Long-Term Care Insurance

Why Long-Term Care Insurance Matters

Look at these numbers. If they don’t make you take long-term care coverage seriously, nothing will.

• On average, a majority of people 65 or older will need some form of long-term care.
• The average daily cost of a private nursing home room, and of assisted living, runs well into six figures annually, and can run significantly higher depending on the state.
• Among Americans 65 and older earning above $20,000, only a small fraction carry LTC insurance.
• “Failure to prepare for the cost of a nursing facility stay or other long-term care is the primary cause of impoverishment among the elderly.” (The American Health Care Association)

Do you have LTC insurance? Based on those numbers, most people reading this don’t. Should you? If a single year in a nursing home runs well past $100,000, ask yourself how many years it would take to burn through a real share of what you’ve built, if not all of it.

There are really only two reasons people skip LTC coverage: cost, and the belief that it won’t happen to them. The uncomfortable truth is that the people who do buy coverage are usually the ones who watched someone close to them absorb the financial damage of long-term care with no coverage at all.

Coverage varies policy to policy. Some cover only nursing home care, others extend to in-home care and more, typically up to a daily or monthly limit. Coverage usually gets triggered once you can’t perform two of the six “activities of daily living”: bathing, dressing, toileting, transferring, continence, and eating unassisted.

Ways to Actually Get LTC Coverage

Traditional LTC insurance offers the most coverage available, and it’s also the most expensive. Like term life insurance, if you never use it, you never see that premium again.

Single-premium life insurance with an LTC benefit is an option most people don’t even know exists. Need care, and the policy pays. Never need it, and the premium you paid is often still accessible through a return-of-premium option. Some of these policies grow money in a way similar to a CD or money market account, a good fit for someone who keeps cash in CDs “just in case” but doesn’t want to fully commit to traditional LTC insurance.

Retirement Life™ can also grow wealth without stock market losses, tax-free, while including a chronic-illness rider as a natural byproduct. Fail two of the six ADLs, and the insurance company releases part of the death benefit early, tax-free. It’s not as robust as a dedicated LTC policy, but if you’re already buying a policy to build wealth, there’s a real case for one that comes with a chronic-illness benefit attached.

Most people don’t realize LTC premiums can, in some cases, be fully tax-deductible when structured correctly through a business. See the Tax Planning page for how that actually works.

Information provided is not intended as tax or legal advice and should not be relied on as such. You are encouraged to seek tax or legal advice from an independent professional.

Single-Premium Life for Long-Term Care

A single-premium life policy is built to act partly like an annuity and partly like an LTC policy: funded in part for the death benefit, but also for real living benefits accelerated for LTC expenses, and often critical or terminal illness too. Typical benefits include:

• Simplified issue: no full medical underwriting like a traditional life policy requires.
• Long-term care benefits built directly in, the main reason people buy these in the first place.
• Avoiding probate, since a death benefit payout passes outside the probate process entirely, which in some places can save heirs up to 10% of the asset’s value.
• Liquidity, since some policies include a Return of Premium option letting you surrender at any time for your full premium back.
• Other living benefits, like terminal or critical illness riders, letting you access a meaningful portion of the death benefit while you’re still alive.

Example. Picture a 65-year-old with $100,000 sitting in CDs, wary of an annuity because of surrender charges, but worried about future LTC costs. A single-premium life policy could deliver a death benefit well above that CD balance if she passes before ever needing care, liquidity through a return-of-premium option if she just needs the cash, and a total LTC benefit worth several times the CD balance if she does need care.

This example is for illustrative purposes only and does not take into account your particular investment objectives, financial situation, or needs and may not be suitable for all investors. It is not intended to project the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

When to Actually Buy Coverage

Timing matters more here than almost anywhere else in a financial plan, because eligibility is medically underwritten. You have to qualify health-wise to get coverage at all, and your premium is priced partly on your age and health the day you apply. Waiting until you’re sure you’ll need care means waiting until it’s already too late, since the coverage window closes the moment care actually becomes necessary. Most people who end up with solid coverage bought it well before they needed it, often in their late 50s or 60s while still in reasonably good health.

That doesn’t mean earlier is automatically better in every case. Buy too early and you could pay premiums for years longer than necessary before there’s any real chance you’ll use the coverage. The right window usually sits somewhere in the years leading up to retirement, which is exactly why this deserves to come up as part of a broader retirement timeline conversation, not as a rushed, isolated decision.

How This Fits With the Rest of Your Plan

Long-term care coverage doesn’t live in isolation. It connects directly to your asset protection strategy, since LTC costs are one of the creditors most people never plan for, your Medicaid planning, since the right LTC coverage can reduce or eliminate the need for Medicaid later, and your estate plan, since an uncovered LTC event is one of the fastest ways a solid estate plan gets derailed. I look at all of it together, because a long-term care decision made in isolation from everything else often ends up working against something you’ve already put in place.