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It’s normal to worry about whether you can afford your senior years. Your retirement savings may cover the cost of living, but the cost of long-term care is something else entirely. There’s a good chance that somewhere down the road you’ll need medical care beyond regular doctor visits and short hospital stays, which can get very expensive very quickly. Long-term care insurance can help with the cost of senior living or chronic health issues that require ongoing medical care. Here’s a guide to the costs and benefits of long-term care insurance, along with an overview of some leading providers.
Long-term care insurance — often referred to as senior care insurance or nursing home insurance — is one way to pay for long-term care. Many people think of long-term care as strictly nursing home care, but that’s false. It can include much more, including help with activities of daily living, home care, and adult day care.
You’re generally eligible for senior care insurance benefits when you’re no longer able to perform two activities of daily living (ADLs) on your own. ADLs include bathing, continence, dressing, mobility, eating, and toileting. Another common eligibility trigger is cognitive impairment.
Coverage varies depending on the plan purchased but often includes:
It’s important to know exactly what services and types of facilities a senior care insurance policy covers. Personal care homes, for example, are often not covered, according to the National Association of Insurance Commissioners (NAIC). Always talk to your insurance provider about coverage before choosing care communities or services.
Many factors affect the cost of long-term care insurance, but the most important are age and health. Premiums range widely: A single male aged 55 could pay as little as $950 per year, whereas a couple, each aged 55, on a plan with benefits that grow at a rate of 5% annually, could pay $8,575 or more.
The average annual premiums in 2022 for 55-year-olds buying a $165,000 policy were as follows:
The cost for a long-term care insurance plan depends on the following factors:
There are two important things to consider when deciding whether to buy long-term care insurance:
A person who turned 65 in 2022 has at least a 70% chance of needing some type of long-term care, according to A Place for Mom’s research. For residents in a long-term care facility, 20% need to stay for at least five years. Women typically need care longer (3.7 years) than men (2.2 years), and the average length of time spent in long-term care is 3.2 years.
Medicare, the federal health insurance plan for individuals 65 and over, does not cover long-term care, though it may cover short-term care in a nursing home after a hospital stay. This means the cost of long-term care falls to the recipient.
According to the most recent annual survey by Genworth, a long-term care insurance provider, the median annual costs for different long-term care services in 2021 were as follows:
Many people don’t buy long-term care insurance because premiums have increased noticeably.[04] Additionally, fewer insurance companies now offer the coverage.
A person’s decision to buy senior care insurance depends on their financial situation, which is usually the primary factor in determining if they will elect to buy a policy. If you have savings to pay out of pocket for the care associated with a disability or chronic condition, then paying for insurance premiums may be unnecessary.
Keep in mind that the numbers listed above reflect median costs, so the costs of your care could fall well below or above those numbers. The cost of care at an assisted living community or nursing home depends on the level of care you need. For example, if you require specialized memory-care services on top of daily food and housekeeping services, the cost of your care will likely be higher than the median.
Your location also matters. If you live in a state with a large population of senior citizens and an abundance of senior living communities with a high turnover rate, and you only need basic care, you might find much lower prices for a room at a nursing home or other facility that can support long-term care needs.
Other benefits of long-term care insurance include:
The best time to buy long-term care insurance is in your mid-50s, according to the American Association for Long-Term Care Insurance. Insurance companies know that most people begin to develop more serious health issues after age 55, so premiums are higher for older applicants. But if you’re around 55 and in relatively good health, you’re still young enough that insurance providers are likely to offer the best rates.
| Your age | |
|---|---|
| 50-70 | Within this range, you’ll have many companies and policies to choose from. Premiums will be more affordable. |
| 80-84 | Only a few companies market to this age range. Some companies sell only one year of coverage to people 80 and older. |
| 85 and older | Few companies sell to people older than 84. Very elderly people should carefully consider the benefits of purchasing long-term care insurance compared to its cost. |
Here are few things the NAIC recommends when searching for a long-term care plan:
If you would like the help of a licensed advisor, speak to a Local Professional | Infinite Retirement Solutions
National Association of Insurance Commissioners. (2018). Shoppers Guide to Long-Term Care Insurance.
American Association for Long-Term Care Insurance.Long-term care insurance facts – data – statistics – 2022 reports.
Genworth. (2022, June 2). 2021 Cost of Care Survey.
Figuracion, K. E. (2022, August 29). Long-term care rate increases persist as Genworth, Mutual of Omaha hike in H1. S&P Global Market Intelligence.
American Association for Long-Term Care Insurance. What’s the best age to buy long term care insurance.
National Association of Insurance Commissioners. (2019). A Shoppers Guide to Long-Term Care Insurance.
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Infinite Retirement Solutions (“Infinite”) is an independent provider of financial and insurance products, not affiliated with Medicare, Medicaid, or any other government agency. Information presented here is for general knowledge only and shouldn’t be considered personalized financial or insurance advice. We strongly recommend consulting qualified professionals like financial planners, tax advisors, and legal counsel to determine the suitability of any product or service offered by Infinite. Investments involve inherent risk, including potential loss. Specific product features, limitations, and exclusions may vary. Please refer to the actual policy wording for complete details. Infinite is headquartered in Florida.