Is long-term care insurance worth it? (2024)

Guides

By Mark Rosanes

Unfortunately, health insurance doesn’t cover these types of expenses. To be protected, you will need to get long-term care insurance.

In this client education article, Insurance Business answers the question, “Is long-term care insurance worth it?” We will discuss the policy’s pros and cons, how much premiums cost, and the right age to get coverage.

If you’re planning for your own care or helping an older loved one, you’ve come to the right place. Find out the answers to the most pressing questions about long-term care insurance in this guide.

The agency’s data also shows that men will require long-term care support for an average of 2.2 years, while women will be needing it for 3.7 years. Regardless of gender, a quarter of American seniors may require care services for at least five years.

Without long-term care insurance, you’ll have to pay for these expenses out of pocket – but they don’t come cheap. To give you a picture of how much care support and services cost, here’s a summary from industry giant Genworth.

Given the steep costs, long-term care services can eat into your retirement savings very quickly. Purchasing long-term care coverage can help to address this.

You can also get assistance through Medicaid, but there are certain restrictions. One, your options will be limited to nursing homes that accept payments from the government-sponsored program. You will also need to exhaust most of your savings to get coverage. Despite this, Medicaid won’t pay for all your assisted living expenses.

The costs are categorized by age, gender, and marital status. The data also includes the cost of policies with inflation growth provisions.

Is long-term care insurance worth it – cost for policies purchased at 55 years old

AALTCI’s price index shows that the value of the policy can grow to $298,900 once the holder reaches 85 years old for plans with a 2% inflation growth provision. For those with 3% provisions, the value can top $400,500 and $679,100 for policies with a 5% inflation benefit.

Is long-term care insurance worth it – cost for policies purchased at 60 years old

Long-term care insurance coverage can be worth $270,700 on the policyholder’s 85th birthday if the plan has a 2% inflation growth provision. The value increases to $345,500 and $588,750 for policies with 3% and 5% inflation benefits.

Is long-term care insurance worth it – cost for policies purchased at 65 years old

The value of long-term care insurance plans with 2% inflation growth provisions can rise to $245,000 after the policyholder turns 85. The policies can be worth $298,500 and $437,800 if they have respective inflation benefits of 3% and 5%.

The figures above are for “Select” long-term care insurance policies. These are more expensive than “Preferred” plans, according to the AALTCI. The industry non-profit adds that the rates are for seniors living in Illinois. Your premiums can be higher or lower, depending on different factors, including where you live.

Krystie Dascoli, voluntary benefits practice leader at Marsh McLennan Agency, notes that anyone can develop conditions or get into accidents that can impact their long-term health. This highlights the need for long-term care insurance across different age groups.

“Long-term care can happen at any time in someone’s life, not just due to old age or chronic illness,” she explains. “This is a great program to complement other financial wellness programs such as term life and disability insurance.”

Dascoli suggests getting coverage while you’re still gainfully employed.

“Rates will go up significantly with age, so buying a long-term care policy early in the working years is ideal,” she says.

If you’re already 65 years old but haven’t purchased long-term care insurance, taking out coverage should still be a consideration, she adds.

“A big mistake we see individuals make is waiting until after retirement to purchase long-term care insurance. By purchasing long-term care plans during their working years and through their employer, individuals will have the opportunity to buy this insurance without answering medical questions and usually have access to higher face amounts. This is especially important for anyone with pre-existing medical conditions.”

The American Association of Retired Persons (AARP) says your early to mid-60s is the “sweet spot” if you’re single. For married couples, the best time to get long-term care insurance is at 55 years old.

The group adds that premiums may be higher when you buy coverage at this age range than it would have been in your late 40s to early 50s. The benefit is you’ll be paying less premiums overall until you reach 80.

One of the biggest drawbacks of getting long-term care insurance is the risk of losing all the premiums you have paid over the years. If you end up not needing long-term care services, you won’t be eligible for coverage. This means the money you’ve spent for coverage goes down the drain.

“An individual who purchases a standalone long-term care policy has a 50/50 chance of using it,” Dascoli notes. “Standalone or traditional long-term care insurance is a 'use it or lose it' type of policy. An insured could hold on to this type of policy for many years and never use it.”

She recommends buying an alternative form of coverage instead, called hybrid life insurance.

“This is a multi-use policy that not only pays a death benefit, but also pays out when the individual is diagnosed with a terminal illness or needs long-term care,” she explains. “We promote the hybrid policies more because, at some point, the individual will use it and it also builds cash value.

“The only real downside to either of these policies is that premiums can be steep, especially the older an individual gets. It is important to purchase a hybrid policy at a young age to offer the most financial protection long-term.”

Here’s a checklist of what you need to consider in choosing a long-term care insurance that’s worth it. You can download and print the list for easy reference.

Is long-term care insurance worth it – policy checklist

You can also head to our Best in Insurance Special Reports page if you want to find a long-term care insurance provider that offers top-notch coverage. The companies featured in our special reports have been nominated by their peers. They have also been vetted by our panel of experts as dependable and respected market leaders. By partnering with these insurers, you can be sure that your needs are well taken care of.

Is long-term care insurance worth it? When do you think is the right time to buy coverage? Let us know in the comments.