Different Types of Long-Term Care Insurance Policies

LTC Policy Type Comparison Table 

Here’s a quick comparison table to help you see how each type of LTC policy stacks up:

Quick note: Short-term care insurance technically isn’t LTC insurance (the name kind of gives it away). But it's often grouped as an LTC type since it's designed to handle the same type of care as the others, just on a shorter time scale.

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

There are so many decisions to make when planning for retirement. Figuring out what type of long-term care (LTC) insurance policy to get shouldn’t be one of the hard ones. Whether your main goal is to protect your nest egg, avoid burdening your kids, or get your ducks in a row well ahead of time, there’s only one type of LTC insurance policy we can wholeheartedly recommend: traditional. But we’ll explain the different types and how they work so you can be confident in your decision. Got your coffee ready? Let’s dig in.

What Is Traditional Long-Term Care Insurance?

Traditional long-term care insurance policies only cover costs from LTC services (like assisted living, nursing homes and in-home care). They aren’t mixed with any other financial product. Think of it like bourbon, neat (nothing added). This isn’t some trendy cocktail with questionable mixers served in a fancy glass for more than the price of a meal. You asked for two fingers of bourbon, and that’s what you get.

How Does Traditional Long-Term Care Insurance Work?

Once you break it down, traditional long-term care insurance is pretty straightforward:

• You pay ongoing premiums. With most policies, you make monthly or annual payments, a lot like home or auto insurance. These premiums can increase as you age.
• It’s “use it or lose it.” If you never need long-term care, you typically don’t get that money back. But this is where you save money: Traditional LTC insurance costs a lot less up front than a hybrid policy.
• Benefits only kick in when you qualify. You can’t just choose to use the coverage—you have to meet certain benefit triggers. This usually means needing help with at least two out of six activities of daily living (ADLs)—like bathing, dressing or eating—or having a cognitive impairment (like dementia).

Once you qualify, the policy starts paying for covered care—whether that’s at home, in assisted living, or in a nursing facility—up to your policy’s limits.

What Are the Pros and Cons of Traditional Long-Term Care Policies?

We’re not going to mince words: We only recommend traditional LTC policies. We’ll go into more detail later, but the pros heavily outweigh the cons. While it sucks that your premiums could rise (no one wants that), it’s still a much better choice than paying a lot more immediately.

Who Is Traditional Long-Term Care Insurance Best For?

A traditional LTC policy works well for:

• People around age 60 in good health
• People with strong savings who can afford ongoing premiums.
• People who are financially set for retirement so they’re self-insured (don’t need life insurance)
• People who want the most LTC coverage for their money

How Much Does a Traditional LTC Policy Cost?

Traditional long-term care insurance premiums vary widely based on age, gender and the kind of coverage you get. For example, a healthy 55-year-old man might pay around $950 per year for basic coverage with a benefit worth $165,000, but a woman the same age might pay $1,500. Costs rise with age—by 65, that same coverage can cost $1,750 per year for men and even more for women.^[1]

Data from the American Association for Long-Term Care Insurance, based on a policy benefit worth $165,000^[2]

When choosing who to buy your policy from, there’s one thing you should know that can save you hundreds of dollars: The insurance company you go with can have a big impact on your premiums for the same coverage. So it’s super important to shop around—and doing it with an LTC insurance pro is an even better idea.

What Is Hybrid Long-Term Care Insurance?

Hybrid policies combine long-term care coverage with life insurance or annuities and are marketed as a way to keep your money from being “wasted” if you don’t use LTC services. As personal finance experts who want to see you build wealth, we’re passionate about warning people to stay away from these policies. Usually, the math doesn’t work out when you mix one type of insurance with investments or another type of insurance. But let’s take a closer look at hybrid LTC policies so you can understand how they work and the rare instance when this might be the best option.

There are two main ways to set up a hybrid policy: one based on life insurance and the other on a deferred annuity.

Hybrid Life Insurance With Long-Term Care Rider

The main goal of hybrid long-term care policies built on life insurance is to provide a death benefit while also giving you flexibility if you need care later. Typically, a hybrid policy is structured as a whole life or universal life policy, also called permanent life insurance.

The “hybrid” part is an LTC rider. This allows you to access (or accelerate) your death benefit early to pay for qualified care expenses. If you never need LTC, your beneficiaries receive the full payout when you die just like a regular permanent life insurance policy. But if you do need care, the policy lets you tap into that benefit while you’re still alive, reducing the final death benefit by whatever amount was used.

Hybrid Annuity With Long-Term Care Benefits

A hybrid annuity with long-term care benefits is built on a deferred annuity. Instead of paying ongoing premiums, you typically fund it with a lump sum up front, and that money becomes your policy’s cash value.

