Understanding long-term care and insurance

ARTICLE | MARCH 16, 2022

It's not a topic that many people like to think about, but unfortunately, most of us will need long-term care at some point in our lives.

According to the U.S. Department of Health and Human Services, 70 percent of people over age 65 will require some type of long-term care service during their lifetimes. Women typically need care for an average of 3.7 years, while men need care for 2.2 years. 

The cost of long-term care can be prohibitive, especially if you need to rely on professional service providers for an extended period of time. Fortunately, there are ways to help offset those costs. One option is long-term care insurance. 

As its name suggests, long-term care (LTC) insurance is a policy that helps pay for the costs of long-term care. This can include assisted living, home health care, adult day care, and nursing home care. 

In this overview of LTC insurance, we’ll explore the average costs of long-term care and the different methods of paying for it. 

The average costs of long-term care 

Long-term care (LTC) services provide help to seniors who cannot perform some of the activities of daily living on their own or who have social, emotional, or cognitive problems that make it difficult for them to live independently. The cost of these services varies greatly depending on several factors, including the type of service needed. 

Let's take a closer look at the average expenses across the spectrum of LTC services, from assisted living to nursing homes. The cost estimates provided are based on national averages compiled by Genworth's Cost of Care Survey (2021).

Home Health Care

Home health care generally includes part-time services provided by a visiting nurse, physical therapist, home health aide, or other health care professional. Individuals who benefit from home health care tend to be independent and capable of performing most daily activities without assistance. 

In 2021, home healthcare costs averaged around $5,000 per month nationally.

Assisted Living Facility

Assisted living provides personal care in a housing setting where residents have a private room furnished with their items. Services are provided by trained staff during certain hours when residents need help with activities of daily living. Assisted living facilities usually have limits on the types of care they will provide. They often do not accept residents who require daily help with medication management, meal preparation or cooking, and other services. 

In 2021, assisted living costs averaged $4,500 per month nationally. 

Nursing Home

Nursing homes provide care to individuals who need assistance with basic daily activities as well as health and nursing care. Nursing homes vary in their services, and the amount of care residents receive. Some nursing homes provide intensive, around-the-clock skilled nursing and medical supervision, while others offer less extreme custodial care for residents.

As of 2021, the average monthly cost nationwide for a private room in a nursing home was $9,034; this includes nursing services, personal care assistance with activities of daily living, medication management, and more. A semi-private room averaged $7,908 per month.

Adult Day Care

Adult day care centers provide professional care for elderly adults who need assistance and supervision during the day. Typically, adult day care centers offer planned programs that enable seniors to socialize and enjoy structured activities in a group setting while also receiving health services as needed. Like nursing homes and assisted living facilities, services and the level of care offered differ from one day care to the next. Centers that provide more comprehensive medical care are often costlier than facilities that only focus on social and recreational activities.  

In 2021, adult day care centers charged an average of $78 per day for up to 8 hours of structured activities and care. This cost typically includes meals, social activities, and basic health services. However, the cost increases for facilities that provide more comprehensive medical services like medication management or occupational therapy for those with health conditions. 

Factors that influence costs

Not only do costs differ based on the type and amount of services provided, but your region of the country also has a significant impact on pricing. In addition to the type of services you need and where you live, there are other factors that impact costs like: 

  • Length of time needed - the longer a person needs LTC services, the more it will cost. 
  • Age - the older you are when you start an LTC service, the more expensive it is likely to be. 
  • Healthcare providers - For some types of long-term care, the provider you use can impact costs. For example, home health aides typically cost less than registered nurses.
  • Sex - women typically pay more for LTC because they tend to live longer than men. 
  • Health - the more health problems you have and the greater their severity, the more you’ll pay for long-term care. 

Options to cover the costs of long-term care

Long-term care is often paid out-of-pocket, using personal savings or funds from one's retirement account. However, there are other options available to help defray the cost, including Medicare, Medicaid, Life Insurance, Long-Term Care Insurance, and Hybrid Policies.


Medicare is a federal health insurance program for those aged 65 and older and does not cover most long-term care services. Medicare Part A covers some stays in skilled nursing facilities following a hospital stay of at least three days. However, it usually requires co-insurance payments for days 21-100. Additionally, Medicare Part A does not cover the entire cost of skilled nursing care; it only covers up to 100 days of such care in every benefit period. 


