How Much Does Long-Term Care Insurance Cost?

The cost of long-term care insurance varies widely, but the average 55-year-old man will pay $1,700 per year for a three-year policy that covers $164,000 in care.¹ The average 55-year-old woman will pay $2,675 for the same coverage.²

While it’s not fun to think about, everyone eventually gets older. We all have to plan for the future.

But long-term care is expensive and getting expensiver (is that a word?). You need to have a plan to pay for it so you don’t get wrecked financially and end up paying for it on your own. That’s where long-term care insurance comes in.

Why You Need Long-Term Care Insurance

Before we dig into the costs of long-term care insurance, let’s look more closely at why you need it.

First, did you know that 65-year-olds today have a 70% chance of needing long-term care?³ Around 20% will need it for longer than five years.⁴ But only 7.5 million Americans have some form of long-term care insurance.⁵ So give yourself a pat on the back for even researching this. You’re already ahead of the curve.

 Long-term care is an important decision. Connect with a trusted pro to make sure you have the right coverage.

Having a long-term care insurance policy will take away a ton of worry about your future. It’ll also ease the burden off your loved ones. And you’ll have peace of mind knowing you won’t go broke dipping into that nest egg you’ve worked so hard for. The last thing you want to do is pay for expensive care out-of-pocket—directly out of your savings and retirement funds. And while you could sock away a bunch of money in something like a pretax Health Savings Account (HSA), this probably isn’t the best idea since you’re still using up your hard-earned savings.

What Is Long-Term Care Insurance?

Long-term care insurance is a policy that covers costs related to nursing home care, assisted living facilities or caretakers coming to your house. It pays for support for those who can no longer perform everyday activities as they age. It also covers things like home modifications, in-home caretakers, medical equipment and care coordination (or care management). Care coordination is a service that handles all aspects of long-term care, even finding it and managing schedules. All of this means you’ll potentially be able to live longer in the comfort of your own home.

Traditional long-term care insurance policies are triggered when you can no longer perform two out of six activities of daily living (think bathing, dressing or eating).

Since Medicare only kicks in for hospitalizations and short-term rehabilitative care—and your regular health insurance won’t cover these costs—long-term care insurance is a must. Also, Medicaid (the government program for low-income people) only covers certain long-term care expenses, and not for very long. No matter how you slice it, these options shouldn’t be your first choice.

Long-Term Care Costs Without Insurance

If you don’t have long-term care insurance in place, get ready to pay a lot of money for long-term care. It’s expensive! Like Gucci expensive. Let’s look at the numbers.

The average cost for a semi-private nursing home stay in the United States is $7,756 for just one month.⁶ And that number rises to $8,821 for a private room.⁷ Remember, that’s per month!

The estimated cost for care in the final five years of life is $367,000 for people with dementia and $234,000 for those without.⁸ On average, Americans pay a total of $172,000 for long-term care.⁹

These are huge numbers, people!

And keep in mind these costs are rising year over year, even faster than inflation. For example, according to research done by Genworth Financial, an insurance firm, the annual cost of home-care services has risen by $980 each year from 2004 to 2020.¹⁰ And a private room in a nursing home for just one year? That went up by $2,542 each year during that same period.¹¹

Here’s a breakdown of annual long-term care costs as of 2020.¹²

If you don’t have a solid plan, these costs could burn up your savings pretty quickly. But if you do have a high enough net worth though, you may be able to self-insure.

How Much Does Long-Term Care Insurance Cost?

So, how much does long-term care insurance cost?

It can vary pretty widely. Yearly premiums can run as low as $1,000 to around $10,000. The insurance company will look at your age, gender, location, marital status, current health and family health history. You’ll also pay more if you choose a longer term or a bigger benefit. And keep in mind that different carriers charge different rates for the same policy. They can also raise your premiums after you bought the policy.

Right now, the average 55-year-old man will pay $1,700 per year for a three-year policy that covers $164,000 in care and a daily max of $150.¹³ And this benefit compounds every year at 3% so it would hit close to $400,000 by age 85. The average 55-year-old woman will pay $2,675 for the same level of coverage.¹⁴ Women pay more because they tend to outlive men. According to federal data, women outlive men by about five years and need an average of 3.7 years of care as opposed to only 2.2 years for the average man.^15,16

The good news is that couples get discounts. The average 55-year-old couple will pay $3,050 a year for a combined policy.¹⁷ Some states allow for savings up to 30%, but others are trimming them back to around 15%.¹⁸

If you have a pretty standard policy, you’ll probably have a waiting period between 30 and 90 days before insurance kicks in. This means you should have about three months’ worth of out-of-pocket expenses ready to fill this gap, even with long-term care insurance in place. 

And if you’re worried about the cost of long-term care increasing and aren’t sure if your policy will cover your care, you can add something called an inflation rider. With this in place, your benefit will rise (usually around 3% per year) to get closer to inflation rates. But adding this rider will also cost you a little more in premiums.

Are Hybrid Long-Term Care Policies Cheaper?

If you’ve been researching long-term care insurance for any length of time, you’ve probably come across something called a hybrid policy. Hybrid policies combine life insurance with long-term care coverage. They allow you to use your death benefit (the money your beneficiaries would receive when you die) while you’re still alive to pay for long-term care. If you don’t end up needing care, your heirs get the full payout.

Hybrid policies are typically thousands of dollars more than traditional ones. This is because, on top of long-term care insurance, you’re also paying for life insurance you might not even need. And while hybrid policy premiums are fixed, they’re not tax deductible.

With hybrid policies, the insurance carrier is investing your money for you, like whole life insurance. The problem is, they’re not making good investments, and your returns will probably barely keep up with inflation. If you factor in the lost earnings, hybrids might be the most expensive long-term care insurance option.

One caveat: If your health prevents you from qualifying for a traditional long-term care insurance policy, you might want to look into buying a hybrid plan.

If you qualify for a traditional policy, just buy long-term care insurance and life insurance separately. (And speaking of life insurance, learn why term life is your best option to protect your income and your family’s future.)

Tax Benefits of Long-Term Care Insurance 

Although long-term care insurance is expensive, there is a silver lining: Long-term care insurance premiums are tax deductible up to a certain limit. And you might even be able to pay your premiums out of a pretax Health Savings Account (HSA).

If you itemize your deductions, the federal government and some states allow you to count some or all of your premiums as tax-deductible medical expenses. But they must rise to a certain level. And not all long-term care insurance plans qualify for these tax breaks. Be sure to ask an insurance pro to see if yours is tax qualified.

Here’s a handy breakdown from the IRS showing the maximum amount of your premiums you can deduct based on your age.¹⁹

How to Get Long-Term Care Insurance

So, now that you’ve learned about the costs of long-term care and long-term care insurance, maybe you’re ready to start shopping rates or see if you qualify.

While you could do this on your own, we recommend using one of our independent and trusted insurance agents who are part of our Endorsed Local Providers (ELP) program. They’ll shop for you so you can save time and get peace of mind knowing you’re getting the right coverage at the best price.

Connect with an ELP today!