What makes this look appealing for long-term care planning is how you can use that value. If you need care, the annuity often multiplies your available funds (usually two to three times) to create a larger pool specifically for qualified care expenses. If you don’t need long-term care, you (or your beneficiaries) will receive the remaining annuity value.

What Are the Pros and Cons of Hybrid Long-Term Care Policies?

Here’s an honest look at the pros and cons of hybrid LTC policies. Like we mentioned earlier, the cons far outweigh the pros.

*It’s debatable whether this is actually a pro since the reason they remain stable is premiums start out already very high.

H3: Who Is Hybrid Long-Term Care Insurance Best For?

In rare cases, a hybrid policy might be the best option if:

• It's the only LTC or life insurance you can qualify for (maybe because of preexisting conditions)
• You have a spouse or dependent who wouldn't be okay financially if you died—and this is your only option for life insurance
• You can afford the higher premiums

There’s pretty much no situation where it makes sense to get an annuity-based LTC policy (we’ll do the math for you on that in a minute).

How Much Does a Hybrid LTC Policy Cost?

Now let’s look at the cost. This is where it becomes clear that hybrid policies don’t add up to a good wealth-building strategy.

Because of the variables involved with life insurance and annuities, hybrid premiums are harder to estimate. But here are some representative numbers:

A single 55-year-old male could pay $3,540 per year for a linked-benefit policy (life insurance plus LTC) that includes an LTC benefit pool of $180,000 and a minimum death benefit of $120,000. A single 55-year-old female could pay $3,265 per year for a comparable policy.^[3]

Hybrid policies designed around annuities are sold as a lump sum (meaning you pay the premium up front). For a 55-year-old male, the same $180,000 LTC benefit pool and $120,000 death benefit mix above could cost $52,753 as a single premium. For a female, the lump-sum cost could be $54,022.^[4]

We’ll talk about the financial consequences of these costs compared to traditional LTC policy premiums in a minute.

What Is Short-Term Care Insurance?

Short-term care (STC) policies cover the same type of care that LTC policies cover but for a shorter period—usually a year. They’re not a full substitute for an LTC policy, but you’ll often run into them as an option when comparing long-term care insurance plans for seniors.

STC policies are intended to cover temporary care needs like recovery from an illness or injury—not long-term care of chronic illnesses. Because the length of care is shorter (which means the value of the policy is much smaller), STC policy premiums don’t cost nearly as much and it’s easier to qualify for one.

What Are the Pros and Cons of a Short-Term Care Policy?

The pros and cons of an STC policy really show up when you compare cost versus value it offers. At age 65, a policy with one year of home care and nursing home benefits can cost $125 monthly (with benefits of $1,050 per week for home care and $200 per day for nursing home care).^[5] But coverage only lasts a year. On average, men need long-term care for 2.3 years and women for 3.2 years.^[6]

Here’s a quick summary of the pros and cons of buying an STC policy:

H3: Who Is Short-Term Care Insurance Best For?

In reality, STC insurance is only a good fit if you:

• Can’t qualify for a traditional LTC policy (because of age or health, for example)
• Can’t afford a traditional LTC policy

If long-term care insurance planning wasn’t on your radar when you were 60, it might be pretty expensive by now. In your case, a short-term care insurance policy might be your best option.

How Do Long-Term Care Insurance Costs Vary by Policy Type?

Traditional LTC policies are your cheapest full-coverage option. Hybrid policies, on the other hand, are quite expensive. Short-term policies offer the lowest premium, but you get much less coverage.

Any cost you see in an article is an estimate because many factors affect your premiums. For example, you might be on the younger side—say, 55—but if your health isn’t great, your premiums will still be higher.

Price factors include:

• Age
• Health
• Coverage amount
• Inflation protection^[7]

The cost associated with each type of LTC premium and policy varies a lot. And your choice can have a big impact on your retirement savings.

Lump Sum vs. Traditional Premium Comparison

How you pay for your LTC coverage—whether through monthly premiums (traditional LTC policy) or an up-front lump sum (annuity-based hybrid policy)—has big financial consequences. You’ll likely come out ahead if you choose the first. Take a look:

We’ll use the estimate values from earlier: a 55-year-old paying a lump sum of $52,753 for a policy with a $180,000 LTC benefit pool and $120,000 death benefit mix. With some basic math, the lump sum option might sound like a sure deal—you get at least a $120,000 guaranteed payout. But the complexity of a hybrid policy means we need to take a closer look.

