815
Couple, Both Age 55 (Combined) $3,870
Single Male,  Age 65 $2,600
Single Female,  Age 65 $4,230
Couples, Both Age 65 $5,815

According to data from the American Association for Long-Term Care Insurancethe rejection rate for long-term care insurance increases with age, so you may even want to look into options sooner.

If you have a parent who does not have long-term care, and you are worried that they could not afford care if anything were to happen to them, consider investing in a long-term care policy for them or talking to them about it.

Long-Term Care vs. Critical Illness Insurance

If you haven't reached your 50s, you may want to consider critical illness insurance rather than long-term care insurance. Critical illness insurance pays a lump sum if you become critically ill.

Eligible conditions typically include life-threatening cancer, heart attacks, renal failure, and strokes. Once you reach your 50s, you may want to either add a long-term care policy to your portfolio or drop your critical illness coverage once you've secured long-term care insurance.

How to Choose a Good Long-Term Care Insurance Company

In addition to coverage terms, policy premiums, and how flexible the policy will be for your needs, consider the insurance company's financial standing and reputation. It's difficult to predict how insurance companies will perform financially over time.

There are rating systems that show the financial stability of an insurance company; they can be used as indicators. Asking a licensed professional (like a broker who represents several insurance companies) may help, but you can also check the company's AM Best rating.

How to Save Money on Long-Term Care

The best way to save money on LTC insurance costs is to plan. Consider the risks for yourself and your family, and review your insurance portfolio and overall financial situation.

A financial advisor can help you decide whether long-term care insurance is right for you. If you choose to purchase it, shop for competitive rates and a reputable insurance company that offers flexibility and favorable benefit options. ​