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.

What is Long Term Care Insurance?

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.

  1. Bathing
  2. Continence
  3. Dressing
  4. Eating
  5. Toileting
  6. Transferring

Additionally, it’s worth noting that you only trigger benefits when you are unable to perform at least two out of the six Activities of Daily Living.

Types of Long-Term Care Insurance Policies

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 Long Term Care

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 largely replaced the older traditional policies from CNA Long-Term Care Insurance, John Hancock, and GE.

Hybrid Long Term Care Insurance

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 people prefer this idea over 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.

Long-Term Care Insurance Riders

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.

How are Benefits Paid Out?

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 to Buy Long-Term Care Insurance?

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.

LTC is a good option if you are concerned about needing extended health care someday and what that care would do to your financial situation.

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

Long-Term Care Insurance Costs

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.

Sample Pricing

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
AgeMonthly
LTC Benefit
Total
LTC Benefit
Death
Benefit
Return of
Premium
155$5,659$284,106$152,600$70,000
1165$7,605$381,815$135,818$70,000
2175$10,221$513,127$135,818$70,000
3185$13,736$689,600$135,818$70,000
46100$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
AgeMonthly
LTC Benefit
Total
LTC Benefit
Death
Benefit
Return of
Premium
155$6,078$ 305,143$145,875$70,000
1165$8,169$410,087$145,875$70,000
2175$10,978$551,123$145,875$70,000
3185$14,753$740,663$145,875$70,000
46100$22,985$1,153,929$145,875$70,000

How Much Does a Nursing Home Cost?

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:

ServiceCost
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.

Medicare Long-Term Care

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 1-20Medicare Pays 100% of Approved Costs
Day 21 – 100Patient Pays $204 CoPay Per Day in 2024
Day 101 and BeyondMedicare 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.

Who Offers Long-Term Care Insurance?

Many companies offer long-term care insurance, including:

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

Choosing Your Policy

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.

Pros of Long-Term Care Insurance

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.

Cons of Long-Term Care

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.

Is Long-Term Care Insurance Tax Deductible?

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.

Long-Term Care Premium Deductions

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)

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

Self Employed Tax Deduction

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.

Taxation of Long-Term Care Benefits

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).

HSA Accounts and Long Term Care Premiums

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.

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

Flexible Spending Accounts and LTC

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

Long-Term Care Tax Deductions & Partnership Programs by States

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:

StatePartnership
Program?
AlabamaYes
AlaskaNo
ArizonaYes
ArkansasYes
CaliforniaYes
ColoradoYes
ConnecticutYes
DelawareYes
District of ColumbiaNo
FloridaYes
GeorgiaYes
HawaiiNo
IdahoYes
IllinoisPending
IndianaYes
IowaYes
KansasYes
KentuckyYes
LouisianaYes
MaineYes
MarylandYes
MassachusettsNo
MichiganYes
MinnesotaYes
MississippiNo
MissouriYes
MontanaYes
NebraskaYes
NevadaYes
New HampshireYes
New JerseyYes
New MexicoYes?
New YorkYes
North CarolinaYes
North DakotaYes
OhioYes
OklahomaYes
OregonYes
PennsylvaniaYes
Rhode IslandYes
South CarolinaYes
South DakotaYes
TennesseeYes
TexasYes
UtahYes
VermontYes
VirginiaYes
WashingtonYes
West VirginiaYes
WisconsinYes
WyomingYes

Final Thoughts


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!

Scroll to Top