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Do You Need Long-Term Care Insurance?

According to the Social Security Administration, men and women who reach age 65 live to age 84 and 86.5, respectively.

Also, approximately one in three 65-year-olds will live past age 90, and one in seven will live past age 95. That means for 14.2% of those 65 or older, retirement years will make up a third of their lifetime. 

As we live longer, we need to alter our financial planning accordingly to ensure that we don’t outlive our retirement savings. One of the most significant factors in that equation is our ability to live independently. According to the U.S. Department of Health & Human Services, approximately 70% of Americans turning 65 can expect to use some form of long-term care during their lifetime. 

To prepare financially for the possibility that you will be part of that 70%, should you purchase long-term care (LTC) insurance? 

To answer that, you first need to understand exactly what is involved in long-term care, what long-term care insurance is, and what alternatives exist. 

What is long-term care and who requires it? 


Long-term care covers a wide range of services, from in-home care to nursing homes and assisted living facilities. While we often associate the term with serious medical conditions, long-term care can also include services that older adults need to live independently, such as assistance with housework and mobility. 

The National Institute on Aging lists these factors in determining who is most likely to need long-term care. 

  • Age. Not surprisingly, the older we get, the more likely we are to need some form of long-term care. 
  • Gender. Women are more likely to need long-term care because their life expectancy is greater. 
  • Marital status. Statistically, single people require more long-term care than married people do. 
  • Lifestyle. Positive habits such as exercise and a healthy diet decrease the need for long-term care. 
  • Health and family history. Your physical condition and family medical history are factors in your potential need for care. 

What is long-term care insurance? 


Long-term care insurance is insurance that covers the costs of a nursing home, assisted living, and in-home care. It’s important to know that these costs are not covered by Medicare, while Medicaid only covers those who have limited financial resources (income levels for eligibility depend on your state). 

The industry research firm LifePlans estimates the annual LTC premium at $2,700 (spousal discounts are available), which is out of the reach of many retirees. At the same time, AARP estimates the average out-of-pocket expenses for long-term care at $140,000. The average cost of a private nursing home room in 2019 was $8,365 per month, or $265 a day. 

LTC policies: 

  • Cover $160 a day for nursing home expenses. 
  • Include a three-month waiting period. 
  • Provide a maximum of three years’ coverage. 

LTC premiums rise sharply as you get older. For example, initial premiums for someone age 65 will be eight percent to 10% higher than those of someone age 64. 

What are some alternatives to long-term care insurance? 


  • Short-term care insurance. These are policies that provide $50 to $300 per day of coverage for periods ranging between six and 12 months. 
  • Hybrid plans. A combination of long-term care and traditional life insurance policies, these plans require a substantial upfront payment. The advantage is that, unlike LTCs, your beneficiary will get a life insurance payout when you die. Some of these plans also allow you to cancel if you determine you no longer need or want the coverage. 
  • Reverse mortgages. If home equity represents the majority of your assets, a reverse mortgage may be a viable option to cover the costs of long-term care. 
  • Invest for long-term care — Dedicate a portion of your retirement savings to cover long-term care expenses. This is an option if you’ve saved sufficiently, and it avoids the possibility of paying for something you may not use. 

How to decide if long-term insurance is right for you


As with most major financial decisions, one size does not fit all. 

In the case of long-term care, your individual medical, family and financial situation will inform what’s best for you. Are you in good health or do you suffer from a chronic medical condition? What is your family medical history? Do you have family members who can help you age in place, and do you want to rely on their assistance? Have you saved enough for retirement to cover the potential costs of a nursing home? 

How you answer these questions will determine if long-term care insurance is the right choice for you. Because this is a major decision, consider consulting with a financial advisor who specializes in retirement planning. Their insight and perspective can help you do what’s best for you and your family. 


This content and information was created by a third party and not The College. The College assumes no legal liability for the accuracy, completeness, or usefulness of any such content and information and the views expressed therein do not necessarily represent the views of The College.

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