As you plan for the possibility of extended care in retirement, find out how long-term care insurance works and whether it’s the right solution for you.
As you age, planning for the possibility of long-term care presents a unique dilemma. Costs associated with in-home care, assisted living facilities and nursing homes are often significant — and it’s hard to predict if, when and what kind of care you may need.
Further, assets take years to build, and one care episode can impact your ability to retire as you had envisioned. So, how do you prepare for this uncertainty while also protecting yourself financially?
You may want to consider choosing long-term care insurance, which can help you protect your assets while offering flexibility to cover long-term or extended care expenses.
We can help you evaluate your long-term care insurance options and help you choose a policy that will suit your specific needs. Here are answers to commonly asked questions about long-term care insurance:
In this article:
What is long-term care insurance?
Long-term care insurance is a policy that helps pay for expenses related to long-term care needs not covered by Medicare, Medicaid or health insurance.
How does long-term care insurance work?
Policies will vary, depending on which long-term care insurance you choose. However, they typically require you to pay a premium on a consistent basis — even while you are using long-term care. If you need to use the benefits outlined in your policy, the policy will pay for the type of care detailed in the policy. This payment is often a certain dollar amount per day and is set for a specific time period.
Typically, a policy determines when benefits are payable based on your ability to perform a specific number of defined daily tasks or if you have a cognitive impairment that may pose a risk to your health and safety.
In other instances, policies may require a doctor to deem care medically necessary.
How to plan for the cost of long-term care
Make a plan now for potential long-term care costs in the future.
Learn more
Why should I buy long-term care insurance?
Someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and support in their remaining years, according to the U.S. Department of Health and Human Services.1
To help you protect the assets you’ve saved for retirement and legacy goals, it’s important to prepare for unexpected events — and long-term care could be one of the costliest of those events. For example, if you need to move to a nursing home, the median cost per year for a private room today is more than $116,800.2
Health maintenance organizations (HMOs), Medicare and Medigap will not cover every heath care expense at every facility. Medicaid may cover some extended care costs, but only under certain limited conditions — and often only once most of your assets are depleted. As a result, out-of-pocket expenses for long-term care could significantly impact your life savings.
Do I need long-term care insurance?
Before you choose to purchase long-term care insurance, you’ll want to consider a variety of factors such as your age and finances. Long-term care insurance may be a good fit for you if some or all the following considerations apply:
- You are between ages 40 and 75 years
- You can and will be able to afford long-term care insurance premiums
- You are currently in good health and are considered insurable
Everyone’s situation is unique. We can help you decide if long-term care insurance may be a beneficial approach for you.
How much does long-term care insurance cost?
The cost of a long-term care policy depends on a variety of factors, including the size of benefits, length of benefit time, care options and optional riders.
Your premium cost is based primarily on your age at the time of purchasing a long-term care plan. Typically, the younger you are, the lower your monthly premium will be.
You may need to adjust the length of coverage or the daily payment in your policy to make the purchase realistic for you. You may also want to consider a policy that provides automatic cost-of-living increases to protect against inflation.
How do I choose a long-term care insurance policy for me?
When comparing policies, pay close attention to these common features and provisions:
- Elimination period: The period before the insurance policy will begin paying benefits.
- Duration of benefits: The limitations placed on the benefits you can receive (e.g., a dollar amount such as $150,000 or a time limit such as two years).
- Daily benefit: The amount of coverage you select as your daily benefit, which typically ranges from $50 to $350.
- Inflation rider life insurance: Designed to adjust the dollar amount of your coverage to keep up with rising costs, such as medical care.
- Range of care: Coverage for different levels of care (skilled, intermediate and/or custodial) in care settings specified in the policy (e.g., nursing home, assisted living facility, at home).
- Pre-existing conditions: The waiting period (e.g., six months) imposed before coverage will go into effect regarding treatment for pre-existing conditions.
- Other exclusions: Whether certain conditions are covered (e.g., Alzheimer's or Parkinson's disease).
- Premium increases: Whether your premiums could increase during the policy period.
- Guaranteed renewability: The opportunity for you to renew the policy and maintain your coverage despite any changes in your health.
- Grace period for late payment: The period during which the policy will remain in effect if you are late paying the premium.
- Return of premium: Return of premium or nonforfeiture benefits if you cancel your policy after paying premiums for several years.
- Prior hospitalization: Whether a hospital stay is required before you can qualify for long-term care insurance benefits.
Do I have other options besides a traditional long-term care insurance policy?
Besides a traditional long-term care insurance policy, you could also consider life insurance with a long-term care rider or a hybrid life and long-term care insurance policy.
- Life insurance with a long-term care rider is a living benefit that lets you access a portion of the policy's death benefit to pay for long-term care expenses. If you use your rider's long-term care benefits, your policy's death benefit will go down proportionately. If you don't use your long-term care benefits, your heirs will get the full death benefit from your life insurance policy, minus what you owe on any policy loans.
- Hybrid life and long-term care insurance policy primarily emphasizes the long-term care benefits, with the life insurance being secondary. These hybrid insurance policies are typically funded with a single upfront premium and offer the benefits associated with the life policy base, together with additional benefits of long-term care coverage. This policy basically creates a pool of money that can be used to pay for long-term care either for a specified minimum period of time or for a lifetime.
What if I buy a long-term care policy and don’t end up needing it?
If you’re concerned about spending money on long-term care insurance that you’ll never use, you could consider some of the hybrid long-term care insurance options available. Many life insurance policies offer a long-term care benefit rider that allows the policyholder to use a portion of the death benefit for long-term care. Additionally, some life and hybrid long-term care insurance policies will pay a death benefit if the policyholder never needs long-term care.
Both options mean that you or your beneficiary may benefit from the policy regardless of your circumstances.
What are the pros and cons of the different types of long-term care insurance?
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Type of insurance
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Pros |
Cons |
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Standalone long-term care
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Sole purpose is long-term care protection
Flexible policy design |
Rates can increase
Won’t get your money back if you don’t use the insurance |
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Life insurance with a long-term care benefit rider
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Combines life insurance and long-term care in one policy
Death benefit goes to your beneficiary |
Long-term care benefits may be more limited than with standalone policy |
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Hybrid of life insurance and long-term care
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Cost of long-term care coverage may be guaranteed never to increase
May have money back guarantee
All guarantees are based on the claims-paying ability of the issuing company |
Death benefit with a long-term care benefit rider may be lower than with life insurance |
Let’s discuss your options
We can provide guidance as you review policies to help you determine the type and amount of long-term care protection that's right for you.