How Much Does Long-Term Care Insurance Cost and When to Buy It

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

Senior woman and daughter doing basic coordination tasks thinking of long term care costs
••• Eva Katalin Kondoros / Getty Images

According to the U.S. Department of Health and Human Services, today's average 65-year-old has a 70 percent chance of needing some kind of long-term care as they age. They also report that although one-third of today's 65-year-olds may not ever require long-term care or assistance living, that one out of five will need it for more than five years, that's 20 percent.

Paying for five years of assisted living or long-term care services or housing can be extremely expensive. One more statistic which is surprising is:

8 percent of people between 40 and 50 years old, have a disability that could require long-term care services

At a time when many Americans hardly have their retirement funded, it pays to look into the options for long-term care and what kind of costs are involved with a Long-Term Care Insurance Plan, regardless of your age. Having the facts can save you money long-term, and help you come up with a financial plan to weather difficult times.

Why Get Long-Term Care (LTC) Insurance? Do You Really Need It?

No one knows if they will need long-term care insurance, in the same way, you don't know if you will need home insurance for a theft or fire. However, the statistics indicate that with our aging population one out of every handful of people will need some sort of long-term care, so the question is more about can you afford your own long-term care if the situation arises, and how willing are you to run the risk? 

Will The Government Pay for Long-Term Care?

Some people believe that they do not need to worry about long-term care because the government may pay for these services. This is a misconception. Medicare is a health plan for medically necessary services, and Long Term Care is not considered a health service, so coverage on Long Term Care costs would be very limited to those considered medically necessary. 

Do not expect the government to cover costs of Long-term Care. The government will only pay for long-term care under specific circumstances and the coverage is limited based on specific criteria and situations.

For example, Medicare may pay for long-term care up to a maximum of 100 days for skilled services or rehabilitative care in a nursing home. It is very limited.

Medicaid does provide some types of Long-term care coverage, but in order to qualify for Medicaid, you must fall into a certain low-income level.

For certain populations, there may be some coverage for those who qualify under the Older Americans Act or the criteria set by the Department of Veterans Affairs.

Other than programs like these, which are limited programs that only cater to specific populations, people often have to turn to private health insurance coverage to get help with long-term care costs.

What Is Long-Term Care Insurance?

Long-term care insurance (LTC Insurance) provides you with income if you become dependent on someone else's care or require assistance for basic living tasks and needs due to an illness.

The reason for needing long-term care could be a chronic illness, a prolonged physical illness, a degenerative disease, or other medical condition which requires you to receive home care or get care in an assisted living or long-term care facility.

The income benefit you receive can then be used to pay for your long-term care and assures that you or your family get the help needed for your personal care when you can not provide it for yourself.

Services needed, including those of a caregiver, due to a debilitating illness may include Activities of Daily Living (ADL), home care, housekeeping, nursing services, and relocation to specialized long-term care or assisted living facilities. 

How Much Does Long-Term Care Insurance Cost?

The cost of long-term care insurance varies greatly. Even with the same exact situation, the cost you could get quoted with one insurance carrier can be significantly higher than another. With long-term care insurance, it really pays to shop around.

When trying to save money on health insurance, the best approach is to do your research, you could save hundreds of dollars a year which works out to thousands of dollars over time. Although the cost of long-term care varies based on the kind of care you need, there are some online tools that can help you figure out how much Long-Term Care costs per month, Genworth has a tool that gives an average cost of long-term care as well as state-specific info. A tool like this may help you figure out if you could pay for it yourself, or if you should consider Long-Term Care Insurance.

Getting a health insurance broker that can help you is an option you may want to look at. The broker may not only check many insurance companies for you but will also be able to review your supplemental health insurance coverage options and possibly put together a package that will address many of your needs in health insurance. They will also be able to explain in detail what the various coverage options and conditions are on the policy. 

Just like with other private insurance, each LTC insurance provider will set their own rates based on their loss experience and underwriting. LTC packages will have different terms and conditions or requirements. 

Examples of Long-Term Care Insurance Costs

This information is based on data from the American Association for Long-Term Care Insurance (AALTCI), these are examples to show the variation in cost in different circumstances and how the choice of LTC Insurance carrier can make a significant difference.

