Senior Living and Long-Term Care Insurance Cost

We often dread thinking of nursing homes or assisted living facilities as eventually becoming our reality.

And rightfully so. Not being able to complete day-to-day tasks you’ve been efficiently performing your whole life is a scary thought. Add in the fact that healthcare and long-term care costs continue to rise, and you’ve got a recipe for disaster.

It doesn’t have to be all doom-and-gloom, though. With proper preparation and financial management, you can curb the bulk of your unanticipated medical expenses, giving you more peace of mind to focus on your health and vigor.

What is long-term care insurance?

Long-term care insurance (LTC Insurance) is insurance coverage tailored explicitly toward senior citizens who may require Long-Term Care at some point in their lives.

A typical long-term care policy is similar to a traditional health insurance policy. However, it has an emphasis on long-term care services like extended home care or nursing home care. As the client, you pay an annual premium in return for financial assistance if you ever need help with day-to-day activities.

A typical long-term care policy framework might include:

  • Daily benefit of $160 for assisted living facility coverage
  • Waiting period of about three months before insurance kicks in (commonly called the elimination period)
  • Maximum of three years’ worth of coverage benefit period

Of course, many of these factors will vary depending on your location and your specific needs. However, this framework is widely applied across the industry and resembles what you might expect when meeting with an agent.

The policy kicks in when you require regular, ongoing assistance with some everyday activities in your life. These are commonly referred to in the insurance industry as Activities of Daily Living (ADL), which fall into six categories:

  • Eating
  • Dressing
  • Bathing
  • Transferring (think getting in and out of bed)
  • Maintaining continence (ability to hold bodily functions)
  • Toileting

The inability to perform these tasks may result in you needing long-term care services.

For many policies, you become eligible for insurance benefits either when you reach a point you can’t do two of the six listed above OR if you develop a chronic illness, such as Alzheimer’s or dementia, or another cognitive impairment.

The frequency and intensity of the services needed vary by person. As an example, someone with advanced Alzheimer’s will require round-the-clock memory care while someone recovering from a hip replacement may need a few hours of in-home assistance.

While those two scenarios present different care needs, both patients would stand to benefit by having an LTC insurance policy in place and paying more in premiums upfront.

Why buy long-term care insurance?

The unpleasant truth is if you turn 65 years old today, there is a 62% chance you’ll require long-term care at some point.

62 percent.

That is a staggering figure, especially in the context of a risk management industry.

Toss in the fact that the cost of care for the average semi-private room in a U.S. nursing home is $90,155 annually (Genworth); the problem becomes more apparent. If you don’t set a plan in place, insurance, or otherwise, you’re at severe risk of spending your fortune on something that you could’ve offset with regular premium payments.

Traditional health insurance policies and Medicare don’t typically cover most long-term care services. There are a few specific scenarios where these policies may come in handy. According to, the following are LTC services are covered :

  • For medically necessary or acute care in hospitals or doctor’s offices
  • For some services that help improve your medical condition, such as physical therapy or rehabilitation, for a limited number of days
  • For some medical devices such as walkers or wheelchairs

However, Medicare won’t cover any expenses related to Activities of Daily Living. Non-medical services such as home care, nursing home care, or adult daycare are often needed to help with ADLs, but Medicare or traditional health insurance policies don’t cover them.

Note: Medicaid does cover long-term care services if you have low income and low assets. But most senior citizens aren’t eligible for Medicaid until they delete the bulk of their savings, meaning it’ll only help you once you’ve burned through your savings.

Consider that the median savings for Americans in their 60s is about $172,000. A semi-private nursing home room alone could knock those savings out in only 2 years. After that, the options fall to applying for Medicaid or hoping some loving family members can help support your long-term care needs.

Instead of falling into this mess, you can opt for a long-term care policy and begin paying your monthly premiums. These premiums will grant you access to a daily expenditure limit down the line, which will dramatically reduce the stress of money talk when so much of your life is changing rapidly.

Ultimately, these daily expense allowances you receive from the insurance company will give you more flexibility to get the care you need. Whether you require a home health aide, nursing home care, memory care, or any other type of long-term care, you’ll be able to choose from high-quality institutions and top-of-the-line comfort providers.

Finally, long-term insurance is a form of inflation protection. By putting your money into an account now, you’re preserving the value of your dollar as the CPI rises over time, making your daily expense allowances that much more valuable in the long-run.

Cost of long-term care insurance

Monthly premium payments are the critical expense when enrolling in a long-term care insurance policy. From a personal finance perspective, these premiums are preferable to sudden expenses later on because they have a known amount and function on a fixed schedule, allowing policyholders to work these expenses into a steady budget.

Several factors will determine your monthly insurance premiums and long-term care costs, including:

  • Gender: Women tend to live longer and are more likely to need long-term care
  • Age & Health: The older you are, the higher the risk, and hence the more you pay in premiums
  • Insurance company: Research shows that prices will vary significantly across insurance companies, so always make sure you are shopping around for the best rate
  • Marital Status: If you are married, you can often get a reduced price for you and your spouse, sometimes up to 30% off
  • Amount of coverage: The amount of daily spending you want for long-term care will impact the number of premiums you pay

When reviewing potential LTC policies, agents can help tailor your plan to cover in-home care, adult day care, assisted living, skilled nursing, or all of the above. For example, you may carve out a $75/day expense allowance for home care and $175/day for nursing home care.

An agent will help you work out these exact figures, but it is good to earmark more resources toward the service you think might match best with your medical history.

