How Much Does Long Term Care Insurance Cost?

Trying to secure your senior years through Long term Care insurance? You are at the right place. Learn everything you need to know about LTC.

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It’s natural to fret about whether you can manage to pay for your senior years. Your retirement savings may cover the cost of living — but the cost of long-term care is something else completely.

There’s a good chance that somewhere down the road you’ll require medical care ahead of regular doctor visits and short hospital stays, which can get very costly very fast. Long-term care insurance can assist with the cost of senior living.

The article will explore long term care insurance in-depth, how long term care insurance work, how much does long term care insurance cost, alternatives to long term care insurance, and more.

What is Long-Term Care Insurance?

Long-term care (assistance beyond 100 days) is usually not covered by Medicare because it’s deemed as custodial care and not medical care. While Medicaid does cover long-term care for millions of Americans, there’s an extremely low-income threshold to be eligible.

Long-term care (LTC) insurance can assist retirees who don’t intend to spend down their assets to meet the criteria for Medicaid pay for the cost of an in-home caretaker, or a stay at an assisted-living facility, skilled nursing facility, or nursing home.

How Does Long-Term Care Insurance Work?

Like all other kinds of insurance, once you buy an LTC policy and start paying the monthly premium, you become eligible for the benefits.

Coverage on most LTC insurance policies starts once the policyholder wants help with two or more of the six Activities of Daily Living (ADLs): eating, bathing, dressing, transferring, using the toilet, and maintaining continence. Serious cognitive impairment that raises the policyholder’s health and safety risk also be eligible.

Each policy has an elimination period, which says the number of days the insured must wait to get benefits after the insurer decides they’re qualified. A normal elimination period is 30, 60, or 90 days.

The amount of money the policyholder will be reimbursed for is referred to as the daily limit. This is defined in the policy and usually is around $150 a day or more. The insurer will carry on paying the daily benefit up to a maximum number of days, normally a period between two years and 10 years, or up to a specific amount of money.

What Does Long Term Care Insurance Cover?

Many people think of long-term care as nursing home care only, but that’s untrue. It can contain much more, including help with activities of daily living, home care, and adult daycare. Long term care insurance covers the following::

  • Extended nursing home stays
  • Assisted living communities
  • Alzheimer’s or memory care facilities
  • Adult daycare centers
  • Home health provided by a professional
  • Home care (some policies)
  • Respite care
  • Hospice

It’s critical to understand exactly what services and kinds of facilities your long-term care insurance policy covers. Personal care homes, for instance, are every so often not covered, according to the National Association of Insurance Commissioners (NAIC). Always discuss with your insurance provider about coverage prior to selecting care communities or services.

You’re normally qualified for long-term care insurance benefits when you’re no longer capable to carry out two activities of daily living — or ADLs — on your own. Cognitive impairment is another common eligibility criteria for long term care insurance.

How Much Does Long-Term Care Insurance Cost?

The longer you wait to purchase long-term care insurance, the more costly it is. The American Association for Long-Term Care Insurance suggests buying a policy between ages 52 and 64 for the best rates.

A single male in good health will pay about $2,050 a year, on average, while a single female will pay $2,700 annually, according to the organization’s data. For a couple aged 55, the average annual premium is about $3,050.

It’s crucial to keep in mind that insurers have the right to increase your premium after you purchase the policy, as long as they do it for all policyholders in the same category. People who already need assistance with any qualifying daily activities, have had a stroke in the last several years, or have dementia, a progressive neurological condition, AIDS, or metastatic cancer may be refused long-term care insurance.

Your cost for a long-term care insurance plan is based on your personal situation, which means:

  • Your age and health: The older you are and the more health issues you face, the more costly your premiums will be.
  • Your gender: Women live longer and hence are expected to make a long-term care claim, so their premiums are typically higher.
  • Your marital status: Married couples who purchase coverage together pay less.
  • Your benefit amount: This is the amount of money the insurance provider would incur for your long-term care (for instance, $150,000 per year). If the plan you select covers a high cost of care, your premium would be higher.
  • Your benefit period: The length of time covered differs from one plan to the next. The more years your plan covers, the more costly your premium.
  • Your elimination period: Like a deductible amount, this is the amount of time you must pay for your care before your insurance is in effect and starts paying. For long-term care insurance, it’s normally between 30 and 180 days.
  • Inflation protection option: This is an optional element that safeguards your benefit amount from inflation, so if your care gets more costly each year, your benefit amount increases as well.

