Long-Term Care Insurance: An In-Depth Guide to Coverage, Cost, and Providers

Long-term care insurance (LTCI) — sometimes referred to as senior care insurance or nursing home insurance — is one way to pay for long-term care. Many people think of long-term care as nursing home care, but it can include much more, including help with activities of daily living, home care, and adult day care.

LTCI coverage varies depending on the plan purchased but often includes:

• Extended nursing home stays
• Assisted living communities
• Memory care facilities
• Adult day care centers
• Home health care provided by a professional
• Nonmedical home care (for some policies)
• Respite care
• Hospice care

It’s important to know exactly what services and types of facilities a senior care insurance policy covers. Personal care homes, also known as residential care homes, are often not covered, according to the National Association of Insurance Commissioners (NAIC).^[01] Always talk to your insurance provider about coverage before choosing care communities or services.

Qualifying for and using long-term care insurance

Insurance companies underwrite long-term care insurance policies and are strict about who they will insure. Older applicants or those with pre-existing health conditions may be declined coverage. Because it’s difficult to purchase a new policy when you’re older, and since new policyholders can’t use their benefits immediately, these policies should be purchased well before you need them. Long-term care insurance policies are helpful when planning ahead, but they’re likely not ideal for people who think they’ll need care soon.

Once you purchase a policy, you’re generally eligible to claim senior care insurance benefits when you’re no longer able to perform two activities of daily living (ADLs) on your own. ADLs include bathing, dressing, walking and transferring, eating, and toileting. Another common eligibility trigger is cognitive impairment. However, most long-term care insurance policies feature a waiting period or elimination period of 30 days or more before benefits will actually start. This means that seniors often have to pay for care out-of-pocket before LTCI begins to pay.

The cost of long-term care insurance varies depending on multiple factors, but the most important are age and health. Premiums range widely depending on age, gender, interest rate adjustments, and more. For example, a single male aged 55 could pay as little as $900 per year, whereas a couple, each aged 55, on a plan with benefits that grow at a rate of 5% annually, could pay $8,575 or more.^[02]

The average monthly cost of a long-term care insurance policy in 2023 for 55-year-olds buying a $165,000 policy were:^[02]

• $75 for a single male
• $125 for a single female
• $173 for a married couple

The cost for a long-term care insurance plan depends on the following factors:

• Your age and health. The older you are and the more health issues you have, the more expensive your premiums will be.
• Your gender. Women live longer and therefore are more likely to make a long-term care claim, so their premiums are usually higher.
• Your marital status. Married couples who buy coverage together typically pay less.
• Your benefit amount. This is the amount of money the insurance provider would pay for your long-term care (for example, a policy may cover $150,000 over the life of the policy). If the plan you choose covers a high cost of care, your premium will be higher than the premium for a plan covering a lower cost of care.
• Your benefit period. The period of coverage — or how long the insurer will pay out — varies from one plan to the next. The more years your plan covers, the more expensive your premium.
• Your elimination period. Like a deductible amount, this is the amount of time you must pay for your care out of your own pocket before your insurance begins paying. For long-term care insurance, it’s usually between 30 and 180 days.
• Inflation protection. This is an optional feature that protects your benefit amount from inflation. Care costs typically get more expensive each year. Inflation protection can help ensure that your benefit amount increases as well.

Let our care assessment guide you

Whether long-term care insurance is worth it will be different for each person. It usually boils down to two important factors:

• Your risk of needing long-term care. A person who turned 65 in 2020 has almost a 70% chance of needing some type of long-term care. Furthermore, people use long-term care services for around three years on average, which can add up very quickly.^[04]
• Your financial situation. If paying out-of-pocket, national median long-term care prices can range from $24,700 per year for adult day health care to $116,800 for a private room in a nursing home.^[05] Most seniors can’t afford this for one year, let alone three.

If you have ample savings to pay out of pocket for the care associated with a disability or chronic health condition, then paying for insurance premiums may be unnecessary. Additionally, if paying insurance premiums would be a hardship for you, it may not be worth it.

