Is Long-Term Care Insurance Worth It?

Exploring long-term care insurance (LTC) can seem challenging at first. Should you even buy coverage? If so, which policy type and company should you buy from?

And what about having to deal with some pushy insurance agent? That’s a lot of fun 🙁

There is NEVER any pressure or obligation with our service! We help you explore the best options available. If you change your mind anytime, simply tell us to close your file.

Long-term care insurance (LTC) covers the expenses that your health insurance, Medicare, or supplemental insurance policies do not cover.

Coverage may cover home health care, assisted living, nursing, adult day care, respite care, and hospice care.

You probably heard about the Six Activities of Daily Living (ADL) used to evaluate your health.

Additionally, it’s worth noting that you only trigger benefits when you cannot perform at least two out of the six Activities of Daily Living.

There are three types of coverage available.

1. Traditional Long-Term Care Insurance
2. Hybrid Long Term Care Insurance
3. Long-Term Care Insurance Riders

Traditional LTC policies serve solely long-term care purposes.

A traditional policy will outline the following:

• Daily Benefit Amount
• The Benefit Period
• Elimination Period
• Inflation Protection
• Included Riders
• Discounts Available
• Underwriting Health Class

While each company’s product varies, you will find the above with all traditional LTC coverage.

The following hybrid policies have primarily replaced the older traditional policies from CNA Long-Term Care Insurance, John Hancock, GE, and Transamerica Long-Term Care Insurance.

As a side note, the CEO of Genworth indicated that their CareScout subsidiary is entering the LTC market.

A hybrid policy will be a whole life, universal life insurance, or an annuity combined with long-term care benefits.

The appeal of a hybrid policy is that it offers a death benefit or an investment should you never need long-term care. Some prefer this idea vs. paying for a traditional policy that may never be used.

Examples of a hybrid policy are Lincoln National’s Moneyguard Fixed Advantage or Nationwide’s Care Matters II policy.

Several life insurance companies allow the addition of a long-term care rider to universal and whole life insurance policies.

Additionally, some companies offer a basic rider, while others have riders that compare well with a traditional or hybrid policy.

When we discuss your needs, we’ll explain the pros and cons of each type of coverage to you so that you will make an informed decision.

Long-term care insurance policies are either indemnity policies or reimbursement policies.

An indemnity long-term care policy pays the specified benefit of your policy, while a reimbursement policy pays the actual cost of services rendered subject to your policy limits.

When you’re younger and healthier is the best time to purchase LTC insurance.

Premiums tend to be lower, and you’re more likely to qualify for coverage.

But don’t worry if you wait until later in life to consider coverage, as great options are still available.

Long-term care insurance is a good idea if you have the resources to purchase coverage.

And while LTC is expensive, compare that to what could happen to your family and finances if you had to pay for care for 2-3 years.

Long-term care insurance costs vary based on several factors, including age, health status, coverage amount, and specific policy details. Generally, the younger you are when you purchase the insurance, the lower the premiums will likely be.

How much does long-term care insurance cost?

Long-term care policies have many features, riders, etc., available to consider that will affect your pricing.

You can tailor different policies with varying benefit amounts to fit your needs and budget.

Also, remember that additional discounts are available if you apply with your partner.

Here are some examples using Lincoln National’s MoneyGuard Fixed Advantage plan.

Just take a look at the guaranteed benefits you receive with this policy.

Age 55 Female – One-time premium = $100,000 – Standard Underwriting, Basic Return of Premium, and 3% compound inflation rate – 4-year benefit duration.

Policy Year	Age	Monthly LTC Benefit	Total LTC Benefit	Death Benefit	Return of Premium
1	55	$5,659	$284,106	$152,600	$70,000
11	65	$7,605	$381,815	$135,818	$70,000
21	75	$10,221	$513,127	$135,818	$70,000
31	85	$13,736	$689,600	$135,818	$70,000
46	100	$18,461	$1,074,374	$135,818	$70,000

Age 55 Male – One-time premium = $100,000 – Standard Underwriting, Basic Return of Premium, and 3% compound inflation rate – 4-year benefit duration.

Policy Year	Age	Monthly LTC Benefit	Total LTC Benefit	Death Benefit	Return of Premium
1	55	$6,078	$ 305,143	$145,875	$70,000
11	65	$8,169	$410,087	$145,875	$70,000
21	75	$10,978	$551,123	$145,875	$70,000
31	85	$14,753	$740,663	$145,875	$70,000
46	100	$22,985	$1,153,929	$145,875	$70,000

Long-term care insurance may seem expensive until you consider how much it will cost for your loved one to receive nursing home care, assisted living, adult day care, or in-home services.

Costs vary by the type of services provided and where you live. Here’s a great nursing home cost calculator from AARP to give you an idea of costs.

Here are some examples using the above calculator should you retire to the Sarasota, Florida region.