Best Long-Term Care Insurance

Best Overall: New York Life

New York Life is an apparent choice for best overall for its long-standing history, top financial strength ratings, and choice of plans that offer protection against inflation, flexibility for the type of care (whether in-home, at a facility, or offered by a family member), and a small death benefit even if the total coverage is used. There is even a money-back guarantee if no LTC is required.

However, online quotes are not available by New York Life; customers need to make contact with a financial professional through the company for a quote

In a sample online quote for the company’s traditional long-term care insurance plan, a married 55-year-old male can anticipate to pay $24.93 per month for a maximum lifetime benefit of $50,000 or $119.45 per month for the highest amount of coverage, a $250,000 maximum lifetime benefit.

Best for Discounts: Mutual of Omaha

With three kinds of discounts offered (the potential for up to 30% in savings), Mutual of Omaha tops the list when it comes to best long term care insurances.

Mutual of Omaha is in business since 1909 with AM Best rating of A+ Superior for financial strength. The downside however is that Inflation protection and refunds of premiums are available at an additional cost.

Mutual of Omaha provides one long-term care base plan. It has built-in elements that can be tailored as needed. As part of the basic plan, customers can receive:

  • Cash benefits instead of being reimbursed for actual costs
  • Access to a care coordinator who can evaluate your needs, build an individual care plan, and organize services as needed
  • Waiver of premium, which entails that customers dare not required to pay for their monthly premiums while getting LTC
  • Coverage for alternate care that may not yet exist

Extra benefits are available for an extra cost, such as inflation protection, shared care (letting partners share benefits if needed), and a return of premium for any benefits not utilized.

Best for No Waiting Period: Lincoln Financial Group

Waiting periods can result in extra out-of-pocket expenses, right when you’re seeking financial relief. Lincoln Financial Group is the only company on this list that offers plans (two in fact) with no elimination period for all covered services, comprising nursing homes and assisted living facilities. The only other company on this list that offers the best long-term care insurance with no waiting period plan, Pacific Life, does so with many exemptions.

Lincoln Financial Group was founded in 1905 and has A+ Superior AM Best rating. However, online quotes are not available; customers need to contact a financial professional through the company for a quote.

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Best for Flexible Options: Pacific Life

There’s no way to tell whether you’ll need long-term care or not. And if you do require it, will it be in a facility or your home, in the U.S. or abroad? Of all the long-term care insurance plans available on the market, Pacific Life’s PremierCare Advantage policy offers some of the greatest flexibility. It accounts for a variety of different potential possibilities, with options for benefit periods, inflation rates, and monthly maximum benefits.

It has been operating since 1868 and enjoys an A+ Superior rating from AM Best. But, online quotes are not available; customers need to contact a financial professional through the company for a quote

Best for Easy Benefits Payout: Brighthouse Financial

While many plans offer coverage in the form of reimbursements, that’s not the case with Brighthouse Financial’s SmartCare plan. It’s a hybrid universal life insurance policy with long-term care benefits. Once customers are qualified to receive benefits, they can receive their maximum amount of available benefit dollars, regardless of how much their care costs. No receipts are needed.

It has over two million customers and an A rating from AM Best. However, online quotes are not available; customers are required to contact a financial professional through the company for a quote.

Brighthouse Financial also offers a guaranteed death benefit and terminal illness benefit, with a payout of 50% of the policy’s value capped at $250,000. As with many other plans, there is an elimination period. In this case, it is a 90-day wait time. No labs or exams are needed for customers ages 40 to 75, and no medical records are mandatory for those 40 to 65, except in the event of a major medical condition.

Hybrid Long-Term Care Insurance Calculator

The escalating cost of long-term care, combined with an increasing range of options, can make it hard for families to find the best, reasonably priced care. The hybrid long term care insurance calculator can help with that procedure by approximating the cost of long-term care. Options contain expenses for care in a nursing home, assisted living facility, or adult daycare, and usage of a home health aide or homemaker service.

Simply choose your state and region along with the kind of care needed to find your estimate.  You can even evaluate costs in one state and region with another.  The calculator will provide you a total cost estimate.

Alternatives to Long-Term Care Insurance

Long-term care insurance can be costly. It’s also normally most cost-effective when bought before people turn 60. In 2020 the average annual premium for a healthy couple, both 55-years-old, is $3,050, according to the American Association for Long-Term Care Insurance.

Even at these high premiums, insurance companies that provide this type of insurance can refuse applicants after examining their health histories in depth. Due to these reasons, people may require other alternatives for long-term care coverage.

Short-Term Care Insurance

Short-term care insurance, also recognized as convalescent insurance, is a policy that usually offers between $100 to $200 per day of healthcare coverage for one year or less. Because there is no long-term obligation for the insurance companies, the premiums are typically less than traditional long-term care coverage options. The average short-term care premium for a 65-year-old, for instance, is $105 a month.

