How Much Does Long-Term Care Insurance Cost?

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 Department of Health and Human Services, someone who is 65-years-old today has a 70% chance of needing some type of long-term care (LTC) as they age. They also report that although one-third of today's 65-year-olds may not ever require long-term care or assisted living, that one out of five will need it for more than five years.

Assisted living and long-term care services can be costly. While Medicaid will cover some long-term care costs, it requires you to have very little income and assets. Another option to pay for care is long-term care insurance. Learn more about long-term care insurance and how much it costs.

What Is Long-Term Care Insurance?

Long-term care insurance pays or reimburses you for long-term care costs. You may have either a daily benefit like $180 per day or a monthly benefit like $5,000 per month.

Policies typically cover care in nursing homes, at home, in assisted living facilities, and at 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 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, but that's all.

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 Department of Veterans Affairs.

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

How Much Is Long-Term Care Insurance?

The cost of long-term care insurance varies greatly 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.

Long-Term Care Costs in 2020
Average Cost for Age 55 Annual Premiums
Single Male $1,700
Single Female $2,675
Couple (Combined Premium) $3,050
Lowest Cost for Age 55 Annual Premiums
Single Male $1,876
Single Female $3,141
Couple (Combined Premium) $4,825
Highest Cost for Age 55 Annual Premiums
Single Male $3,081
Single Female $5,085
Couple (Combined Premium) $8,534

How COVID-19 May Affect LTC Insurance Costs

As of now, there's a lot of uncertainty around the impact 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 many insurance companies have experienced in 2020. As of now, having COVID-19 isn't necessarily going to 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. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) allows withdrawals of up to $100,000 if you've been impacted by COVID-19. You have the option to repay the withdrawal, but if you don't, that could significantly impact your retirement savings. This 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 you can compare policies on an apples-to-apples basis. Here are key questions to ask: 

  • What circumstances start policy benefits?
  • What are considered ADLs 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 for?
  • Is there an elimination (waiting) period before benefits start? 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 own situation. Consider:

  • Whether 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 health 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 2020. These premiums are for a total of $164,000 of benefits initially that increase with inflation for age 55 and $162,000 for age 65.

Average Annual Long-Term Care Premiums by Age
 Applicant  Average Annual Premium
Single Male, Age 55  $1,700
Single Female. Age 55 $2,675
Couple, Both Age 55 (Combined) $3,050
Single Male, Excellent Health, Age 65 $1,400
Single Male, Some Health Issues, Age 65 $2,100
Single Female, Excellent Health, Age 65 $2,100
Single Female, Some Health Issues, Age 65 $3,100

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 if anything ever happened that they could not afford care, consider investing in a long-term care policy for your parents 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 attack, 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 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. 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 ahead. Consider the risks for you 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 long-term care, shop for competitive rates and an insurance company that offers flexibility and favorable benefit options. ​