Individuals with limited income and resources may qualify to receive government-sponsored healthcare assistance for long-term care services (including assisted living and nursing home care). Medicaid is a state-administered program, so eligibility criteria vary, and it can take several months to begin receiving Medicaid benefits even if you qualify. It’s important to note that individuals who are eligible for Medicaid may not be able to use LTC insurance. 

Life Insurance

Some life insurance policies may help pay for long-term care costs or allow the policyholder to transfer all or some of their death benefit to an irrevocable trust for care. These policies usually require that the benefits be used for long-term care and not other expenses such as funeral expenses. 

Long-Term Care Insurance

Long-term care insurance is a policy that helps cover the cost of long-term care services. It can help pay for home health aides and nurses, adult daycare, respite care, nursing home care, and assisted living facilities. Some LTC policies may even cover home improvements designed to make a house more accessible for the elderly, like a wheelchair ramp or handrails. 

It's worth noting that not everyone qualifies for LTC insurance. Providers may deny those who are already in poor health requiring end-of-life care. As such, it's essential to consider LTC insurance long before you need it. 

Hybrid Policies

Hybrid policies combine long-term care benefits with other benefits like life insurance or an annuity. Typically, these policies provide LTC coverage in addition to a life insurance benefit that will be distributed to your heirs if the LTC benefits aren’t used. If you need long-term care, the associated life insurance payout is reduced (or used entirely) based on the amount paid for long-term care. Many people like hybrid policies because it reduces the risk of paying for LTC insurance and not needing it - if such a situation arises with a hybrid policy, heirs are still entitled to benefits.

Benefits of long-term care insurance

There are a  few significant advantages that everyone should know about when it comes to long-term care insurance. First and foremost is the peace of mind that comes with knowing you’re prepared for the future. If something happens and you need long-term care, having insurance will help you afford the best possible care without breaking the bank. 

Other advantages of owning an LTC insurance policy include: 

  • Paying a fixed premium price - the cost of your policy will not go up, even if the cost of long-term care services rises. 
  • Choice of benefits and duration - you can choose the amount and type of coverage you want when purchasing a policy. 
  • Protection against inflation - if you choose to purchase a policy with an inflation rider, your benefits can increase over time. 
  • Premiums may be tax-deductible - If you meet certain income thresholds and make payments toward a tax-qualified insurance policy, your premiums may be deductible (up to certain limits, based on your age). 

While LTC insurance costs vary from policy to policy, it is not inexpensive. However, the younger you are when you buy a policy, the less expensive it will be. That being said, you can cut costs by limiting your coverage, but limited coverage could be a disadvantage in itself. 

How does long-term care insurance work? 

If you’re considering purchasing long-term care insurance, it’s crucial to understand how LTC policies work and when you can use them. For instance, most policies will not pay out benefits unless you’re unable to perform at least two out of six activities of daily living (ADLs) on your own. 

Common activities of daily living include:  

  • Getting dressed,
  • Using the toilet independently,
  • Bathing or showering,
  • Getting into and out of bed,
  • Caring for issues of incontinence, and
  • Eating independently

You may also be able to receive LTC benefits if you are diagnosed with dementia or another cognitive impairment, although these issues tend to affect ADLs as well. 

To make a claim, most insurance companies require medical documentation from your doctor outlining your health condition, need for care, and a suggested plan of care. Some LTC companies may even send their own medical professional to perform an evaluation and determine your LTC needs. 

Once a care plan is approved, many LTC companies require that you pay for services out of pocket for a specified period (e.g., 30, 60, or 90 days) before benefits kick in. This is often referred to as an “elimination period.” From there, the insurance company typically pays for services up to a daily limit or until you reach your maximum lifetime payout. 

What are the costs of long-term care insurance? 

According to the American Association for Long-Term Care Insurance, the average cost of LTC coverage for a 55-year-old man in good health was $2,050 in 2019.  For a 55-year-old female in good health, it was $2,700. However, pricing is dependent on the individual’s unique situation and the terms and benefits of the policy.

When should you consider long-term care insurance? 

If you're considering purchasing long-term care insurance, the best time to do so is when you are in your early 60s. You should be healthy enough for insurers to consider you a reasonable risk at that age. The younger and healthier you are when buying your policy, the lower the premiums. 

We can help with your planning

Long-term care should be considered when planning for your estate regardless of your age. This article is meant to provide an overview of long-term care and insurance and is not a substitute for speaking with one of our expert advisors. If you would like to discuss your unique situation and whether long-term care insurance should be part of your financial planning, please contact our office.

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