Since the premiums are lower and the coverage is just for a year or less, many applicants who are refused by traditional long-term-care coverage may be taken by short-term care insurance. These kinds of policies have short or no elimination periods, letting benefits to start instantly for those in need.

With short-term care insurance, benefits usually reset. This implies if someone files a claim but then recuperates preceding to receiving the full benefit, it is possible to file another claim in the future and get coverage.

While this type of insurance coverage can assist those who are denied long-term care insurance, the swiftness of the insurance coverage makes it only a short-term solution to long-term care coverage. Though, Medicare provides post-hospitalization rehab for up to 20 days, making it feasible to cover healthcare for somewhat over one year if short-term care insurance is used after that 20-day period.

Based on the policy, only people under the age range of 85 to 89 are normally qualified for short-term care coverage.

Critical Care or Critical Illness Insurance

Critical care and critical illness insurance are two kinds of coverage that offer lump-sum cash payments to people who are diagnosed with cancer, stroke, heart attack, and other severe illnesses. Furthermore, Aflac and Guarantee Trust Life Insurance Co., two key carriers, provide critical care and critical illness insurance with daily or monthly benefits for inpatient rehab and continuing care.

Aflac’s daily benefits can last up to six months and Guarantee Trust’s monthly benefits can last up to two years. Daily and monthly benefits aside, critical care and critical illness insurance are usually less costly than long-term care insurance. For instance, if a 60-year-old woman is considering to get critical care or illness insurance, she can get a $50,000 lump sum payment from a plan for as little as $100 a month.

Even a monthly benefit insurance structure bought through Guarantee Trust can give someone in need of long-term care up to $2,000 a month for two years and only cost about $110 a month.

People looking for long-term care coverage through critical care or critical illness insurance are not qualified if the issue is from a past diagnosis—coverage is only effective if the injury or illness is new and formerly undetermined.

Annuities With Long-Term Care Riders

For people who are refused by traditional long-term care insurance providers, it is possible to take out an annuity with a long-term care rider. Money invested in an annuity with a long-term care rider can be utilized tax-free to pay for long-term care as specified under the contract. This provides a person a stream of monthly payments they can use exclusively to pay for the care required.

Medical underwriting for this kind of option is less strict than traditional long-term care, giving greater liberty in how people make use of the care benefits. If it turns out long-term care is not required, it is likely to restore the accumulated value of the annuity. Upon the passing of the annuity owner, heirs collect on the funds, excluding any withdrawals for long-term care.

Nevertheless, annuities need to be bought upfront directly, requiring a large up-front payment in return for monthly cash flow for a specified period. Annuities like these have minimum up-front premiums of $50,000, and the money is typically locked in for five to 10 years.

Deferred Annuities

Long-term care can be preplanned using a deferred fixed annuity. If people consider that they have a 70% likelihood of needing long-term care after age 65, it is wise to protect against future costs by putting money down before retirement in return for a promise an insurer will pay monthly sums starting when a certain age is reached.

Suppose, for instance, a person is 60 years old and chooses to buy a deferred annuity for $100,000. When that person reaches a specified age (72 if the annuity is in a tax-qualified retirement account) they start receiving distributions. The distribution amount will be based on the type of distribution. Required minimum distributions involve calculations from an Internal Revenue Service schedule. Other distributions will normally be based on the contract terms of the annuity.

A deferred annuity is different from an annuity with a long-term care rider because it is not created solely for long-term care. Rather, this option can be used as peace of mind that if long-term care is required after retirement, there is a monthly cash flow available to pay for the necessary expenditures. A deferred annuity does not cover any long-term care required before retirement.

Most people over age 65 will want long-term care at some point. Because long-term care insurance isn’t for everyone, it’s wise to look at other options. Take into account the above alternatives for long term care insurance when intending to pay the high costs of long-term care, should you need it down the road.

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John Otero

John Otero

John Otero is an industry practitioner with more than 15 years of experience in the insurance industry. He has held various senior management roles both in the insurance companies and insurance brokers during this span of time. He began his insurance career in 2004 as an office assistant at an agency in her hometown of Duluth, MN. He got licensed as a producer while working at that agency and progressed to serve as an office manager. Working in the agency is how he fell in love with the industry. He saw firsthand the good that insurance consumers experienced by having the proper protection. John has diverse experience in corporate & consumer insurance services, across a range of vocations. His specialties include Major Corporate risk management and insurance programs, and Financial Lines He has been instrumental in making his firm as one of the leading organizations in the country in generating sustainable rapid growth of the company while maintaining service excellence to clients.

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