Average Costs:

Service	Cost
Home Health Aid	$129 Per Hour
Adult Day Care 5x Per Week	$2064 Per Month
Assisted Living	$4,145 Per Month
Semiprivate Nursing Home	$9,490 Per Month
Private Nursing Home	$10,615 Per Month

Statistics show that women tend to need care for longer durations than men, with women averaging 3.7 years of care needed vs. men needing 2.2 years.

Does Medicare cover long-term care?

Medicare will pay for medically necessary skilled long-term care for brief periods of time if the following criteria are met:

1. The individual must have had a prior hospital stay of at least three full days.
2. The individual must be admitted to the skilled care facility within 30 days of hospital discharge.
3. A doctor must certify that skilled care is required.

Medicare limits the days it will pay for long-term care, and care must occur in a skilled nursing facility.

Number of Days in Skilled Nursing Facility	Coverage
Day 1-20	Medicare Pays 100% of Approved Costs
Day 21 – 100	Patient Pays $204 CoPay Per Day in 2024
Day 101 and Beyond	Medicare Pays Nothing

Day 21-100 will cost you a minimum of ($204×80) and $16,320 in copays alone!

If you have a Medicare Advantage or Medigap plan, that policy may help with some of the $204 daily copays.

Long Term Care Insurance Underwriting

Each company has its own set of underwriting guidelines.

All companies have a telephone interview component with a cognitive screening component. Although not often, in some cases, a company may require a face-to-face assessment.

Most companies will review your medical records as part of underwriting. If you don’t visit a physician regularly, underwriting becomes more difficult.

In addition, companies will search prescription databases and the Medical Information Bureau for information.

Certain pre-existing health conditions or disabilities might disqualify individuals from obtaining coverage. Insurers assess applicants’ health and medical history to determine eligibility and pricing.

Many companies offer long-term care insurance, including:

• Lincoln National – MoneyGuard Fixed Advantage
• Mass Mutual – CareChoice One
• Mutual of Omaha – MutualCare products
• Nationwide – CareMatters II
• OneAmerica – Asset Care
• Pacific Life – PremierCare Choice
• Securian – SecureCare

And with our service, you can see what these companies offer in a no-pressure, no-obligation setting.

Which long-term care insurance companies should you avoid?

The good news is that you don’t have to avoid them, as the worst companies put themselves out of business and/or stopped issuing LTC policies.

When financial conditions get so bad for an insurance company, the state where the company is domiciled will order the liquidation of the company.

All states have a Life and Health Insurance Guaranty Association that handles claims and benefits when a company goes under.

Some of the worst companies include:

Company Name	What Happened?
Penn Treaty	Liquidation
CNA Long Term Care	Stopped Issuing Policies
Genworth	Stopped Issuing Policies
John Hancock	Stopped Issuing Policies
UNUM	Stopped Issuing Policies
Prudential	Stopped Issuing Policies

Now that you have decided to purchase long-term care insurance, you must make some important decisions about the policy.

Type of Policy – Will you choose a traditional, hybrid, or rider-based policy?

Benefit Amount – How much coverage do you need daily or monthly? We have guidelines available to help you with this.

Elimination Period – This is the time that must pass before benefits become available. Options include 0, 30, 60, 90, or 180 days before benefits start.

Inflation Protection – You can choose no protection (not recommended), simple inflation, or compounded inflation to keep up with the times.

Policy Features – Each company’s product varies, and you must choose what is most important for your situation.

Policies today offer home-based care as most people want to receive treatment at home.

Discounts – If your spouse/partner needs coverage, discounts are available with some companies.

We’ll help you wade through everything.

One of the best benefits of LTC is its ability to protect your assets from the high costs of an expensive nursing home stay.

A long-term care policy dictates the management of your healthcare needs.

It may be possible to use 401k assets to purchase LTC protection!

You can set up a 10-pay plan to fund your long-term care.

You may be able to use your HSA to fund insurance premiums.

Always consult your tax advisor to discuss if your qualified long-term care premiums are deductible.

Business owners may benefit from additional business tax deductions.

Cost is the biggest obstacle keeping insureds from buying a long-term care policy.

Choosing the wrong policy is another concern – you must buy one that will address your needs and budget now and far into the future.

If you wait too long, you may not be insurable.

If you previously qualified for a tax deduction but decide to cancel your policy, those prior deductions may become taxable income – As always, consult your tax expert.

As always, you must consult with your tax advisor to get definitive answers to any tax questions, as we do not give tax advice.

If you want the possibility of a tax deduction, make sure your policy is tax-qualified, as most policies issued today are tax-qualified long-term care insurance policies.

Tax-qualified LTC premiums are considered a medical expense as an itemized tax deduction subject to the medical expense limits.

With current rules, medical expenses must exceed 7.5% of your AGI to be deductible. While it’s unlikely to get tax benefits in your younger years, as you can see below, the older age deductions may be substantial, giving you a deduction.

