Guide to Long-Term Care Insurance

[Last updated February 12, 2025]

No one likes to imagine a future in which we might need help with basic tasks, but the reality is that most people eventually face a point in life at which assistance with daily activities becomes necessary. Planning for this possibility in advance can make all the difference, ensuring we receive the care we need rather than leaving us unprepared and vulnerable. Long-term care insurance is designed to be there when that time comes.

Many people mistakenly assume health insurance and Medicare will cover long-term care expenses, but these programs mainly address short-term medical needs like doctor visits, hospital stays, and recovery after surgery. Neither is designed to cover ongoing help with activities of daily living (ADLs), such as eating, dressing, bathing, and ambulating. The need for assistance with these tasks can develop over time, regardless of surgery or illness. Long-term care insurance (LTCi) steps in to fill the gap. Here, we go over what you need to know about long-term care insurance. We’ve also included a handy list of terminology at the end of the article.

What long-term care insurance covers

Long-term care insurance (LTCi) covers ongoing custodial care that falls outside the scope of other insurance, helping with the activities of daily living that become harder to manage independently as time goes on.

Some daily living activities that may require assistance include:

• Hygiene.
• Mobility.
• Cooking and meal preparation.
• Medication management.
• Cleaning.
• Running errands.
• Transportation.

When the right conditions are met, these types of services can be provided by a home health aide or in a care facility and paid for by the LTCi policy carrier. Each policy is different, so it’s important to check with your provider to see what coverage they offer and when you are eligible to receive benefits.

Does long-term care insurance cover assisted living or nursing homes?

For many, there may come a day when home health aide services aren’t enough. Long-term care needs often escalate over time, and they may eventually warrant a move to an assisted living facility or a nursing home for more intensive care requiring 24-hour supervision and medical assistance.

Depending on the policy, long-term care insurance can help cover the costs of assisted living and nursing home care — a vital safety net, especially considering that the median annual cost of a private nursing home room was nearly $117,000 in 2023, according to research by Genworth.

To ensure all these forms of long-term care are covered, it’s important to understand the different types of policies available.

Types of long-term care insurance policies

There are three primary types of long-term care insurance policies:

• Traditional LTCi: A stand-alone policy covers long-term care costs, like nursing homes, assisted living facilities, or in-home care services.
• Hybrid LTCi: A hybrid LTCi policy is essentially a life insurance policy with a long-term care rider (policy add-on). The LTC rider allows the policyholder to use the death benefit for long-term care expenses. If long-term care isn’t required, the remaining death benefit is paid to the policy’s named beneficiary, like a traditional life insurance policy.
• Asset-based LTCi: An asset-based policy is essentially a life insurance policy or annuity designed to cover long-term care costs. These policies focus on building value that can be used for long-term care expenses, while any unused value is passed on to a beneficiary as a death benefit. 

Timing is key, with most people saying that the “sweet spot” for buying LTCi is between the ages of 50 and 65. The American Association for Long-Term Care Insurance (AALTCI) found that 78% of LTCi policies were started by people aged 50 to 69, reflective of the time in life when the need for long-term care is more foreseeable or apparent. However, you’ll need to set up hybrid and asset-based policies well in advance to allow time for the policy to accumulate value to pay for long-term care expenses. Typically, funds aren’t accessible for the first five to 10 years.

As a general rule of thumb, the longer a hybrid or asset-based policy is in effect, the more coverage it offers. If you need care sooner, the accumulated value of an asset-based or life insurance policy with an LTC rider may not be accessible immediately. For individuals who may need early-stage long-term care, a stand-alone LTCi policy may make the most sense. These policies are specifically designed to cover care costs over a shorter timeline.

How does long-term care insurance work?

Individuals with long-term care insurance policies must pay premiums to a provider on an ongoing basis. In return, once certain events trigger the policy’s benefits, the provider helps pay for long-term care services that might otherwise drain savings or strain resources. 

Typically, benefits on a newly initiated long-term care insurance policy are not payable until after the elimination period — a predefined time frame between the policy’s start date and the point when benefits become available. Elimination periods usually range from 30 to 90 days, though they can be shorter or longer depending on the carrier and the terms agreed upon before the policy’s effective date.

Once the elimination period ends, the benefits period begins, during which benefits are payable for qualified triggering events.