In each instance, there is a price difference of about $1,000 or more based on the insurance company. It can be used as a good example of how important it may be to shop for good Long-Term Care Insurance Rates. These are based on a maximum daily benefit of $150 for three years benefit period. Keep in mind you would need to get your own quotes based on your personal situation, and that shopping for a good price could save you hundreds of dollars.

  • Age 55 — Single Individual; Cost Range: $1,325 to $2,550
  • Age 55 — Couple (both age 55, Preferred Health, Shared Policy); Cost Range: $2,085 to $3,970
  • Age 55 — Couple (both age 55, Standard Health); Cost Range: $1,985 to $3,970 
  • Age 60 — Couple (both age 60, Preferred Health, Shared Policy); Cost Range: $2,605 to $4,935

Long-term care insurance provides coverage for limited times. It is unlikely the benefit will cover costs "forever". Therefore, you can manage the costs of your long-term care insurance by choosing plans with longer or shorter periods of coverage, as well as by choosing the length of time you will be dependent for before the benefits kick in.

10 Tips for Buying Good Long-Term Care Insurance

Since each insurance company works with its own underwriting standards, it is helpful to have a checklist of items to ask about so you understand what you are shopping for and buying in the coverage. 

Here are some points that are important to consider when you are looking for the best company to cover you for LTC:

  1. Ask them about the Activities of Daily Living requirements in order for you to receive a payout of benefits, you want to understand what qualifies for coverage under the LTC plan you are considering.
  2. Does it cover cognitive impairment, some people may have cognitive impairment, yet still be able to perform ADL. Will the plan you are looking at payout in these cases?
  3. Find out what is on the list of Activities of Daily Living that qualify for each plan you are comparing. For example, maybe there is a function of daily living that you can not perform, but by the terms of the policy you chose, it isn't considered one of the qualifying ADL. A company will usually require more than one activity of daily living to be an issue before you can qualify for your benefits. You want to know what qualifies in advance before you buy your policy. There is no standard definition across the industry for how ADL are evaluated, so it is important to ask questions and get examples o situations for the coverage you are buying. Some examples of ADL are: bathing, dressing, moving around (transferring), eating. How each is defined can make a difference.
  4. Ask them if there is a cash value or option to cash out should you not use the coverage and if the policy pays dividends. What happens if you die and haven't used the coverage?
  5. Compare the cost of single coverage vs. shared coverage with a spouse. This is a good way to save money. In these circumstances ask for a full explanation of what happens and how this shared benefit works if you both are requiring care, vs. only one of you. 
  6. Do premiums increase over time or remain constant? Is there inflation protection? Inflation will affect rates of long-term care you may have options in the plan you purchase that addresses this. 
  7. How will payment work on a claim? What is the claims process? Are there monthly or daily amounts? What are the limits?
  8. What is the maximum benefit pool? What is the maximum amount of time the benefits are payable for? On average, an LTC policy may provide between one to five years of coverage. Policies do not usually have an unlimited amount of time. This is an important factor to consider when comparing policies. Then, you will want to know if there are riders available to extend that time. These details can make a big difference in your choices and when comparing costs.
  9. Is there an elimination, or waiting, period? How long is it? 
  10. If you take a policy with a longer-term waiting period, do you have other benefits that you qualify for that can cover you during the waiting period, like Medicare or other private health plans?

When To Buy Long-Term Care Insurance?

People often wait until they think they need something before they start planning for it, and unfortunately, in the case of Long-Term Care Insurance, this will not work in your favor. The AALTCI recommends the ideal age to look into long-term health care insurance to be between the ages of 52-64. 

Long-Term Care Average Costs in 2019*
  Age 55   Age 60 Age 65*
Single Male, (Select Health) $  2,050  $ 2,010* $2,460
Single Female,  (Select Health)  $  2,700  $ 3,050 $4,270
Couple, Both  (Combined Premium)  $ 3,050  $ 3,400 $4,675
Male, Female and Couple Cost Comparison for LTC Insurance

The information in the table above is based on 2019 American Association for Long-Term Care Insurance annual Price Index survey of leading LTC insurers. *Where data was unavailable in the 2019 data, the data from the 2018 survey was used as indicated by "* "

In fact, according to data from the American Association for Long-Term Care Insurancethe rate of rejection for long-term care insurance seems to increase with age. So you may even want to look into options sooner. The increasing rate of rejection as you age makes a lot of sense given that insurance is based on an expected risk, and as you get older more medical restrictions and situations may come up which would point to an increased risk leading to a greater need for long-term care. 