The maximum deductible amount is based on your age. (2024 limits)

Age	Deductible Limit
Age 40 or Less	$470
Age 41 – 50	$880
Age 51 – 60	$1760
Age 61 – 70	$4710
Age 71 +	$5880

If you’re self-employed, you can deduct 100% of the premiums you paid up to the above limits. You don’t have to meet the 7.5% AGI threshold to deduct.

If your business operates as a partnership, LLC, or Subchapter S, the premiums paid on your behalf contribute to your AGI. Yet, you can deduct 100% of the premiums, subject to the above limits. You do not have to meet the 7.5% AGI limits.

C – Corporations can take a 100% business expense deduction and are not subject to the age limits. You should also know that LTC policies are not subject to non-discrimination rules, so you can choose whom to offer coverage.

As always, you must check with your tax advisor about your situation to ensure deductions are available before purchasing coverage.

Long-Term Care Benefits Taxation – LTC benefits are generally paid income tax-free under Internal Revenue Code 104(a)(3).

Taxation of Death Benefit – Death benefits are paid to beneficiaries income tax-free under Internal Revenue Code 101 (a)(1).

If you have a high deductible health plan at work, a Health Savings Account (HSA) allows you to set aside pre-tax money from your wages to pay for qualifying medical expenses.

Long term care insurance premiums are a qualifying medical expense.

If your LTC policy is tax-qualified, premiums can be reimbursed through your HSA, subject to the following limits in 2024.

Age	Deductible Limit
Age 40 or Less	$470
Age 41 – 50	$880
Age 51 – 60	$1760
Age 61 – 70	$4710
Age 71 +	$5880

Your FSA account can not reimburse long-term care premiums.

Some states offer a credit or tax deduction for premiums you’ve paid for long-term care.

In addition to tax deductions/credits, some states participate in LTC partnership programs that greatly benefit you.

A partnership program typically allows you to exclude some assets from Medicaid spend-down rules equal to the amount of LTC benefit you purchased.

States that participate in partnership programs include:

State	Partnership Program?
Alabama	Yes
Alaska	No
Arizona	Yes
Arkansas	Yes
California Long Term Care Insurance	Yes
Colorado	Yes
Connecticut	Yes
Delaware	Yes
District of Columbia	No
Florida	Yes
Georgia	Yes
Hawaii	No
Idaho	Yes
Illinois	Pending
Indiana	Yes
Iowa	Yes
Kansas	Yes
Kentucky	Yes
Louisiana	Yes
Maine	Yes
Maryland	Yes
Massachusetts	No
Michigan	Yes
Minnesota	Yes
Mississippi	No
Missouri	Yes
Montana	Yes
Nebraska	Yes
Nevada	Yes
New Hampshire	Yes
New Jersey	Yes
New Mexico	Yes?
New York	Yes
North Carolina	Yes
North Dakota	Yes
Ohio	Yes
Oklahoma	Yes
Oregon	Yes
Pennsylvania	Yes
Rhode Island	Yes
South Carolina	Yes
South Dakota	Yes
Tennessee	Yes
Texas	Yes
Utah	Yes
Vermont	Yes
Virginia	Yes
Washington	Yes
West Virginia	Yes
Wisconsin	Yes
Wyoming	Yes

When considering long-term care insurance, you must review the policies that are available in your home state, as there may be wide variations in products.

Many states (but not all of them) offer Long Term Care Partnership Programs. The benefit to you is that partnership programs allow you to exclude assets from your estate if you have a long-term care insurance policy.

If you have residences in multiple states, it may be possible for you to choose which state to obtain coverage in.

Here are some quick highlights by state:

When considering long-term care insurance in Arizona, look for policies that qualify under the Long Term Care Partnership Program (most do) as these policies provide additional benefits under the Estate Recovery Program.

We have a page dedicated to long term care insurance in California.

Long-term care insurance in Connecticut that meets the partnership guidelines will provide you with Medicaid asset protection. Additional details may be found here.

You’ll find additional details about long-term care insurance in Florida and how their partnership program works – here.

Long term care insurance in Maryland that meets the partnership program requirements, offers you additional benefits – Click here for MD details.

The long-term care insurance partnership in NJ allows insureds to protect assets equal to the amount of the insurance benefits. You’ll find some basic information here from New Jersey.

Long-term care insurance in Ohio is also referred to as LTC4ME. Ohio provides additional consumer information at this link.

Long-term care insurance policies in South Carolina that are approved partnership policies offer you additional protection. You’ll find additional South Carolina information – here.

A long-term care insurance partnership program is available in Texas, and the insurance department offers consumer information for your review.

Long-term care insurance in Washington is partnership-approved. Washing has some of the most straightforward and up-to-date information available to consumers.

In addition, Washington started its Wa Cares Fund in 2023, which uses payroll tax deductions to provide up to $36,500 of long-term care benefits.

Long-term care insurance provides peace of mind for individuals and their families.
Understanding these policies’ coverage, costs, and implications is crucial in making an informed decision about LTC.

And keep in mind that our service is free, with no obligation or pressure to buy. Please request a quote today. Thank you!