Yes, you would get a return on your premium “investment” after you’re dead. But think about why an insurance company would be happy to take roughly $50,000 in exchange for having to pay out over twice that much later. It’s because they would have that $50,000 to invest for roughly 25 years before having to pay the death benefit or long-term care benefit.

Consider this: You buy the policy at age 55, the average age of death is 79, and the average nursing home admission age is 80.^[8],[9] If you assume a return rate of at least 10% (the historical average of the S&P 500), your insurance company would make over $600,000 on your lump-sum premium.^[10]

If you invested that lump-sum premium yourself in mutual funds and got that 10% return, your investments could be worth over $180,000 (the LTC payout value) by the time you turn 68. That’s 12 years before the average person needs long-term care. If you didn’t need it until you were 80, your investment could grow to about $600,000 (and it would be yours instead of your insurance company’s).

Now compare that to what you’d spend if you bought a traditional LTC policy at the same age (55). Over the next 25 years, you’d pay $23,750 in premiums and get an LTC benefit of $165,000. You’re already spending about 50% less—but because you're paying those premiums over time instead of all up front, more of your money stays invested longer and has time to grow. Even after paying $950 a year in premiums, you could earn about $194,850 on the money that remains invested over those 25 years.

Yes, it’s a little complicated. But that’s where insurance companies can get you. If it’s complicated enough, they can hide the fact that they’re making a lot of money off you with these hybrid policies and just ask you to trust them. But you’re here reading this, which means you’re doing the research so you can make an informed decision.

Hybrid Premium vs. Traditional Premium Comparison

You also come out with less money in the end if you choose to pay the higher premiums of a hybrid policy with life insurance. Paying an extra $2,590 per year in premiums doesn’t just cost you $64,750 over 25 years—it also costs you the growth that money could’ve earned. Using the same values as before (starting at 55 years old and a 10% return), that difference could grow to at least $255,000 over 25 years.

You might be thinking, Why don't I just skip buying LTC insurance and instead invest the money that would've gone to paying premiums? Well, the point here is to protect your retirement. Your potential need for long-term care is still real, and that stuff’s expensive. We’re here to help you find the most cost-effective way of protecting your retirement. And the math shows that’s a traditional LTC insurance policy.

H3 Hybrid vs. Traditional Long-Term Care Insurance Cost Comparison

Here’s an example of a hybrid versus traditional LTC insurance cost comparison, based on a 55-year-old in good health:

Data from the American Association for Long-Term Care Insurance^[11]

Which Policy Type Is Right for You?

So, which long-term care insurance policy should you buy? Because we want your retirement to be as financially comfortable as possible, there are very few scenarios where we’d recommend buying a hybrid LTC policy. This type of policy just doesn’t serve you and your money well. But sometimes it might be your best option. Here’s a look at people in different situations and what kind of LTC policy will fit best.

The Long-Game Planner

The Limited-Options Optimizer

The Last-Resort Planner

The Baby Steps Multimillionaire

If you’ve spent any time listening to The Ramsey Show or reading our content, you’ve probably picked up on the fact that we don’t view insurance as anything but protection. It’s not a wealth-building tool—it’s a wealth-protecting tool. When a policy is set up like an investment—like whole or universal life insurance (or hybrid LTC policies)—it tries to do too much and ends up doing nothing well. It’s best to leave investing to people who are good at investing—and that’s not insurance companies.

A lot of marketers position hybrid policies as the right choice for people who want to be sure they’ll get something back after paying insurance premiums for years. It’s true that some people are more comfortable than others with paying for insurance and never seeing a dime in return (because the calamity they were insuring against never happened—yay!).

But even though something like that can feel scary for others, we hope everyone can become comfortable with that idea because it’s the smartest way to handle insurance from a wealth-building perspective. Traditional LTC policies are for people who understand the risk trade-off and have become comfortable with it.

Get Help Choosing the Right Long-Term Care Plan

Long-term care is expensive and often needed for years, not months. Without insurance, those costs typically come out of your savings, which can quickly drain your nest egg.

If you want help from a real person figuring out which LTC policy is right for you (or if you even need coverage), we can connect you with insurance pros we trust to serve, not sell. Their mission is to make sure you get the right coverage for your situation, not sell you on a particular policy. And you can rely on their industry expertise to steer you toward the best long-term care insurance companies.

We recommend getting a policy when you turn 60. If you’re in good health, that’s the sweet spot for getting a policy—you don’t have to pay the crazy high premiums for older applicants or pay for premiums too long. A RamseyTrusted^® insurance pro can help you evaluate your health and age and get quotes so you can figure out the right time to buy. 

With the right guide, choosing your long-term care insurance plan can be simple.