How to start a long-term care insurance policy

Starting a long-term care insurance policy involves finding a provider, which you can do by contacting an insurance agent or broker or searching for providers on your state’s Department of Insurance website.

Once you have identified carriers, the next step is to request quotes for policies that match the desired coverage.

Insurers carefully review each application to determine eligibility. There are a number of disqualifying factors, which may include:

• Preexisting conditions like Alzheimer’s, dementia, or severe cognitive impairments that may require intensive ADL support.
• Severe physical disabilities that would require immediate, extensive care.
• Terminal illnesses that require end-of-life care.
• History of addiction or substance abuse.
• Poor overall health that requires constant medical attention.
• Certain chronic conditions that the insurer deems too risky to cover (e.g., advanced heart disease or some types of cancer).
• Ineligibility due to age. Some insurers have minimum and maximum ages for which they will underwrite new policies.

It’s a good idea to get quotes from multiple carriers since pricing and eligibility criteria can differ between carriers. 

If you meet the eligibility criteria, the next step of the application process is to determine coverage and pricing. 

How much does long-term care insurance cost?

Age and gender are key factors influencing LTCi pricing. Women’s policy prices are generally higher than men’s because statistically, women have a longer life expectancy and are therefore more likely to need care at some point. Starting a policy while you are younger and in better health can help you secure more affordable premiums. 

According to AALTCI 2024 data, a stand-alone LTCi policy with $165,000 in coverage costs $950 per year for a 55-year-old man and $1,500 for a woman of the same age. If the policy started at age 60, the premiums would increase to $1,200 and $1,900, respectively. 

Pricing is determined by a range of factors that influence the timing and level of care the applicant may need over time. In addition to age and gender, other variables influence the premium pricing of a policy. These variables include:

• Health: Preexisting conditions or health history increase costs.
• Coverage amount: Higher levels of coverage are more expensive.
• Elimination period: Shorter waiting periods mean higher premiums.
• Benefit period: Longer benefit periods typically mean higher costs.
• Riders: Additional coverage like inflation protection or caregiver training costs more.
• Location: Premiums vary by state regulations and local care costs.
• Policy type: Stand-alone long-term care insurance policies are typically less expensive than hybrid or asset-based policies.
• Family history: A family history of certain conditions may affect pricing.
• Lifestyle factors: Diet, exercise, smoking and drinking habits, and body mass can all affect the price.

Once you find a policy that matches your needs and budget and for which you meet the eligibility criteria, you’ll pay your first premium and the policy will be started.  

Long-term care insurance tax benefits

On the upside, long-term care insurance offers some key tax perks: 

• Premiums paid for qualified policies may be tax deductible, especially for self-employed individuals or people whose premiums exceed a certain percentage of their income. 
• Benefits received from a qualified LTCi policy are generally tax-free.
• In some cases, if an employer offers LTCi as a benefit, the premiums might be tax deductible for the employer and not taxed as income for the employee. 

Consult a tax professional to fully understand eligibility and details.

Important long-term care insurance terminology

• Activities of daily living (ADLs): ADLs are the basic tasks people do every day, like bathing, dressing, eating, getting around, and using the bathroom. 
• Benefit period: A defined period of time that policy covers. Some LTCi policies offer lifetime benefits; others cover a predefined number of years (e.g., three, five, or 10 years).
• Custodial care: This kind of care is nonmedical assistance with ADLs, including personal care services in a home or facility setting.
• Elimination period: This is a waiting period after the policy start date but before the benefits period begins (i.e., an initial period during which benefits cannot be claimed). 
• Policy limits/coverage amounts: LTCi policies usually have daily, weekly, or monthly payout limits along with an overall benefit cap (maximum). 
• Premiums: The premium is the price the policyholder (the named insured) pays the insurance company to keep the policy active, usually on an ongoing basis.
• Riders: Riders are policy add-ons that expand coverage or events that trigger benefits.
• Term: Policies that have defined lifetimes, usually three, five, or 10 years. Hybrid and asset-based policies are typically permanent and remain in effect for the insured’s lifetime as long as premiums are paid.
• Triggering events: These events are predefined circumstances, such as the inability to perform a certain number of activities of daily living (ADLs) or cognitive impairment, that activate the policy’s benefits.

This information is for educational purposes and is not legal, financial, tax, or investment advice. It should not be substituted for information from professionals authorized to practice in your area. You should always consult a suitably qualified professional regarding your specific situation.