Long-term Care Insurance | Bankrate

By 2030, when the last of the Baby Boomers turns 65, projected demographics show that the U.S. will have more older adults than children under the age of 18 for the first time in history. This disproportion in population age will create a shift in healthcare needs and highlight the importance of planning ahead for long-term care for aging parents and yourself. The American Association of Retired Persons (AARP) reports that as of this year, 56 percent of Americans aged 65 and over will require about three years of long-term care in their lifetime. While health insurance or Medicare might cover short hospital stays, it won’t cover the costs of a home health aide or assisted living. That’s where long-term care insurance steps in.

What is long-term care insurance?

Long-term care (LTC) insurance covers the cost of personal support for people who need assistance with activities of daily living (ADLs), such as bathing, dressing and eating. This care may be given in a senior living home, assisted living facility, daily care program or even at home. You may need this care because of a chronic condition or because of an injury or other non-permanent condition.

Having LTC insurance may be valuable because it covers many expenses that health insurance doesn’t typically cover. For example, Medicare and Medicaid only cover skilled nursing and rehabilitation for short periods of time, like immediately after surgery or while recovering from an injury. If you need assistance for an extended period of time, your health insurance probably won’t cover it, and you may have to pay out-of-pocket.

These are the main types of LTC insurance:

• Traditional LTC insurance: A traditional long-term care insurance policy covers a variety of long-term care services. Depending on the policy selected, care can range from help with daily activities at home, like eating and getting dressed, to nursing home care. Policyholders can customize the benefit period, amount of coverage and waiting period to fit their needs. In addition, many policies offer inflation protection to keep up with rising costs associated with LTC.
• Hybrid LTC insurance: A hybrid LTC insurance policy includes the benefits of LTC insurance and some of the benefits of permanent life insurance. A hybrid policy provides a death benefit to your heirs when you pass away, even if you never use the LTC benefits, and can accumulate cash value. The rates are locked in at the start of the policy, but hybrid policies tend to be more expensive than traditional policies.
• Life insurance with LTC rider: Another option is to add a long-term care rider to a life insurance policy. With the rider, the death benefit can be used to cover long-term care costs up to a certain percentage. Once you pass away, the beneficiaries will be paid the remaining portion of the policy. If you never use the long-term care rider, your beneficiaries will receive the death benefit. But unlike traditional LTC insurance, the benefits usually remain the same and will not adjust for inflation.

Features of a long-term care insurance policy

Long-term care insurance policies have several customizable features that affect both coverage and cost. Understanding how these features work together is essential to selecting the policy that fits both your needs and budget.

• Benefit payment plans: LTC insurance generally has two payment options: per diem and reimbursement.
  • Per diem plans: Also known as indemnity plans, the named insured receives a predetermined monthly or daily payment regardless of the cost of treatment, up to the policy amount. Then, the policyholder uses the funds to pay for the care directly.
  • Reimbursement plans: The policyholder can either pay for the care service directly and be reimbursed by the insurer, or the care provider can bill the policyholder’s insurer directly.
• Elimination periods: The elimination period is a waiting period before the policy kicks in, which can range from 30 days to two years. Policies with longer elimination periods typically have lower insurance rates.
• Maximum duration of benefits: This refers to how long the policy will pay for care. Depending on the provider and your budget, policies can run for a set period of time, such as one, three or five years, or you can opt for lifetime coverage.
• Nonforfeiture options: This is a benefit option that allows policyholders to retain some of the policy benefits even if a lapse in coverage occurs. This benefit typically comes with an extra cost and is only available after the policy owner has made payments over a specified number of years. The most common options are the reduced paid-up benefit and shortened benefit period.
  • Reduced paid-up benefit: If a lapse occurs, your policy may continue but with reduced benefits.
  • Shortened benefit period: If a lapse occurs, benefits will continue at the same amount, but will stop when the predetermined nonforfeiture benefit amount is exhausted.

Long-term care and medical bills data

The cost of medical care as we age can quickly accelerate. Long-term care coverage may be one way to prepare for these costs.

Long-term care insurance cost

Similar to life insurance costs, the cost of long-term care insurance varies greatly. According to the AALTCI, a 55-year-old man in the United States can expect to pay a premium of $2,220 per year on average for a $165,000 long-term care insurance policy with a 3 percent inflation option. A 55-year-old female will average $3,750 for the same coverage.

55-year-olds who opt to purchase a hybrid policy (life insurance plus long-term care) with a 3 percent inflation option can expect to pay more. For example, a male may pay $5,025 annually while a female pays $5,975.

However, policies can vary in costs by a number of factors, such as benefit selection. Hybrid policies tend to cost more than traditional policies, but they can accumulate cash value and also have a death benefit should you not use all or any of the LTC benefits. If you have time on your side, a policy with a 180-day elimination period may be cheaper than one for only 60 days. The type of care will impact your rate as well. For example, an LTC policy that only covers nursing home care will be more affordable than one with comprehensive home health care.

As you can see, age plays a big role in determining your cost, and LTC insurance premiums typically increase significantly the older you get. There are other factors as well that play into the cost, including gender, marital status, whether tobacco is used, the amount of coverage and the company that underwrites your policy.

What does long-term care insurance cover?

Long-term care insurance helps cover the costs of services that support individuals who require assistance with daily activities due to aging, chronic illness or disability. Policy coverage varies, and care options go beyond just nursing homes. This may include:

• Assisted living facilities
• Hospice
• Alzheimer’s facility care
• Home health care
• Adult day care

Some plans also offer care coordination to help families manage services, as well as respite care to give primary caregivers a break. Benefits may even extend to training a family member or friend to provide care at home.

