Health Insurance

Do You Need Long-Term Care Insurance?

We all hope to stay healthy enough to take care of ourselves for as long as we live. Unfortunately, for many Americans, this isn’t the case. According to the U.S. Department of Health & Human Services, the 2017 national average for long-term care costs for a private room in a nursing home was about $7,698 per month.

If you don’t plan for this late-life expense, long-term care costs could hurt your financial security. To accommodate these extra expenses (and to avoid placing financial burden on your loved ones), consider purchasing long-term care insurance (LTCI).

But is long-term care insurance worth it? Here’s what you need to know before buying long term care insurance policy.

What is long-term care insurance?

Long-term care consists of paid assistance with everyday tasks, including bathing, dining, and getting dressed. Note that long-term care doesn’t include medical attention.

Long-term care insurance provides financial assistance when the policyholder is no longer able to take care of their own day-to-day affairs. Unlike traditional insurance, long term care insurance reimburses policyholders a predetermined amount for their daily assistance needs.

Should you get long-term care insurance?

It depends on your financial situation! If you retire with substantial savings and can afford long-term care costs, purchasing a long-term care policy may not be necessary. On the other hand, if you are barely making ends meet, you may not be able to afford the premiums.

The majority of people who purchase long-term care insurance fall somewhere in between. The best way to determine if you need long-term care insurance is to calculate your remaining lifetime income once you retire. Not sure how to calculate that figure? Check out the United State Department of Labor’s Lifetime Income Calculator — it can help you assess your retirement cash flow.

Keep in mind that long-term care is costly. The average private room in a nursing room costs $253 a day, or $7,698 per month. For a unit in an assisted living facility, you’re looking at $119 a day, or $3,628 per month (source)

If your projected lifetime income per month is enough to pay for a long-term carer (on top of your other expenses), you likely don’t need this policy. But if your projected lifetime income per month is not high enough to cover these expenses, you should consider long-term care insurance.

Pros and cons of long-term care insurance

Evaluating the pros and cons of LTC insurance will also help you assess your need for purchasing a policy.


Pros and cons of purchasing long-term care insurance.

  • You’ll probably need it.
  • Out-of-pocket long-term care costs are expensive.
  • Long-term care insurance provides peace of mind.
  • There’s no guaranteed premium or benefit amount.
  • It’s hard to predict how much assistance you’ll need.
  • Your insurance benefits may not go into effect right away.
  • You may not qualify.

Advantages of purchasing long term care insurance

You’ll probably need it

It’s hard to put down money for a service you’re not sure you’ll need, especially if you take pride in your independence. But according to the U.S. Department of Health & Human Services, 70% of Americans aged 65 or over will need long-term care at some point. And almost 20% of today’s 65-year-olds will need it for 5 years or more. It’s unwise to bet that you’ll be part of the 30% that never needs care, especially if you don’t have the savings to afford care in a pinch.

Long-term care insurance provides peace of mind

Many consumers worry about their financial future and whether they’ll have enough money to support their lifestyle. Purchasing LTC insurance can help give you peace of mind, knowing you have a plan and protection in case you need care.

Out-of-pocket long-term care costs are expensive

For a semi-private room in a nursing home, you could spend about $253 a day. These costs can add up fast. Long-term care insurance can provide financial security to account for these costs (source).

Disadvantages of purchasing long-term care insurance

There’s no guaranteed premium or benefit amount

Since this type of insurance is fairly new, insurance companies are still figuring out how much to charge. That means your premiums could rise throughout the life of your policy.

It’s hard to predict how much assistance you’ll need

Long-term care costs range in price depending on the level of assistance required. But it’s hard to predict how much assistance you’ll need 10, 20, or 30 years in the future.

Your insurance benefits may not go into effect right away

Many long-term care insurance plans have an elimination period between when your disability begins and when the benefits kick in. This could leave you footing the bill during the time in between.

You may not qualify

Like with life insurance, you’ll need to pass a physical before you receive approval for a policy. The state of your health and age could yield higher premiums or rejection of your application.

Long-term care insurance costs

It’s estimated that LTC insurance costs about $2,007 a year for the average 55-year-old (source). These plans yield an average benefit of $164,000. You need to make sure you can factor this amount into your budget without it adding too much financial stress.

Keep in mind, if you end up needing assistance with a private room nursing home, it could cost about $253 a day. Your health insurance coverage will probably not cover the entire cost of long-term nursing home care. You’ll have to use additional financial resources to make up for the difference.

Alternatives to long-term care insurance

If you find you are uncertain about purchasing a long-term care policy, there are other alternatives that may be a better fit for your needs.

Set aside money and pay out-of-pocket if needed

If you end up not needing long-term care, you will still have the money you saved for other expenses. Your funds can go where you need them, as opposed to toward premiums for an insurance policy you may never use.

But remember, long-term care is expensive. The more you prepare for this expense, the better.

Purchase an annuity

You can buy an annuity with a lump sum or a series of payments. This investment vehicle then pays you predetermined recurring payment amounts based on the contract agreement between you and the insurance agency.

If you’re in poor health, this could be a viable option. However, you’ll need a large amount of money up front to purchase an annuity.

Buy a short-term care insurance policy

This policy is similar to a long-term care policy but for a shorter timeframe, typically a year or less. Short-term care plans don’t have elimination periods and will pay out benefits right away.

The bottom line

Is long-term care insurance worth it for you? The answer depends on your financial situation.

Is your estimated lifetime monthly income large enough to cover an additional $4000 a month on top of your usual expenses? If so, you may be better off saving your money and paying for long-term care out-of-pocket as needed. If not, it would be wise to start preparing for the worst by paying for long-term care insurance now.

Of course, this assumes that you can afford an additional insurance premium today. If you’re struggling to make ends meet, consider investing your savings instead. You can put your gains toward late-life financial security.

Are you ready to choose a long-term care policy? The first step is to do your research and find the best policy for your needs. Compare these top insurance companies to find the right one for you!