It’s also important to make sure that a policy makes sense for you and your family. Instead of buying a traditional long-term care insurance policy where one risks losing all their premiums if they end up cancelling their policy or not needing care, many people opt for a hybrid plan or combination plan. These plans combine aspects of long-term care insurance and permanent life insurance into one product. A hybrid policy enables you to get most of your premiums back if you decide to cancel your policy after the surrender charge period ends, which is usually 10 years.^[03]

Many people also worry about their family, and may feel regret when thinking that the money spent on premiums could have helped a loved one. With a hybrid policy, however, the death benefit will go to your loved ones when you pass away. This includes some of the money that’s spent on premiums.^[03]

Read more:Using Life Insurance to Pay for Long-Term Care: 5 Ways Seniors Can Free Up Cash

What are the benefits of long-term care insurance?

The main benefit of buying senior care insurance is cost savings. Your rates for premiums will be far less than what you’d pay for long-term care without insurance. If you buy an insurance policy early enough and end up needing to file a claim later in life, you can have some peace of mind about your future out-of-pocket expenses. Other benefits of long-term care insurance include:

• Choice of multiple care options. If Medicaid helps pay for care, a nursing home or home health care are the only options that are guaranteed in every state. Some states may have waivers or other programs that provide more care options. However, with long-term care insurance, you can decide where you want to receive care, whether it’s at home, in an assisted living community, or a nursing home.
• Coverage for nonmedical and medical support. This could mean care from visiting nurses or home health aides, home-delivered meals and some chore services, time in adult day care centers, and respite services for caregivers.
• Relief for family caregivers. With insurance to help pay for long-term care, you won’t need to rely on your loved ones for daily assistance, saving them from caregiver burnout and other related health concerns. Some policies do pay family caregivers, though, if your family chooses to keep providing your care.

What if I decide I want to cancel my policy?

LTCI policies can be cancelled by the policyholder or the insurance company for a few reasons. If you’re unable to pay your premium, the company can cancel your policy. Or, you may make this decision on your own.

It’s very important to know, however, that in most cases, you won’t be able to get back the money you put into a traditional long-term care insurance policy. Working with an insurance provider or financial planner can help you decide whether a policy is right for you. This can protect your assets in the long run.

Some policies, however, do have a return of premium feature. This can help you get some of your money back that went into premium payments. In some cases, policyholders can access needed cash through a policy loan as well.

The best age to buy long-term care insurance is in your mid-50s, according to the American Association for Long-Term Care Insurance.^[06] Insurance companies know that most people begin to develop more serious health issues after age 55, so premiums are higher for older applicants. For some people, it may even be a good idea to look at policies in your 40s. Getting an insurance policy if you’re in your 80s can be difficult. But if you’re around 55 and in relatively good health, you’re still young enough that insurance providers are likely to offer the best rates.

Eligibility for buying a long-term care insurance policy

Age and pre-existing health conditions are determining eligibility factors for many long-term care insurance companies. Pre-existing conditions, such as Parkinson’s disease, Alzheimer’s disease, and cancer, are key reasons insurers may decline applicants. Most companies also typically review your or your family’s medical history before issuing a policy.

If your or your family’s medical history puts you at a high risk of developing certain conditions, insurance companies may also charge higher premiums. Additionally, insurance companies often raise premiums as you get older because your likelihood of needing care increases with age.

Talk with a Senior Living Advisor

When shopping for long-term care insurance, it’s important to consider the reputation of the provider, premium costs, and, perhaps most importantly, how you’ll receive your plan’s benefits once you do need care. Here’s a list of popular long-term care insurance providers, plus a description of how they address consumers’ common concerns.

1. Mutual of Omaha

A leader in the long-term care insurance space, Mutual of Omaha is a solid choice for people who aren’t sure if they’ll need long-term care in the future. The company offers numerous discounts, one of the widest ranges of policy riders, and an easy-to-use rate calculator on their website.

2. Brighthouse Financial

Brighthouse, a spinoff of MetLife, is relatively new to the insurance marketplace. But, it has quickly become a standout for offerings such as annuities and life insurance. The company’s plans are hybrid, meaning they blend a life insurance policy with long-term care coverage. The need for care can arise quickly and unexpectedly, and Brighthouse has earned a reputation for helping clients speed up the payment process. Most applicants can expect a decision within a day, labs and exams are waived for some clients, and many reviewers have noted that they received payouts quickly.

