Understanding Long-Term Care Insurance: What It Covers and Whether It’s Worth It
As the population ages and life expectancy increases, there is a growing need for comprehensive long-term care solutions. When people live longer, it underscores the importance of considering long-term care insurance to ensure that one’s future needs can be met without burdening family members or personal finances.
What Does Long-Term Care Insurance Pay For?
Long-term care insurance is designed to help pay for the costs associated with extended care services for individuals unable to perform everyday tasks due to chronic illness, disability, or aging. These tasks, also called the activities of daily living (ADLs), include the following:
- Bathing
- Dressing
- Eating
- Transferring (e.g., from bed to chair)
- Using the toilet
- Continence
When a person needs assistance with two or more of these activities, long-term care insurance may begin to pay benefits.
What Services Are Covered By Long-Term Care Insurance?
The following are the types of care and services typically covered by long-term care insurance:
- In-home care—This includes assistance with activities of daily living (ADLs) provided in the home by licensed caregivers or home health aides.
- Assisted living communities—These offer supportive housing where individuals receive help with daily needs while maintaining as much independence as possible.
- Memory care—This refers to specialized services designed for those with Alzheimer’s disease or other forms of dementia.
- Adult daycare services—These programs provide daytime care and supervision for older adults, often including meals, activities, and health monitoring.
- Nursing care—This involves skilled nursing services provided around the clock, often including rehabilitative therapy and medical monitoring.
- Hospice and respite care—These services offer supportive end-of-life care and temporary relief for family caregivers.
Some policies also include coverage for care coordination, modifications for the home such as grab bars or wheelchair ramps, and caregiver training for family members.
How Does Long-Term Care Insurance Work?
Purchasing a long-term care insurance policy includes a number of decisions. You choose the amount of coverage you want, how long it will last, and the elimination period (the number of days you pay for care before the insurance kicks in). For example, a typical policy might offer $150 per day for up to three years, with a 90-day elimination period.
To activate the benefits, a healthcare professional must assess and certify that you need assistance with at least two ADLs or have a cognitive impairment that requires supervision. Once the elimination period is satisfied, your policy starts paying out benefits, either by reimbursing you for qualified expenses or providing a set daily amount.
Policies vary widely, so you need to read the fine print so you understand what is and isn’t covered. Some modern policies even offer hybrid options that combine life insurance with long-term care benefits.
What Is Hybrid Long-Term Care Insurance?
Hybrid long-term care insurance brings together the benefits of traditional long-term care coverage with a life insurance policy or an annuity. Unlike standalone long-term care insurance, which provides benefits only if you need care, a hybrid policy ensures that your premiums won’t go to waste—even if you never need long-term care. If you don’t use the long-term care benefits, your beneficiaries will receive a death benefit instead. These policies often offer more flexible options, such as a return of premium features or guaranteed payouts, making them an appealing choice for individuals who want both protection and peace of mind. While hybrid policies may require a larger upfront payment or higher premiums, many people find the added value and financial security to be well worth the investment.
What Does Long-Term Care Insurance Typically Cost?
The cost of long-term care insurance depends on several factors:
- Age at purchase—The younger you are when you buy, the lower your premiums will typically be.
- Health status—Healthier individuals generally qualify for better rates.
- Amount of coverage—Daily benefit amount, duration of coverage, and inflation protection all affect cost.
- Type of policy—Traditional vs. hybrid policies can vary significantly in price.
According to the 2024 American Association for Long-Term Care Insurance annual Price Index survey, the average annual premium for a $165,000-benefit policy without inflation protection is $950 for a 55-year-old male and $1,500 for a 55-year-old female. For a couple who are both 55 years old, the average combined annual premium is $2,080.
That same long-term care insurance policy is more expensive when the purchasers are 60, with average annual premiums of $1,200 for a male and $1,900 for a female. Couples at that age will probably pay around $2,600 for a combined yearly premium.
Of course, premiums could be higher or lower depending on specific choices and circumstances.
Is Long-Term Care Insurance Worth It?
Whether long-term care insurance is worth the cost depends on your situation. For those with significant assets, long-term care insurance can be a way to protect your estate. For others, especially those with limited resources, Medicaid might be a more practical safety net.
Consider the following pros and cons:
Pros
- Peace of mind—You and your family can rest easier without worrying about how to pay for care when it is needed.
- Asset protection—Long-term care insurance may protect savings and other assets that might otherwise have to go toward care expenses.
- More options for care—Having insurance coverage may give you greater flexibility in choosing where and how you receive care.
Cons
- High premiums—The cost can be expensive, especially for older applicants.
- Complexity—Policies can be challenging to understand and compare.
- Potential underuse—You may never actually need the full extent of the benefits.
Who Should Consider Long-Term Care Insurance—and When?
Experts often recommend looking into long-term care insurance in your fifties or early sixties, when you’re more likely to be in good health and able to qualify for affordable premiums. If you wait too long, you may face prohibitively high costs or become ineligible due to health issues.
You may want to consider long-term care insurance if any of the following is true:
- You want to avoid burdening your family with caregiving responsibilities.
- You have savings or assets you want to protect.
- You prefer more choice and control over your future care options.
Final Thoughts On Long-Term Care Insurance
Planning for long-term care is one of the most important steps you can take for your future peace of mind. Someren Glen offers several senior living options that provide the continuing care you may need. Long-term care insurance offers a way to manage the financial risk and maintain independence for as long as possible.
Before purchasing a policy, talk to a trusted insurance advisor and consider consulting a financial planner. Look closely at your health, finances, and family history, and compare different plans.
