In a Nutshell
Many factors can affect the cost of long-term care insurance, including age, health status and the level of coverage you desire.Long-term care insurance can be expensive, and nearly 70% of people over 65 need this type of aid. Long-term care insurance can provide coverage for in-home care, community-type care and care in various facilities should you need assistance in everyday life.
The average annual cost of long-term care insurance when purchasing $165,000 of immediate benefits for a 55-year-old man is $900. For a 55-year-old woman, the cost is $1,500. But what does this type of health insurance cover?
- What is long-term care insurance?
- Average cost of long-term care insurance
- Long-term care costs without insurance
- How to buy long-term care insurance
- Tax benefits of long-term care insurance
- FAQs about long-term care insurance cost
What is long-term care insurance?
Long-term care insurance provides financial assistance to those who require long-term services and support. LTSS includes care of people that need support because of physical, cognitive, developmental or chronic health conditions.
LTSS can include care provided in the home, a community-based setting or various facilities and can include help with eating, grooming, walking, cooking, bathing and more.
Qualified individuals can use long-term care insurance to pay for assistance to maintain their well-being. They can enable those in need to afford the care that would likely be unaffordable if they were forced to pay out of pocket.
Average cost of long-term care insurance
Image: factors-impacting-long-term-care-insurance-costsKnowing what you’ll have to pay to receive the care you need is a good idea for financial health and wellness. The following are annual estimates of long-term care insurance premiums in 2023, according to the American Association for Long-Term Care Insurance.
| Status | Age | Annual premium |
|---|---|---|
| Single male | 55 | $900 |
| Single female | 55 | $1,500 |
| Couple | 55 | $2.080 |
| Single male | 65 | $1,700 |
| Single female | 65 | $2,700 |
When underwriting insurance policies, providers may consider the following:
- Age — Long-term care insurance premiums typically increase as you get older.
- Health — Current personal health and family health history can affect annual premiums.
- Family situation — Long-term care premiums maybe be lower if family members are available and willing to provide care as necessary.
- Gender — Women pay higher premiums on average due to their longer life expectancy.
Long-term care costs without insurance
Image: pros-and-cons-of-long-term-care-insuranceThe monthly cost of long-term care insurance can take away from retirement savings. For example, the median yearly cost of living in a nursing home reached over $100,000 in 2021. To get more insight into what paying these bills could look like, here are typical monthly costs of long-term care services in 2021:
| Long-term care service | Monthly cost |
|---|---|
| Homemaker services | $4,957 |
| Home health aide | $5,148 |
| Assisted living facility | $4,500 |
| Adult day health care | $1,690 |
| Nursing home care | $9,034 |
How to buy long-term care insurance
Each state regulates which companies can sell long-term insurance policies, and finding the right amount of coverage for your situation may be complicated. Many people buy long-term insurance from an insurance agent, broker or financial planner.
Additionally, state partnership programs can link some private insurance providers with Medicaid — which can help people purchase shorter-term insurance and may include inflation protection. Some employers may even offer group long-term care programs as a voluntary benefit.
Most long-term care policies have an “elimination period,” requiring you to pay out of pocket for 30, 60 or 90 days before the insurer begins reimbursing funds.
Tax benefits of long-term care insurance
Depending on your provider, you may be eligible for tax-deductible premiums when investing in long-term care. Remember that there are often requirements to meet, like choosing a tax-qualified insurance plan and/or spending a certain percentage of your adjusted gross income (or AGI) on annual medical expenses.
If you qualify, here’s an idea of the maximum yearly deductible amount by age.
| Age | Maximum deductions |
|---|---|
| 40 and under | $480 |
| 41–50 | $890 |
| 51–60 | $1,790 |
| 61–70 | $4.770 |
| 71 and above | $5,960 |
FAQs about long-term health insurance costs
According to the AALTCI, the best time to purchase long-term health insurance is in your mid-50s. This time frame helps make your policy more cost effective and increases approval odds.
Here are common benefits and drawbacks of long-term care insurance:
Pros of long-term care insurance include …
● Flexible benefits
● Reduced out-of-pocket costs
● Savings/asset protection
Cons of long-term care insurance include …
● High monthly payments
● Delayed reimbursements
● Approval requirements
● Potentially unused services
No. Life insurance policies provide a financial payout to your beneficiaries after your death. Long-term health insurance policies provide financial assistance to those who need help with everyday activities.