Long-term care (LTC) and insurance for it (LTCI) are two of the most misunderstood issues in retirement and retirement finances.
One big reason is that people don’t want to talk about it. A survey a few years back reported that more people would rather go to the dentist than talk about LTC.
Other surveys reveal that misinformation and misunderstandings about LTC and LTCI are widespread. But when people have the right information, they’re more likely to develop realistic plans and preparation for LTC.
LTC often is thought to be nursing home care. It used to be. But LTC now encompasses much more.
A significant portion of LTC is delivered at home, and the share of at-home LTC is increasing. Most people prefer that if LTC is needed it is received at home, especially after the large number of COVID deaths at senior care facilities during the pandemic. Technology and other developments make home LTC more practical than it used to be.
Currently, assisted living residences are probably where most LTC is received. Memory care treatment is available at either nursing homes or assisted living residences.
Continuing care retirement communities, also known as life care communities, are multipurpose communities that offer a range of options, such as independent living, assisted living, memory care, and nursing homes.
LTC is defined as needing assistance with at least two of the activities of daily living or being cognitively impaired. The ADLs are dressing, bathing, transferring/mobility, eating, talking, and using the bathroom.
Many people need LTC for only a few days or weeks, such as after an illness, injury or surgery. The cost often is covered by Medicare or other insurance. Others need LTC for an extended period, which is what most people think of as LTC and need to plan for.
Studies typically find that about 70% of Americans will need LTC after age 65. But most of that care is the short term care after an illness or injury. Often, it is provided by a family member at home.
It’s the potential for an extended need for LTC that concerns most people and requires planning.
A question is how much LTC to plan for.
Only about 20% of Americans who need LTC need it for five years or more during their lifetimes, according to data from the American Association of Long-Term Care Insurers.
Another 20% need LTC for two to five years, while 12% need it for one to two years.
More detailed data, that generally agrees with the AALTCI numbers, is from the federal government’s Administration for Community Living.
On average, women will need LTC at some point for about 3.7 years while men will need it for 2.2 years, according to ACL. About 37% of people who receive LTC outside the home need it for one year or less.
LTCI is the most likely way to plan for and finance LTC.
There is the traditional stand-alone LTCI policy in which the insured pays premiums while healthy and receives benefits after the need for LTC arises. Should the policyholder never need LTC, there is no refund of premiums or payment to a beneficiary.
Traditional LTCI has fallen out of favor. After the financial crisis, many insurers increased premiums significantly on existing policyholders. Most insurers stopped issuing new policies. Those that stayed in the market generally charge higher premiums than before and offer reduced benefits.
Fewer than 50,000 traditional LTCI policies have been issued in each of the last few years, compared with a peak of 600,000 policies in 2000.
Premiums for traditional LTCI can vary significantly, according to AALTCI.
Among the three largest traditional LTCI insurers, in January 2025 annual premiums for an identical policy for a couple with each spouse age 55 were $5,108 annually from one company, $6,247 from another, and $6,325 from the third company.
For a 65-year-old couple the annual premiums were $7,137, $12,250, and $7,850.
The average annual premium for a male age 55 in average health who wanted $165,000 in lifetime benefits with a 3% annual growth rate was $2,200. A 55-year-old female would pay $3,750 for the same policy. A couple buying together would pay a total of $5,050.
At age 65, the premiums rise to $3,280 for the male, $5,290 for a female, and $7,150 for a couple.
The other way to insure is through a hybrid policy, also known as linked, asset-based, or combo policy, among other names.
Hybrid policies are annuities or permanent life insurance policies with long-term care benefits. These policies have been much more popular, generating sales of over 500,000 annually in recent years.
Details of hybrid policies vary greatly between insurers and even among policies offered by the same insurer.
About 27% of first claims on LTCI policies are made between ages 80 and 84, according to AALTCI. Another 30% are made between ages 85 and 89. Less than 20% of initial claims are made after 90.
On average, the first claim on an LTCI policy is made about 15 years after the policy is purchased.
It’s best to shop for LTCI long before the need arises. The denial rate for applicants increased over the years and increases with age.
In 2021, about 47% of applicants between ages 70 and 74 were denied policies. The denial rate was 38% between ages 65 and 69, 30% from age 60 to 64, and 20% from ages 50 through 59.
In addition, premiums are higher for older first-time applicants, according to AALTCI. Buying at 65 instead of 55 results in premiums almost 50% higher.
The cost LTC varies greatly with the type of care and the area of the country where it is received.
You can see a review of median costs around the country for different types of care by visiting the web site of Genworth Insurance at www.genworth.com.
The site lists only median rates. Costs of individual providers can vary significantly from the median.
It’s best to visit or call a few providers in your area to determine the likely costs.
Most people pay for additional services in addition to the base rate. Ask what’s included in the base rate and for the price schedule of additional services. For example, some assisted living residences administer patients’ medications as part of the base rate while others charge extra. It’s best to assume you’ll pay about 20% of the base rate in additional fees.
Most people don’t shop around for LTC services before they need it. It’s best to do that to determine the firms you’d like to receive care from if you need it. Most LTC decisions are made by a middle-aged woman, usually a daughter or daughter-in-law of the person receiving the services, because the person didn’t do any preparatory work before needing LTC.
