Long-Term Care Insurance: Costs, Coverage, and Whether You Need It

70% of Americans Over 65 Will Need Long-Term Care. Medicare Won't Pay for Most of It.

The U.S. Department of Health and Human Services estimates that 70% of people who reach age 65 will need some form of long-term care services during their lifetimes—and the median stay in a nursing facility exceeds two years. The national median annual cost for a private room in a nursing home reached $108,405 in 2023, according to Genworth's Cost of Care Survey. Medicare covers only short-term skilled nursing care after a qualifying hospital stay. Long-term custodial care—assistance with daily activities over months or years—is almost entirely a private-pay or Medicaid obligation.

What Long-Term Care Insurance Covers

Long-term care (LTC) insurance covers the cost of services for people who can no longer perform activities of daily living (ADLs) independently. The standard trigger is inability to perform two or more of six ADLs without assistance:

• Bathing
• Dressing
• Eating
• Transferring (moving from bed to chair)
• Toileting
• Continence

Policies also typically cover care triggered by cognitive impairment—including Alzheimer's and other forms of dementia—even when ADLs are intact.

Covered care settings include in-home care (home health aides), adult day care programs, assisted living facilities, memory care units, and nursing homes.

Key Policy Features to Understand

How Much Does LTC Insurance Cost?

Premiums are set at policy issuance based on age and health and can increase over time (unlike life insurance). The American Association for Long-Term Care Insurance (AALTCI) 2023 data shows typical annual premiums for $165,000 in initial benefit:

Women pay more than men because they statistically live longer and use more LTC services. Premiums have historically increased significantly over time—some policyholders have seen 80%–100% increases on older policies. Many traditional LTC insurers exited the market due to underpricing; about a dozen major carriers remain.

Alternatives to Traditional LTC Insurance

• Hybrid LTC/Life Insurance: Life insurance policies with LTC riders let you access the death benefit early to pay for care. Unused benefits pass to heirs. Lincoln Financial, OneAmerica, and Pacific Life offer prominent hybrid products. Premiums are typically paid as a lump sum or over 10 years and don't increase.
• LTC annuities: Annuities with LTC acceleration riders that pay 2–3× the annuity value if care is needed
• Self-insurance: Accumulating a dedicated pool of assets specifically for potential LTC needs—works for high-net-worth households ($2M+ in assets)
• Medicaid planning: For those without substantial assets, Medicaid pays for nursing home care after spending down to eligibility limits. Medicaid planning attorneys can help structure assets legally to preserve spousal assets while qualifying.

The Optimal Purchase Window

The traditional advice to buy LTC insurance in your mid-50s holds: premiums are still moderate, you're likely healthy enough to qualify, and you'll pay premiums for a reasonable period before potential claims. Buying at 70 or later means dramatically higher premiums—and potential inability to qualify if health conditions have developed. Roughly 25% of LTC applicants in their 60s are declined for health reasons; that percentage rises sharply in later years.

Disclaimer: Long-term care insurance involves complex decisions about coverage, cost, and alternatives. This article is for informational purposes only. Consult a licensed insurance professional and financial advisor before purchasing any LTC product.