Guides / Life Events

Long-Term Care Insurance: How to Get the Best Deal

Roughly two in five people who reach 65 will eventually need long-term care. Understanding how this coverage actually works helps you decide whether it belongs in your plan.

How long-term care insurance works

Long-term care insurance (LTCI) pays toward the cost of care when you can no longer independently perform activities of daily living, such as bathing, dressing, or eating, or when you experience serious cognitive impairment. Most policies pay either a set daily benefit or reimburse actual charges up to a policy limit. Because premiums rise sharply with age at purchase, buying earlier, while you're healthy and rates are lower, is generally far cheaper than waiting.

A few structural details shape both cost and value: the benefit period (how long payments continue, from a set number of years to lifetime), the elimination period (how many days you wait after becoming eligible before benefits start, typically zero to 90 days), and whether the policy includes inflation protection, which increases your benefit annually to keep pace with rising care costs over what could be a decades-long gap between purchase and use.

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Why people purchase it

Common reasons include avoiding becoming a financial burden on family, preserving assets for heirs, having the flexibility to choose a preferred care facility, staying at home longer with paid support, and simply having peace of mind. These are legitimate goals, but LTCI isn't the only way to achieve them, so it's worth weighing alternatives before committing to a policy.

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The pros and cons

LTCI tends to make the most sense for people who don't have enough assets to self-insure but have enough income to comfortably afford the premiums, generally those with a net worth above roughly $400,000 excluding their home. For this group, LTCI can meaningfully reduce the risk of a catastrophic care expense and, when it includes home care coverage, may allow a policyholder to stay home longer with family caregivers.

On the other side of the ledger, LTCI policies typically return only 60 to 65 percent of total premiums paid out in benefits, a lower return than most other insurance types, and home care coverage is often too limited to keep someone out of a nursing home without significant unpaid family support. People with very high net worth (commonly cited around $2 million or more) are often better off self-insuring, and those with modest assets may qualify for Medicaid regardless.

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Other alternatives

A handful of other approaches are worth understanding before defaulting to LTCI. Transferring assets to qualify for Medicaid is heavily restricted by federal rules, including lookback periods of several years, and rarely works as a clean planning strategy anymore. A reverse mortgage or other home equity conversion can fund in-home care for someone who owns a valuable, largely paid-off home and intends to stay there long-term. Some people simply plan to keep working part-time or longer than originally intended, or to downsize and invest the proceeds. And self-insurance, paying costs directly as they arise, is a reasonable strategy for people with either very high or very modest net worth.

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Can you afford it

Premiums vary substantially by age at purchase, benefit comprehensiveness, and insurer, and they rise meaningfully with age, which is the core argument for buying earlier rather than later. As a general guideline, LTCI tends to make sense if your net worth (excluding your primary residence) exceeds roughly $400,000, you can pay the premiums without financial strain, and you could still afford them if rates rose by 20 to 30 percent in the future, since rates on most policies are not guaranteed to stay level. Long-term care premiums are also partially tax deductible, with the deductible amount increasing by age bracket.

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How to select an insurer

Not every state regulates LTCI the same way, so being licensed to sell it in your state isn't itself a guarantee of quality. Work with a local, independently recommended agent or broker rather than responding to unsolicited door-to-door sales. Most importantly, check the insurer's financial strength rating through a service like A.M. Best or Standard & Poor's, since a policy is only as good as the company's ability to actually pay claims decades after you first bought it. Look for an A+ or higher rating from A.M. Best, or an A or higher rating from Standard & Poor's.

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What to look for in a policy

Read the full policy rather than relying on marketing materials. A strong policy covers assisted living in addition to nursing homes, since assisted living is often the better fit for people who can no longer live fully independently. Eligibility should be based on needing help with activities of daily living rather than requiring "medically necessary" care, and it should explicitly cover cognitive impairment like Alzheimer's disease as a qualifying condition on its own. If you're purchasing before age 75, inflation protection is close to essential, since a fixed benefit can lose much of its value over a 10-to-20-year gap before you might use it. Finally, weigh the benefit duration realistically: since relatively few people need care beyond five years, a policy covering two to three years is often the more cost-effective choice for most people.

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Frequently asked questions

At what age should I consider buying long-term care insurance?

Earlier is generally cheaper, since premiums rise with age at purchase and a serious diagnosis can make you ineligible for coverage altogether. Many people evaluate LTCI in their 50s and 60s while they're still insurable at reasonable rates.

Does Medicare cover long-term care?

Only in limited circumstances. Medicare pays for medically necessary skilled nursing or home health care under specific conditions, but it generally does not cover custodial care, help with daily living activities like bathing or dressing, which is what most long-term care actually involves.

Is long-term care insurance worth it for everyone?

No. It tends to make the most financial sense for people with moderate-to-substantial assets who can comfortably afford premiums. Those with very high net worth often self-insure, and those with modest assets may become Medicaid-eligible regardless.

This guide is for general informational purposes only and is not tax, legal, financial, or investment advice. Every business situation is different, so consult a licensed professional before making decisions based on this content.