Who Should Buy Long-Term Care Insurance to Cover Costs?

The decision to purchase long-term care should be reviewed as part of your long-term financial plan. Whether you need it or not is very specific to your own situation. You may decide after reviewing with your financial planner or broker that there are complimentary choices to explore, or you may make changes to your other insurance coverages as a result that will save you money.

  • Check if you have other potential sources of income that you could turn to in a long-term care situation. For example, do you already have a life insurance policy that you may be willing to borrow money from if the situation came up?
  • Are you in a position to self-insure long-term care costs? Do you have family members who will help? Are those family members really in a position to help? 

Should Millennials or Young People Buy LTC?

If you have a parent who does not have long-term care and you are worried that if anything ever happened that they could not afford care, you should consider investing in buying long-term care for your parents or talking to them about it.

If you have a parent who does not have long-term care and you are worried that if anything ever happened that they could not afford care, you should consider investing in buying long-term care for your parents or talking to them about it.

Families are often the ones who get hit the hardest when an elderly family member becomes sick. According to Genworth's Beyond Dollars study, 46 percent of caregivers said that providing care impacted their health and well-being .

Having to take leave of absence from your work, or not being able to work because a parent needs care can snowball into a financial problem for you. Either because you end up paying for the care yourself, or because you are unable to work as a result. Have a discussion with your parents about what happens if they need long-term care. Insurance can help everyone in the family in a case like this and it may be in your best interest to look out for yourself by planning ahead with them.

Should You Choose Critical Illness or Long-Term Care?

Younger people may consider purchasing Critical Illness insurance as an alternative to Long-Term Care when they are younger, and in some cases, the critical illness insurance provider may offer the option to convert the critical illness insurance into long-term care when you are older in your 50s or 60s without taking a medical exam. Not all critical illness insurers do this, but you may be interested in finding one who does if you are planning for your long-term health care.

Never look at long-term care coverage alone, look at your big picture to make the best decision.

Statistics on Long-Term Care: Could Your Application Be Denied?

Here are some basic stats based on the AALTCI website: Applicants for long-term care below the age of 50 were declined at a rate of 20%, as we look at the rates of declined coverage for long-term care by age group, we see the numbers where coverage is refused increase:

  • for 50-to-59 the rate was 22 percent 
  • 60-to-69 rate increased to 30 percent
  • by age 70-to-79 the figure goes to a rate of rejection of 44 percent

How to Choose a Good Long-Term Care Insurance Company

Aside from coverage terms, policy premium and how flexible the policy will be for your needs, you also need to consider the financial standing and reputation of the insurance company. It is very difficult to know how insurance companies will perform over time, but there are rating systems that show the financial stability of an insurance company that can be used as indicators. This type of information is key when you are looking at purchasing a policy that may only pay off years down the line like with life insurance or Long-Term Care. Asking a licensed professional like a broker who represents several insurance companies may help, but you can also check the financial ratings of the company in AM Best ratings.

Which Long-Term Care Insurance Company Is Best?

Since underwriting for each long-term care plan differs from company to company, the best long-term care insurance benefits plan will be different depending on:

  • Your age
  • Your medical history
  • The amount of long-term care coverage you purchase
  • and a variety of other factors, some of which we covered in our checklist of questions to ask above.

How-to Save Money on Long-Term Care

The best way to save money on long-term care insurance is to plan ahead. When people do not have long-term care options and a situation comes up it throws your whole life into chaos, from lost income to needing help. Give some consideration to what your risks are now, and what the risks are for your family. Look at the collective of all the different insurance policies you have, including your life insurance choices. Shop around for competitive rates and an insurance company that offers flexibility and favorable benefit options. Even if you decide you don't want to purchase the coverage now, at least you will understand what to expect from cost and may benefit from the discussions you will have with brokers or other professionals who can guide you for this part of your financial planning.​

Related: Best Whole Life Insurance Policies

Article Sources

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