As far as the amount of money you should be putting in, 5% of your income past the age of 60 is a good rule of thumb. For men, the average annual input in policy is about $2,000, while women typically put in about $2,700 annually.

While it may seem like a steep price, there is a saving grace you need to keep in mind: tax deductions. 

Most states consider LTC insurance payments like a medical expense, which means it qualifies as a tax-deductible expense. This factor becomes increasingly important for seniors since the limit of tax deductions you can claim to the IRS increases as you age.

According to The American Association for Long-Term Care Insurance (AALTCI), between the ages of 40-50 you can shave off $810 of medical expenses from you taxes each year. In your 70s, that figure skyrockets to $5,430.

This data means most, if not all, of your insurance premiums, will be rebated to you from the government, assuming you don’t exceed the deductible limit for your age bracket. This benefit alone makes long-term care insurance much more affordable to senior citizens looking to curb unexpected expenses.

Who qualifies for long-term care insurance?

First of all, waiting until you need the coverage is not an option. By the time you need LTC services, you won’t find an insurance company that is willing to give you a policy, leaving you with a plethora of out-of-pocket expenses.

Even if the need for the services isn’t imminent, you may not qualify for coverage simply because you waited too long to consider a policy. According to The AALTCI, 51.5% of 75-year-old citizens who applied for long-term-care insurance in 2019 did not qualify for coverage, while only 20% of people in their 50s did not qualify.

On the other hand, purchasing long-term care too early can lead to some unnecessary expenses. On average, policyholders make a benefits claim about 13 years after setting up their long-term care insurance policy, with the mean age at 79 years old.

For many, the sweet spot for applying for coverage falls somewhere between 60-65 years old. If you have a more questionable medical history, you may want to look into getting a policy on the younger side. Alternatively, your medical history may look great on paper, making you more likely to get approval at 65 years old.

How to purchase long-term care insurance

A few decades ago, over 100 companies offered long-term care insurance. However, that number is closer to a dozen these days.

The historically low-interest rates following the 2008 recession influenced this outcome. Insurance companies charge consumers premiums, which they then use to invest in high-value enterprises. They use the gains from those investments to cover their clients’ claims down the road. Unfortunately, the return rates from the market made the model unsustainable for a lot of companies, causing a severe decrease in the number of providers for LTC insurance.

There is good and bad to this. On one hand, there aren’t as many policy options out there which can be limiting at times. On the other hand, the small number of companies gives you more leverage when negotiating with a 3rd party insurance agent or financial advisor.

Insurance policy terms will vary greatly from company to company, so it is very much in your best interest to gather as many potential policies as you can before making a decision.

An agent can help you in your search. While you’ll need to pay them a brokerage fee, there is a chance they find the best deal out there and save you money in the long run. However, since there aren’t too many insurance companies offering long-term insurance, you can conduct the search yourself and be alright – it’ll just be a bit time-consuming.

The AALTCI offers a comprehensive list of companies that provide long-term care insurance policies. GenWorth Financial, Northwestern Mutual, and National Guardian all offer robust LTC packages, along with a few others.

Once you’ve identified the companies you’ll apply for; you’ll begin the process.

Every company is different, but there are some standard procedures you can expect:

  • You’ll likely need to call and set-up a sit-down appointment with a company rep
  • Completing an initial questionnaire about medical history is standard practice
  • The company may seek relevant medical records from you, so be prepared

One reason an agent can prove helpful is they can provide guidance toward which company is the best deal and the best fit for you. It’s essential to keep in mind that the cheapest isn’t always the best option, and an insurance agent or your financial advisor can help you identify areas you want the most coverage.

Agent or no, make sure you’ve exhausted every avenue possible before making a decision—one last place to check: your workplace.

Many companies offer an employee group rate, which can be cheaper than traditional insurance policies. This option isn’t always the case, though, so don’t rely too heavily on these group rates – you still need to do your due diligence to ensure you’re getting the best deal.

Frequently Asked Questions: 

  1. How much does long term care cost per month?

Costs vary depending on factors such as age, gender, medical history, state residence, and more. A 55-year-old man who wants $150 daily allowances would pay about $1,148 annually. At the age of 65, he would pay $1,722 annually. A 55-year-old woman would likely pay $1,552 annually, and at age 65 would pay $2,435 annually.


  1. Is it worth getting long term care insurance?

While this answer depends on you and your specific needs, the answer is usually yes. If you’re in the proper age bracket, your premiums could be entirely offset by tax deductibles.  And if they’re not, you’re still offsetting an enormous expense that has more than a 50% chance of occurring to you.

  1. What age should you buy extended term care insurance?

The sweet spot for applying for coverage falls somewhere between 60-65 years old. If you have a more questionable medical history, you may want to look into getting a policy on the younger side. Alternatively, your medical history may look great on paper, making you more likely to get approval at 65 years old.

  1. How long does long term care insurance last?

You are covered for as long as you pay the premiums. Once you make a benefits claim, you must pay expenses out of pocket for the first 90 days (known as the elimination period) before insurance benefits kick it. At that point, two years is the typical term applied. Many of these factors are variables that can be negotiated with your insurance agent at the point of purchase.

  1. What are the alternatives to long term care insurance?

For alternatives, you can opt for short-term care insurance, which covers similar services as LTC insurance but for periods of 180-360 days. You could also enroll in a hybrid policy, combining Life Insurance with LTC insurance. This would reduce the death benefit your beneficiary receives but is also more flexible in terms of your coverage. Finally, critical-care insurance offers coverage for those diagnosed with severe illnesses such as cancer.