Best long-term care insurance

There are several reputable life insurance companies that sell LTC insurance. To help you find the best long-term care insurance company for you, our experienced editorial team evaluated some of the top carriers based on coverage options, availability and J.D. Power’s 2024 Individual Life Insurance Study scores. Here are some of the best long-term life insurance providers based on our assessment:

Mutual of Omaha

Why Mutual of Omaha made our list: Mutual of Omaha has been writing insurance policies for more than a century, and it is known for offering solid, comprehensive coverage. We like the website’s “Determine Your LTC Insurance Need” calculator, which shows you how much common long-term care expenses, like a home nurse or nursing home, might cost based on your age and location.

Pros:

• Excellent customer satisfaction rating from J.D. Power
• Helpful online resources and calculators

Cons:

• Must work with an agent to get a quote
• Only one LTC insurance policy offering

Learn more: Mutual of Omaha insurance review

MassMutual

Why MassMutual made our list: MassMutual may be a great LTC insurance provider if you want multiple policies to choose from. Mass Mutual offers both traditional and hybrid LTC/whole life insurance policies. The company’s CareChoice hybrid policies provide LTC, a death benefit and a policy surrender value, as well as the potential to receive dividends each year. As an alternative, you could get a life insurance policy from MassMutual with acceleration benefits, which can be used to pay for certain long-term care expenses.

Pros:

• Multiple LTC insurance policy options
• Above-average J.D. Power customer satisfaction ranking

Cons:

• Must work with an agent to get a quote

Learn more: MassMutual insurance review

Nationwide

Why Nationwide made our list: Nationwide offers various insurance products and may work well for those looking to keep their auto, home and life insurance policies with the same carrier. This carrier offers a long-term care rider to add to one of its four life insurance products, as well as standalone policies for individuals and couples. Nationwide also has an A+ AM Best rating and a large network of local agents.

Pros:

• J.D. Power score is well above average
• Offers various life insurance riders for customization

Cons:

• Limited digital resources
• Long-term care quotes must be done over the phone or in person

Learn more: Nationwide insurance review

New York Life

Why New York Life made our list: New York Life offers some of the best online tools and resources for long-term care insurance. You can use the cost calculator to estimate long-term care costs in your area and check out helpful articles in the “Learn & Compare” section. New York Life, founded in 1845, is a national insurer that offers life and LTC coverage across all 50 states and Washington, D.C. New York Life is also an AARP partner for LTC needs.

Pros:

• Many online resources and digital tools
• Traditional LTC and hybrid LTC policies available

Cons:

• Online quoting is not available
• J.D. Power ranking is below average

Learn more: New York Life insurance review

Northwestern Mutual

Why Northwestern Mutual made our list: Northwestern Mutual is a highly-rated company that offers a broad range of insurance policies, including LTC options. It has an A++ financial strength rating from AM Best, which is the highest level given. The carrier also came in fourth in J.D. Power’s 2024 U.S. Life Insurance Study, which ranks overall customer satisfaction. You can purchase a traditional LTC plan, hybrid LTC plan or a life insurance policy with accelerated benefits for long-term care from Northwestern Mutual.

Pros:

• Highest financial strength rating possible from AM Best
• Several LTC plans available

Cons:

• No online quotes available

Learn more: Northwestern Mutual insurance review

Who needs long-term care insurance?

Long-term care insurance may be beneficial, but it’s not necessarily the right option for everyone.

In general, people who wouldn’t be able to comfortably afford to pay out of pocket for long-term care may benefit the most from this type of insurance. Because private health insurance and Medicare only provide a limited amount of long-term care coverage, you would likely end up paying out-of-pocket if you went into a nursing home or needed a permanent home nurse, for example.

On the other hand, LTC insurance might not be worth it if you’re in a comfortable financial position and could pay out of pocket for your long-term care needs. Because some LTC insurance premiums get more expensive over time, you could end up saving money instead, creating a nest egg for your medical care as you age. Additionally, if you know you will be able to live with a friend or family member who can care for you as you age or if you injure yourself, LTC coverage may be less essential.

Frequently asked questions

• What is the best age to buy long-term care insurance?
  

  The AALTCI recommends that you explore options for LTC coverage while you’re in your 50s or younger and in good health. However, the best time to buy long-term care insurance may depend on your personal circumstances and coverage needs. That said, buying coverage when you’re young and healthy may help you qualify for lower premiums.

• When do benefits begin for long-term care insurance?
  

  Benefits for long-term care insurance usually begin after two key conditions are met: the eligibility trigger and elimination period. The eligibility trigger is when the named insured is unable to perform a certain number of activities of daily living (ADL), like getting dressed and eating. If this happens after the elimination period occurs, the coverage can start right away. If the ADL occurs before the elimination period, then the name insurance is responsible for paying the care costs until the elimination period starts.

• How long do LTC benefits last?
  

  The exact length of time will depend on your insurance contract. LTC policies are highly customizable and some may even last for the named insured’s lifetime; however, most LTC policies provide benefits from two to seven years. The length of benefits significantly impacts the cost of the policy, so working with a licensed agent can help you select a policy that fits your needs.

• Do I need to have a physical exam for LTC insurance?
  

  In most cases, you’re required to take a physical medical exam before you can get LTC insurance. The insurance company uses the findings from the exam to determine your eligibility and calculate your premium. However, younger applicants may not be held to the same exam requirements as older individuals.

• What are LTC Partnership Programs?
  

  These programs are collaborations between private insurers and each state’s Medicaid office. Participating in one of them protects some of your assets if you should need Medicaid in the future. There may be other benefits — your state’s Medicaid office will have more details.