Menu

What is Long-Term Care Insurance?

Business Tip

What is Long-Term Care Insurance? Who Needs It and When Should You Consider a Policy?

As we age, planning for our future becomes more important—especially when it comes to our health and personal care. One key element of this planning is long-term care insurance (LTCI). While it’s not the most exciting subject, understanding LTC insurance can help protect your finances, preserve your independence, and ease the burden on your loved ones.

In this article, we will break down what long-term care insurance is, who needs it, and when it makes sense to buy a policy.

What is Long-Term Care Insurance?
Long-term care insurance is designed to cover the cost of services that help you perform activities of daily living (ADLs) if you become chronically ill, disabled, or cognitively impaired. These activities include:

  • Bathing
  • Dressing
  • Eating
  • Toileting
  • Transferring (e.g., getting in and out of a bed or chair)
  • Continence
LTC insurance typically pays for care in various settings, such as:
  • Your home
  • Assisted living facilities
  • Adult day care centers
  • Nursing homes
  • Memory care units
Unlike traditional health insurance or Medicare, long-term care insurance specifically covers non-medical, custodial care that many people need as they get older or face chronic conditions.

Who Needs Long-Term Care Insurance?
While anyone could potentially need long-term care, certain groups are more likely to benefit from LTC insurance:
 
1. People in Their mid-40s, 50s and Early 60s
This is often the best time to consider a policy. Premiums are more affordable, and you're more likely to qualify before age or health issues become a barrier.

2. Women
Statistically, women live longer than men and are more likely to need care for a longer period, often outliving their spouses or support systems.

3. People Without Family Caregivers
If you don’t have nearby family members or a spouse to provide care, professional help is more likely to be needed—and that can get expensive.

4. Middle-to-Upper Income Earners
If you have savings to protect but not enough to comfortably self-fund long-term care (which can cost thousands per month), LTC insurance provides an important financial safety net.

When Should You Consider Buying a Policy?
The ideal time to look into long-term care insurance is usually between the ages of 45 and 60. Here’s why:
  • Lower premiums: The younger and healthier you are when you apply, the cheaper your premiums will be.
  • Medical qualification: Policies typically require underwriting, and pre-existing conditions may disqualify you.
  • Financial planning: Locking in a policy early can provide peace of mind and a clearer plan for your future retirement needs.
If you wait until you’re already in poor health or need care, it’s likely too late to qualify or afford the coverage.

How Much Does Long-Term Care Insurance Cost?
Premiums vary based on:
  • Your age and health at the time of purchase
  • The daily or monthly benefit amount
  • The benefit period (e.g., 2 years, 5 years, or lifetime)
  • Inflation protection
  • Elimination (waiting) period before benefits begin
As of recent averages, a healthy 55-year-old might expect to pay between $3,500 to $6,500 per year for a policy with moderate benefits.

Alternatives to Traditional Long-Term Care Insurance
If traditional LTC insurance doesn’t suit your needs, you might consider:
  • Hybrid life insurance with LTC riders (a life insurance policy that allows you to use the death benefit for care)
  • Annuities with long-term care features
  • Health Savings Accounts (HSAs) to save tax-free for future care
  • Self-funding (paying out-of-pocket using personal savings or assets

Final Thoughts: Planning Ahead is Key
Long-term care insurance isn’t a one-size-fits-all solution—but it’s an essential piece of the retirement puzzle for many individuals. By planning ahead and understanding your options, you can protect your hard-earned savings, reduce the burden on loved ones, and maintain more control over how and where you receive care.

Thinking about purchasing a policy? Consult a licensed insurance professional to evaluate your personal situation and explore the best options.

Need help understanding your LTC options or want a cost estimate? Give Employee Benefit Exchange a call.  We’re here to help you navigate the next steps in your financial journey.
480-839-6100
info@ebxaz.com

What is Long-Term Care Insurance?