3. Lincoln Financial Group

Lincoln is notable for having no elimination period, which can greatly reduce the time to payout (other providers’ elimination period can require you to pay out of pocket for 90 days or more). As with many other providers now, Lincoln’s long-term care plan policies are hybrid. Lincoln’s reviews also note that the company often pays within three days of a claim.

4. Bankers Life

Seniors interested in flexibility can find a range of customizable features at Bankers Life. They offer tax-qualified plans, meaning policyholders can deduct policy premiums as a medical expense and receiving benefits is income tax free. This isn’t a guaranteed benefit for long-term care insurance policies. If your loved one knows they want to receive care in a senior living community, Bankers Life offers a facility-only policy. It helps covers long-term care costs at assisted living and memory care communities. Or, seniors can choose a comprehensive policy that allows them to choose where they want to receive care when they eventually need it.

5. National Guardian

Not all long-term care insurance providers offer lifetime benefits, but National Guardian does. While the policy typically comes with a two- or three-year benefit period, you can choose to add a benefit period extension rider for a lifetime benefit period. National Guardian also offers a joint policy and premium for senior couples that’s similar to what you would pay for an individual policy.

6. New York Life

New York Life offers three long-term care insurance plans: a cost-conscious policy, a traditional policy, and a hybrid policy that combines long-term care and life insurance. While some plans can be expensive, many clients find that the company’s reliability is worth the cost. New York Life provides a money-back guarantee for unused benefits on some policies. Clients also have the option to combine policies, which means one renewal date, one phone number to call, and one representative ready to take care of your needs.

7. Nationwide

Nationwide offers flexible long-term care insurance policies. Those with an existing life insurance policy can add a long-term care rider to their plan. Recognizing that the use-it-or-lose-it nature of long-term care insurance can be off-putting to some customers, Nationwide offers plans with a death benefit that pays out when the insured dies. A policyholder is also guaranteed to receive 100% of their full monthly benefit at the time of a claim, and no receipts or bills are required. They also pay benefits if you opt to use an informal caregiver, such as a family member — something many policies don’t allow for.

8. Genworth Financial

Genworth is a well-established financial services company that now focuses on mortgage and long-term care insurance products. They remain a competitive insurer of couples and offer policies that allow benefit sharing if one partner needs more care than the other.

Here are few things the NAIC recommends when searching for a long-term care insurance plan:

1. Consult with a professional. Insurance is complicated, but if you spend time talking to your agent and insurance company representatives, it will start to make sense. Identify specific things you’re unsure about — whether it’s covered services or future premium rate increases — then ask for clarification until you feel comfortable moving forward with a provider.
2. Ask about partnership programs. Many states offer a “partnership” program where privately owned senior care insurance companies collaborate with the state Medicaid program. The idea behind this collaboration is to provide long-term care assistance that’s protected against inflation and also protects more of your assets when you’ve used up long-term care benefits and need assistance through Medicaid. Certain criteria must be met for eligibility. Your state’s department of insurance can provide additional information about your state’s program and insurance companies that sell partnership policies.
3. Shop around. Insurers may offer nearly identical policies at different price points. Get quotes from several different insurance providers, and compare each policy’s elimination period, premium amount, benefit amount, and coverage location.
4. Take the time you need to make an informed decision. If an agent tries to rush you or isn’t giving you all the information you need, work with another agent. Make a list of the essential features you’ll need before meeting with an agent, and compare the agent’s suggestions against your list. Usually, agents are required to provide you outlines of coverage for all the plans they offer. Once you’ve narrowed a list of policies down to between three and five, review them with a family member or friend you trust.
5. Think ahead. Once you’re ready to select a policy, make sure your budget can accommodate the expense. To do this, consider how much you would need to set aside each month in order to comfortably pay your annual premium. Don’t forget to account for inflation in future years. You might even want to try setting aside this amount for three or four months before you purchase a policy. If you’re under financial strain after this practice test, you may need to reconsider.